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To what extent has globalisation promoted or inhibited economic development in Africa?
Globalisation, this is a heavy word that comes with so much controversy, that makes it complex and ambiguous, especially when you relate it to economic development particularly for Africa. Many, including a large number of economists will have a general view that globalisation is an “opportunity for growth and prosperity” in developing countries particularly for the so called ‘bottom half of the world’s population’, linking trade, investment and finance. However among closer attention, it becomes clear that the benefits from globalisation are not automatic but rather dependant on many different factors that if not carefully addressed, can work adversely and result in globalisation, becoming more of a negative and a burden, this is particularly true for the least developed countries of African economies, “increasing the chasm between rich and poor” (Scott and Storper, 2003: 579; Piasecki and Wolnicki, 2004: 300; Nichter and Goldmark, 2009: 1453; Sachs, 2000: 579; Prasad et al, 2005: 201).
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In this essay we will review to what extent has globalisation promoted or inhibited economic development in Africa. We will be arguing that although globalisation has promoted some economic development in Africa, nevertheless this has not been uniformly achieved, and the inhibitions caused by globalisation are greater in number and effects than initially perceived, placing further challenges on Africa. We will explore this topic by firstly providing a definition to the key words of globalisation and economic development, to allow us to reach a better understanding of the phenomenon. Secondly, we will explore the ways in which globalisation has promoted economic development in Africa exploring a range of arguments put across for its success by proponents of this phenomenon. Thirdly, we will explore ways in which globalisation has inhibited economic development, giving our argument on how globalisation has played more of a inhibitor role rather than a promoter role in regards to economic development in African countries, exploring a range of arguments given which echo those of opponents of globalisation, to indicate that barriers to globalisation have not been dismantled and as such creating further issues of concern. We will conclude with a final critical assessment of the situation and ideas proposed by African intellectuals.
Arguments for and against
In order for us to obtain a clearer understanding of what the question is trying to assess, it is crucial to define the key terms of “globalisation” and “economic development”. It is important to note that although our definition of globalisation will mention both shallow and deep explanation of the term, for the purpose of this essay we will be covering the approach of focusing on trade liberalisation to globalisation within this essay. Firstly, The term globalisation originates from Marshal McLuhan’s idea of the “global village and the “information age” discussed in the Sixties. Yet this term has developed into a far greater phenomenon used in various ways to define the world as being interconnected with a multi facetted disciplines. As such it is complicated, ambiguous, involving a set of processes that are often complex needing further clarification. Globalisation is defined as a “complicated set of economic, political, and cultural factors” (Wells et al, 1998: 323), bringing “people, cultures, products, and markets, as well as beliefs and practices and ideologies into increasingly greater proximity” (Sorrells, 2010:171).
The integration of the national economy to the rest of the world, “the economic and technological forces that facilitate cross-border financial activities” “fused into one global market” (Gkoutzinis, 2006: 12). The International Monetary Fund (IMF) describes globalisation as “the integration of economies throughout the world through trade, financial flows, the exchange of technology and information, and the movement of people” (Ouattara, 1997). Additionally, globalisation is reported to be defined as “the increase in the importance of cross-border economic activities” and then furthered to include “the spread of a single set of liberal rules that govern international economic activities” (Madeley, 2003: 18)
Secondly, the concept of economic development has itself advanced since the sixties from a measure of “economic growth” or “improvements in material well-beings” to include becoming an advanced economy “when both economic and social conditions are improved” (Drydyk and Keleher, 2018: 4). Michael Todaro identifies objectives of development as “life sustaining goods and services, higher incomes, and the freedom to make economic and social choices” (Todaro,1977: 64), recognizing its advantage in that wealth “does not increase happiness” but “increases the range of human choices” (Todaro and Smith, 2006: 22)., The importance of economic development is highlighted and its consequences magnified when it comes to Africa, providing evidence of “economic growth on poverty and economic well-being”. As of the beginning of this century “over 45% of the population” something like “two hundred and fifty million Africans” were classified as poor (Fields, 2000: 45). The world inequality is “high and rising”, and according to the UN data, the average citizen in an African country such as “Ethiopia is 35 times poorer” than that “born in Europe or the United States of America” (Ocampo and Vos, 2008:1).
Thereby, having understood the definitions it’s necessary to expand on the arguments for and against the achievements of economic globalisation in order to have a “clear, coherent, and comprehensive sense” of how factors such as “international integration, including foreign trade, multinational direct foreign investment, movements of short-term portfolio funds, technological diffusion, and cross- border migration” and so on has worked out for the case of countries in Africa (Bhagwati, 2004: XI).
The argument that globalisation provides a promotion of economic development is made by those calling out for global trade liberalisation. Regarded as “globalisation optimists”, they make a long list of steps envisioned and promoted leading towards economic prosperity. A range of factors that talk of how globalisation works in providing economic growth. The conclusion reached by this camp is that all economies can achieve through globalisation the “promoting of competition”, “improving of resource allocation”, “leading to increased efficiencies” and “accelerating overall economic growth”. Also this can lead to the “attracting foreign capital and expertise”, and the “generating much needed foreign exchange”. It would allow for the “eliminating of costly economic distortions caused by government interventions”, and the “promoting of more equal access to scarce resources” (Chandan and Christiansen, 2019: 118). The success of globalisation for example can be seen in the study by Alex Dreher, “using panel data for 123 countries in 1970–2000” that were “analysed empirically” using globalisation “overall index” and constructed “sub-indexes” in measuring economic growth, the report identified that “globalisation indeed promotes growth” (Dreher, 2006: 1110).
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Nevertheless, it needs be pointed out that although benefits to globalisation are at times easily recognisable such as “the increasing of trade giving consumers and producers a wider choice of low-cost goods, often incorporating more advanced technologies, and facilitated a more efficient use of resources” (Ouattara, 1997). There needs to be an appreciation that the driving forces for such a process to deliver would be things like technology, economic policies, trade competitions, in order to link the national economy to the those conditions and practices that are in place in the global market (Petersen, 2017). So these needs to be evaluated because technological progress in reality sets the outer boundary of globalisation, and the policy and the politics determines exactly where we are within that boundary (Madeley, 2003: 66). Are we considering that such increases in the share of trade and finance of the developed countries could be taking place at the expense of those countries with weak economies or what is termed the least developed even in a “non zero sum game” if the policies are not right (Ouattara, 1997). There is evidence based on a number of studies to indicate that the positive link between FDI and development is not present for African economies and there is a lack of diversification of FDI in countries of north and south saharan Africa (Sharma and Gani, 2004: 20; Soumaré, 2015: 5533; UNCTAD, 2015: 253). Subsequently, it is argued that the “promised link between globalisation and development” has not materialised in the African region because “the globalisation process as designed was faulty (external attribution)” (Amah, 2018: 19).
Yet another important point that many globalisation optimists argue helped promote economic development is the history surrounding free markets. The point made is that economies, according to official history developed as a result of free markets arrived through globalisation. (Farina, 2015: 132). However, we argue that although official history might claim this, actual history paints a different picture of “market and trade regulation /protection, intellectual property rights,state ownership and regulation of FDI”. African countries are not able to use such policies due to the “limited policy space” as a result of being crippled by world bank, IMF, or the concept so called ‘kicking away the ladder’. “The UK and the USA, the supposed homes of free trade, used tariff protection and subsidies to develop their industries when they were in catching-up positions”, and the ladder retreating the policies used for economic development, has been “kicked away from African countries” (Chang,2010: 17; Chang, 2003: 21).
The arguments that globalisation has acted as an inhibitor of the development in Africa are made by those emphasizing that globalisation “hurts developing countries”. These are referred to as “globalisation pessimists”. Often a range of negative factors are indicated that are initiated through globalisation, including inequality, inflation, instability, trade imbalance, unemployment, and dominance of global brands. These point out to “the slow growth in demand for their traditional exports, leading to lower export prices”, and without restrictions “the high elasticity for imports, combined with the low elasticity for their exports, leads to slow growth to avoid chronic balance of payments”. The developing nations have their “static advantage in primary products”, and that “export-promoting free trade policies tend to inhibit industrialization” (Todaro and Smith, 2006: 636). For these countries when the “exporting raw materials suffers falling export revenue, this usually goes hand-in-hand with a current account deficit”. According to IMF this has affected Sub-Saharan Africa “the highest of which was 30 percent of GDP or more” increasing the developing country’s foreign debt. Policies such as “the reduction of import tariffs” becomes also problematic for African countries as this is often a major source of revenue, in the Sub-Saharan countries, making up “up to 30 per cent of public revenues” (Giesbert et al, 2016: 9), whereas for example in Germany this would be “less than 1 percent of public revenues” (Petersen, 2017). Yet we should bear in mind that the the counter argument for this is that the main reasons for African countries not benefiting is due to their “monocultural export”, “inability to attract foreign investments” and the “huge debt” they hold, and this can be addressed through “diversification of exports”, “debt reduction” and “expanded development cooperation” with the outside through globalisation (Wenjing et al, 2012: 11059). Africa is recognised as having “one of the highest growth potential in the world” and if the link between globalisation and development does not take place it is “because of internal crises in the African region (internal attribution)” (Amah, 2018: 19).
There is some agreement between both camps discussing globalisation and development that the challenges in Africa have been greater than anticipated, and that the envisaged benefits of globalisation have not materialised for African countries leaving Africa at the margins of global economy despite the potential. To this effect, the approach taken to explain the African growth figures have been based around discussions whether best economic development models were HDI, GDP, GDP per capita, growth rate, globalisation index and so on, and if the analysis frameworks should consider “the market oriented”, “the political economy”, or “the state oriented” approach (Chitonge, 2015: 20). Additionally, for a real analysis of globalisation to take place, there has been attempts to take into account the immense limitations placed on Africa by its unique history. This has and is argued here to continue in hindering the economic development of Africa despite the abundance of natural resources. Africa’s progress has been “greatly interrupted firstly by slavery, and then by several hundred years of European colonisation”. Later, this drawback is extended by the decades of the “colonial overhang” during the years of “independence movements”, and thereafter by the “proxy status of its new nations” throughout the Cold War era and beyond. Thereby, the commodity driven economy of Africa has been handicapped over the years by a huge “global debt” and a “global disconnect” for the continent, leaving the African countries “bankrupt” and “detached” during the globalisation drive (Bright and Hruby, 2015: 26). The globalisation process has further inhibited development of African countries although the pattern is not uniform as the variables are different and the level of growth in each country is different. As such the globalisation process exacerbates the poverty, debt and inequality for countries in Africa.
This essay set out to assess the extent to which globalisation has promoted or inhibited development in Africa. It has become evident that the promise of prosperity and the promotion of economic development by globalisation as reported by the industrialised and emerging countries has not been universal. The analyses of different studies over the last few decades points out to an increase in “global inequality” and the widening of “the gap between rich and poor countries” (Wenjing et al, 2012: 11057). Subsequently, for the least developed economies as those present in Africa, the promises of globalisation (Ouattara, 1997), have not been delivered. Instead, African countries have “high current account deficits” (Petersen, 2017). The “share of the overall population living in poverty” still remains at high levels, and even data presented by IMF in 2017, only show a marginal reduction (Mundial, 2016: 978). Although, various studies discussed indicate that “structural adjustments as dictated by IMF and the World bank have left most African economies worse off than they were when the process first started”, the view of IMF economists is that their continued implementation would allow “African countries to manage their debts properly, improve economic performance, and lead to much needed growth in national wealth” (Mbaku, 2008: 50).
Nevertheless, it should be noted that some have suggested that the key requirement for countries in Africa to develop is to have their governments systematically design policies so to “balance between its current low economic status, its political teething problems and the pressures to catch up and fit into the inevitable globalisation trends” (Wenjing et al, 2012: 11057). Others have suggested that the need to prosper and make the competitive contribution to the global economy requires an adjustment to globalisation, or what is termed a “paradigm shift”. There must be a move away from agriculture toward industrialization and manufacturing. This is highlighted by the Nigerian intellect Moghalu, who states that reorientation is essential “toward industrialization and development of its manufacturing sector”, as “agriculture and resource extraction do not improve the lives of people and are unsustainable for development over the long haul” (Moghalu, 2013).
What is clear from discussions around the topic is that there needs to be careful thought by African countries about their future, and must not blindly follow the “trends of capitalism and democracy” as dictated by others but seek their own “political and economic interests”, this is particularly important as Africa is a matrix of different state with different economic, social and political variables. For globalisation to succeed, there needs to be a realignment of how “Africa views the world” and how the “world view’s Africa”. Since change and economic prosperity are not automatic, the transformation and development required must be based on what is “most relevant for Africa” (Moghalu, 2013). Incidentally, as globalisation leads to increased “integration and interconnection of world economies”, the African disconnect helped the continent at the time when “markets and governments of the highly connected world charged toward financial meltdown” during the recession years of the 2000’s. Globalisation played a major negative role and somewhat paradoxically, the African “continent’s commercial marginalization and the timing of its own debt crisis placed many of its economies in less vulnerable position” (Bright and Hruby, 2015: 27). This allowed the “frontier economies to maintain their growth momentum” escaping “the global financial bubble” and the “economic decline” that followed (Mourdoukoutas, 2016).
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