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Globalization is the on going process which facilitates the people of different countries to participate in goods, services and finance through mutual agreements and by infirmity of rules and regulations in different countries for greater cultural and economic operations. Globalization is the process of dealings with the countries all over the world in order to extend the global economy. Globalization affects the economy for many years. Globalization allows the countries to open new markets outside the country, which boost up country exports. Free trading increases the interdependence of the nation state. It provides more employment and also increases the living standard of developing nations. Globalization increases the opportunities and economic prosperity in the developing world. Due to this goods and people are transferred with more easiness from one country to another.
Globalization is a process in which limited societies, economies, and cultures have connected through a global system of trade. The term is sometimes used to refer specifically to economic globalization: the amalgamation of national economies into the international economy through trade, foreign direct investment, capital flows, and the increase of technology. Globalization is generally known as determined by a combination of economic, technological, socio-cultural, and political factors this term can also refer to the worldwide distribution of ideas, languages, or trendy culture. Competition increases between countries. Globalization is the result of a number of interconnected developments including:
The growth and relative implication of foreign direct investment and multinational projects.
The internationalization of financial markets
The rapidly and continuing development of communication and transport technology
Deregulation and liberalization
Privatization of public sector services.
Economic globalization is characterized by increasing in trade and investment, liberalization, privatization of public services and deregulation of many government institutions. Economic globalization is also linked with increasing inequality in wealth and power between nations and within nations as well as between public and private sectors. Economic globalization has been taking place for the last several years it has begun to happen at an increased rate over the last 20-30 years. This recent boom has been largely accounted by developed economies linked with less developed economies, by resources of foreign direct investment, the reduction of trade obstacles, and the modernization of these developing cultures. Environmental globalization recognizes that an environmental incident or impact that happens in one country is not restricted to that area but has the potential to affect the entire world’s well being. Thus, communicative globalization refers to the rapid growth of communication technologies such as internet, telephone, satellite and so on, Ability to link people, information and ideas around the world which impact on culture, both positively and negatively.
Privatization is a requirement for globalization and goes side by side with it. Nowadays the phrase of globalization has gained importance in all over of the world. Globalization may have positive or negative impact on developing countries. However, the developing nations can survive by alteration in the development of globalization by public policy readjustment for privatization, deregulation and liberalization.
The wave of financial globalization as the mid-1980s has been marked by increase in capital flows among industrial countries, particularly between industrial and developing countries. Where these capital flows have been linked with the high growth rates in some developing countries. A number of countries have experienced interrupted collapse in growth rates and significant financial crises over the same period, that crises have exacted a serious toll in terms of macroeconomic and social costs. 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 and economic development in Pakistan
Indian Journal of Economics and Business, Dec, 2007 by Khair Uz-Zaman, Qaiser Aman
Key Institutions of Globalization
The economic globalization lies with certain powerful financial institutions that are exclusively in the hands of western countries. They include:
International Monetary Fund (IMF)
World Bank (WB)
World Trade Organization (WTO)
These institutions are known as the Bretton Woods institutions and largely influence on economic and political policy formulation in developing countries.
(GLOBALIZATION AND its IMPACT ON BANGLADESH ;( RAHMAN MD FAIZUR, 2005))
The start of globalization goes back to the second half of the 19th century. When nationality as the basis for state formation was already widespread. The World Bank classifies the development of globalization since then as follows:
The 1st wave of globalization: 1870 -1914
The retreat into nationalism: 1914 -1945
The 2nd wave of globalization: 1945 – 1980
The new and 3rd wave of globalization: 1980
The first wave of globalization was started in 1870 and continued until the beginning of the First World War in 1914. In this period globalization made easy for the delivery of imported goods as well as exported goods. The development of telegraph helped to establish contact over long distances.
The period 1914-1945 was tagged a retreat to nationalism and significantly improved in the technical condition of the transport and communication. The great depression of the late 1920s and early 1930s direct to protectionism, which additionally limited the international division of labor.
The second wave of globalization (1945-1980) followed the nationalistic period. As a response to the war, there was much effort to enhance international support. This was reflected in the establishment of the United Nations in 1945 and the Bretton woods institutions in 1946. In 1980, trade of manufactures was to large extent freed of barriers. In the case of agricultural products, trade was restricted still between developing countries; imports of products of developing countries were liberalized if they did not compete with those of the developed countries.
The third wave of globalization started around 1980 and this phase continues today. According to the World Bank, this period has four characteristics that separate it from the previous period.
Large numbers of developing countries ruined into the global markets
Developing countries became increasingly marginalized and suffered from declining incomes and increasingly poverty
Worldwide capital movements and immigration became substantial.
Increasing destruction of production.
Globalization, as World War II, is basically the result of planning by politicians to break down the borders hurdles in trade to increase the prosperity and interdependence as a result to reduce the chances of future war between the countries.
Since World War II, barriers to international trade have been significantly decreased through international agreements GATT. Particularly initiative carried out as a result of GATT and WTO, for which GATT is the foundation, has included:
Promotion of free trade:
Eliminating of tariffs; creation of free trade sector with small or no tariffs.
Reduced transportation cost, especially resulting from development of containerization for ocean shipping.
Reduction , elimination or coordination of financial support for local businesses
Creation of financial support for global corporations.
Coordination of intellectual poverty laws across the majority of states, with more restrictions.
Super national identification of intellectual poverty limitations.
The phrase “Globalization” has been used broadly by media and educational in recent
years. This describes the process of generate networks of connections through a
selection of flows of information, people, capital goods and technology.
In economics, globalization connect in various phase of cross-border dealings, free
international capital flows, foreign direct investment, portfolio investment, and rapid and
widespread distribution of technology. Globalization enhances the economic prosperity and leads to more efficient allocation of resources, which, in turn will result in higher output, more
employment, lower prices and higher standard of living. However, some critics worry
about the resulting outsourcing and off shoring, which have destroyed the American
Impacts of Globalization
According to economists, there are a lot of global events connected with globalization and incorporation. It is easy to classify the changes brought by the globalization.
Improvement of International Trade.
Globalization increases the international trade between many countries and makes the sale or purchase easy.
Governments have upgraded their level of technology to compete and be competitive globally.
Increasing Influence of Multinational Companies.
An important trend in the globalization is the increasing influence and broadening scope of the multinational companies. A company that has subsidiaries in various countries is called a multinational.
Power of the WTO, IMF, and WB.
Another effect of globalization is the strengthening power and influence of international institutions such as the World Trade Organization, International Monetary Fund, and World Bank.
Greater Mobility of Human Resources across Countries.
Globalization allows countries to provide their manpower in countries with cheap labor. For instance, the manpower shortages in Taiwan, South Korea, and Malaysia provide opportunities for labor exporting countries such as the Philippines to bring their human resources to those countries for employment.
Greater Outsourcing of Business Processes to Other Countries.
Different countries are tremendously benefiting from this trend of global business outsourcing. Global companies in the US take advantage of the cheaper labor and highly skilled workers that countries can suggest.
Broadening scope of the global civil society is an important trend in globalization. Many institutions are established in the country and run by citizens which civil society often refers to NGOs. Global civil society refers to NGOs that advocate certain issue or cause. There are many NGOs that promote good environment to women’s and support their rights. Government and NGOs have the same goal of serving the people but these NGOs are working to establish polices that are beneficial to all.
Effects of globalization
More goods and services are available
Expansion of new markets
Income generation and increased in economic growth
Development in the volume and range of cross border transactions in goods and services.
Increase in the use of new technology in small-scale manufacturing to increase the level of production.
The global common market has a freedom to trade of goods and capital
The emergence of a new market where the products were market at an international level for all type of consumers.
Widely access to a large variety of goods for consumers and companies.
Free movement of people of different nation’s leads to community benefits.
Global environmental and other trade problems are solved by discussions.
development of containerization of ocean shipping reduce the transportation cost
Reduction in trade barrier
Increases in international travel and tourism
Increase in the ambition to use overseas ideas and products, accept new practices and technologies and become a part of world culture.
Subsidies for local businesses decrease
Local consumer products are exported to other countries
Capital controls reduce or conquer
Enhancement in worldwide modern traditions/cultures.
Developing countries are those which have a lower per capita income, unemployment, lack of goods and services. People have a lower standard of living, high infant mortality rate.
Characteristics of Developing Economy:
The common characteristics of developing countries:
Lower living standards
Low education standard
Increase in death rate
Limited life and work expectancy
High and rising levels of unemployment and under employment.
Lack of technology
Low standard of education
Advantages of globalization in the developing world:
Globalization increases the economic prosperity and opportunity in the developing world. The national freedom is improved and increases the resources of the developing countries and there is a more efficient use of resources. All the countries involved in the free trade are at a profit. As a result, there are lower prices, more employment and a better standard of life in these developing nations. It is feared that some developing areas progress at the disbursement of other developed areas. However, such suspicions are ineffective as globalization is a positive-sum chance in which the skills and technologies enable to increase the living standards throughout the world. Liberals look at globalization as an efficient tool to eliminate poverty and allow the poor people to hold grip in the global economy.
The Impact of Globalization on the Pakistan Economy
Globalization is not new. Pakistan has been involved in trade, investment, financial flows, technology transfers and the migration of labor since its foundation as a colony. What have changed are the size, direction and influence of these transfers. There are a number of factors that have aided this transformation.
The expansion of new markets:
Foreign exchange and capital markets are linked globally. They operate 24 hours a day with contact any where in the world possible in every time. Financial deregulation increases the impact of globalization on the Australian economy.
New technology and the tools of globalization:
The internet, email, mobile phones, media and communication networks have all sped up the process of globalization. They have increased the spread and speed of knowledge transfer and communication.
New institutional players :
The World Trade Organization (WTO) has emergent right over national governments, as does the IMF with its restrictions and controls it can force on nations requiring support. Multinational corporations have more economic power than many nations. Include funds and financial dealers are able to control financial flows and consequently exchange rates, leaving nations helpless in their wake.
New rules and restrictions:
Mutual agreements on trade, services and intellectual property rights, backed by strong enforcement instrument, reduce the scope for national governments to develop their own economic policies.
Pakistan is a South Asian country that was established in 1947. Pakistan is a developing country; its total population is approximately 180 million. Its neighboring regions include India, Iran, Tajikistan, Afghanistan, and China. Its GDP is $164 billion and contributing in agriculture, industry and services respectively 19.6%, 26.82% and 53.7%. Per capita income and HDI is approximately $1022 and 0.52. Population of Pakistan is in the 6th number and has biggest and strongest army in the world. Pakistan economy is based on agriculture sector. In last two decades Pakistan service industry has grown up rapidly. More than 50% population of Pakistan is linked with the rural sector. So that’s why mostly area is neglected and misused. Total acquired area of Pakistan is 803,940 km2, but mostly area is neglected and underdeveloped. External debts are around $50.1 billion. Pakistan has an outstanding potential for growth and its current growth rate is 2%. Pakistan has marvels treasures of natural resources, fruitful lands, some of largest natural resources mines, highest mountain ranges, 1050 mile coastline, vast deserts and the best productive lands. Pakistan is one of the most blessed countries on the earth. But Pakistan political and economic conditions are not good.
Pakistan economic development
last few years there has been a con rate of Pakistan economic development that has marked itself in its impressive gross domestic product statistics. In financial year 2007 there was a real increase of 52 percent in amount allotted in Pakistani budget for development of national economy. This has been an important step in development of Pakistan economy is concerned as this move has required to address underdevelopment of national economy that has spread at all levels especially in social sector. Economic development of Pakistan has always been among its major assets as far as acquire recognition from global financial circles is concerned. In decade of 60s Pakistan’s economy had progressed at a decent rate and it was regarded as being exemplary. Economic policies adopted by national government have helped economic development in Pakistan to a significant extent. In 1990s 2 % of gross domestic product of Pakistan had been assigned for economic progress and its double in 2003.
In 1999 PKR 80 billion had been set aside for economic development of Pakistan and by 2007 this amount had gone up to PKR 520 billion. In fiscal year 2008 this amount was PKR 549.7 billion. Poverty in rural areas has been an important area of Pakistani economics. From 2005 to 2008 $16.7 trillion has been spent in order to address different issues related to poverty. This money has played a very important role in overall economic development in Pakistan. Poverty has been reduced to 24 % by 2006 from 35 % at 2000-01. As per Human Development Index of 2007 Pakistan has been accorded status of a “Medium Development Country”.
Infrastructural development is an important area of Pakistan economic development. However, it has not been paid much attention by Pakistan national government. Over years a number of international financial organizations have played a most important part in development of Pakistan’s economy such as International Monetary Fund, Asian Development Bank and World Bank. From 2006 to 2009 Asian Development Bank would be providing almost $6 billion for Pakistan economic development. World Bank is supposed to provide a loan for infrastructural development worth $6.5 billion in same period. Pakistan would also receive a yearly financial help from Japan worth $500 million.
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