globalization impact on pak economy

8/7/2019 Globalization impact on Pak economy

1/5

The world of today is gradually getting more unified socio-economically and politically.

Economic globalization or globalization in every sense of the term is encompassing

the whole world and we see an increasing integration of the world production,

consumption and the financial markets with a concurrent homogenization of culture

worldwide.

Globalization of the world economy or economic globalization has been especially

pronounced after World War II and the Great Depression of the 1930s in the USA.

Technically, globalization on the economic front refers to the integration of product

prices, labour wages, interest rates and rates of profit toward developed country

standards. The rise in the volume of trade between the developed and the developing

countries, increase in cross-border transactions, rise in immigration and transfer of

technology are some of the key issues of globalization.

Although some thought about the ill effects of globalization like erosion of sovereignty,

the emergence of cross-culture, the accommodation and assimilation of a large number

of immigrants to the developed countries of Europe and the USA, inequality in the

worldwide distribution of income and environmental degradation persists, globalization

has some desirable fallouts which would have been very difficult to achieve otherwise.

Reduction of barriers to different countries, both economically and politically, have

ensured companies worldwide can reap the advantages of economies of scale by hiring

in cheap labour and raw materials which are not produced domestically. China is one

such example which has reduced its tariff rate to about 13% at present after its

admission to the World Trade Organization (WTO) in 2001. The list of protected goods

which was 300 at that time has also been cut down. Globalization has led to increase in

production capacity of different companies across the world which now caters to a world

consumer base. Large quantities of flow of goods and services from the developed to

the developing countries and vice versa have made Indian textiles and Chinese


2/5


3/5

the third world economies.Notably, the North American Free Trade Agreement (NAFTA)

and the South Asian Free Trade Agreement (SAFTA) has been counterproductive on

many occasions.

Creation of Export Processing Zones (EPZs) and Special Economic Zones (SEZs) with

huge inflow of Foreign Direct Investment needs to be assessed with respect to specific

countries and domestic economic policies which are gradually being too much

dependent on the situation prevailing in foreign countries also need to be corrected.

More industrialization and movement of goods and services across the world is emitting

huge quantities of greenhouse gases which is causing environmental degradation. With

globalization, ecological concerns such as climatic changes, global warming and

excessive fishing of oceans can be addressed jointly and effectively by all the nations.

Not surprisingly, economic and social integration can promote international peace and

harmony among nations.

As a strange fallout of the process of globalization, English might be replaced by

Chinglish (China-English) or Spanglish (Spanish-English) and Chicken Curry and

Rice may become the staple diet of Britain.


4/5

Globalization, with its wide implications, can be discussed in various perspectives,

such as socio-cultural political and economics. Economists define it as the free

movement of goods, services, labor and capital across borders. World Bank defines

globalization as "Freedom and ability of individuals and firms to initiate voluntary

economic transactions with residents of other countries" (Milanovic, B 2002).

Economic globalization is characterized by increased trade and investment,

liberalization (free trade), privatization of public services and de-regulation of many

government institutions. Economic globalization is also associated with increasing

disparities in wealth and power both between nations and between different groups

within nations as well as between public and private sectors. Environmental

globalization recognizes that an environmental incident or impact that happens in

one region or country is not restricted to that area but has the potential to affect

the entire world's health and well being.

Similarly, communicative globalization refers to the rapid growth of communication

technologies such as internet, telephone, cellular phone, satellite and so on.

Capacity to link people, information and ideas around the globe impact on culture,

both positively and negatively.

In recent years, theoretical research on the link between globalization and world

inequality and poverty has been of great interest among economists. However,

comprehensive analysis of the link at the empirical level is still scarce. Globalization

is expected to reduce poverty through faster growth in more integrated economies.

Despite the great importance placed in the recent decade on the globalization

process, its sources, channels and consequences remain poorly understood. The

channels through which globalization affects world inequality have been identifiedas commodity price equalization, factor price convergence, capital mobility and

differentials in marginal products and rates of return of capital among countries,

and dynamic convergence of per capita income growth (Heshmati, A 2005).

Privatization is a prerequisite for globalization and goes side by side with it.

Nowadays the term globalization has gained significance in all parts of the world.

Globalization may have positive or negative impact on developing countries.

However, the developing nations can survive thrive by adaptation to the process of

globalization by public policy readjustment for privatization, liberalization and

deregulation.

The recent wave of financial globalization since the mid-1980s has been marked by

a surge in capital flows among industrial countries and, more notably, between

industrial and developing countries. While these capital flows have been associated

with high growth rates in some developing countries. A number of countries have

experienced periodic collapse in growth rates and significant financial crises over

the same period, that crises have exacted a serious toll in terms of macroeconomic


5/5

and social costs. As a result, an intense debate has emerged in both academic and

policy circles on the effects of financial integration for developing economies. But

much of the debate has been based on only casual and limited empirical evidence

(Prasad, E et al 2003). Clearly, trade could affect these inequalities only through its

effect on economic growth in individual countries. A central issue, therefore,

concerns the possible effect of trade on economic growth.

globalization impact on pak economy

Documents