Topics: Economics, Investment, Macroeconomics Pages: 6 (1160 words) Published: February 27, 2013
Causes of Globalization
While it is truethat state ventures (or
adventures) have at times driven the
process, e.g. the colonial conquests, the
globalization process has largely reflected
market forces, specifically, the
exploitation by large and smaller businesses
in the world of benefits from trade in
commodities, goods, services, capital, and
even labor, and of opportunities for new
investments and markets.
The process of global economic integration
was perpetrated at the behest of World
War II, when the leaders of Britain and the
US helped establishing the World Bank and
International Monetary Fund in 1944 to
promote a liberal, capitalist world to
counter the shadows of Socialism and
The loans are granted by IMF and WB on
the condition that the borrowing country
will reduce the state's role in the economy,
lower barriers to imports, remove
restrictions on foreign investment,
eliminate subsidies for local industries,
reduce spending for social welfare, cut
wages, devalue the currency, and emphasize
production for export rather than for local
consumption. Such conditions imposed laid
the basic foundation to open economies to
steer the mechanism of economic
integration giving birth to the World Trade
By mid 1950s Pakistan had become a
favorite candidate for receiving the
benefits pledged by President Truman,
having joined the network of international
defense treaties with the United States. It
marked the beginning of an enduring trend
in Pakistan to follow every one of the
strategies of development devised
successively in Washington and promoted
globally. Pakistan's own Dr. Mahbub-ul-Haq
called this trend the pursuit of
"development fashions" and listed it among
his "seven sins of economic planners."
Before development theory and practice
could be redesigned in any significant way
to address the lingering issue of social
justice it was literally hijacked to serve the
agenda of a more aggressively mobile global
capital which aimed at a deeper integration
of all national economies into the
structures and ideological framework of
neo-liberal globalization. Foreign debt is the
main lever used by donor countries and
multilateral aid organizations to break
resistance to the imposition of external
economic agendas and development policies.
Claimed Benefits of Globalization
World has discovered new trade routes and
improved the technology of transport to
obtain the benefits from the process of
Openness to foreign direct investment can
contribute to economic growth by
stimulating domestic capital formation and
improving efficiency and productivity, as a
result of greater access to new
Increased competition and access to the
domestic financial system by foreign banks
may improve the effectiveness of the
intermediation process between savers and
borrowers, thereby lowering markup rates
in banking, as well as the cost of
investment, and again raising growth rates.
Financial openness helps to lessen
asymmetric information problems and to
reduce the fixed costs associated with
small-scale lending; it can enhance the
opportunities for the poor to access the
formal financial system.
It is widely accepted that openness has
long been seen as important element of
good economic policy and trade
liberalization as necessary step for
achieving it.
Trade liberalization process often works as
an instrument to combat poverty: it usually
tends to increase not only incomes but also
provide some additional resources in order
to overcome the issue of poverty.
Globalization or trade liberalization in
general is being found to increase economic
opportunities for consumers and producers
and to raise earnings for workforce and
that under grater openness to trade,
resources tend to be reallocated towards
productive activities and away from less
efficient activities.
Foreign Direct Investment (FDI) is well...
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