Globalisation

Facts Background Australia's response The global agenda Facts Global income is more than $31 trillion a year, but 1.2 billion people of the world's population earn less than $1 a day. 80% of the global population earns only 20% of global income, and within many countries there is a large gap between rich and poor. The 3 billion people living in the 24 developing countries that increased their integration into the world economy enjoyed an average 5% growth rate in income per capita, longer life expectancy and better schooling. Two billion people, living in countries in sub-Saharan Africa, the Middle East, and the former Soviet Union, have been unable to increase their integration into the world economy, and their economies have contracted, poverty has risen, and education levels have risen less rapidly than in the more globalised countries. Sea level rise, warming temperatures, uncertain effects on forest and agricultural systems, and increased variability and volatility in weather patterns are expected to have a significant and disproportionate impact in the developing world, where the world's poor remain most susceptible to the potential damages and uncertainties inherent in a changing climate. The digital and information revolution has changed the way the world learns, communicates, does business and treats illnesses. In 2002, there were 364 people per 1000 using the internet in high income countries, while there were only 10 per 1000 in low income countries. Source: The World Bank, 2004, http://www.worldbank.org/ United Nations Development Programme, 2004 http://www.undp.org/ Background What is globalisation? There are many different definitions of globalisation, but most acknowledge the greater movement of people, goods, capital and ideas due to increased economic integration which in turn is propelled by increased trade and investment. It is like moving towards living in a borderless world. There has always been a sharing of goods, services, knowledge and cultures between people and countries, but in recent years improved technologies and a reduction of barriers means the speed of exchange is much faster. Globalisation provides opportunities and challenges. Bigger markets can mean bigger profits which leads to greater wealth for investing in development and reducing poverty in many countries. Weak domestic policies, institutions and infrastructure and trade barriers can restrict a country's ability to take advantages of the changes. Each country makes decisions and policies that position them to maximise the benefits and minimise the challenges presented by globalisation. The issues and perceived effects of globalisation excite strong feelings, tempting people to regard it in terms of black and white, when in fact globalisation is an extremely complex web of many things. The following table presents ten opposing points of view often expressed about globalisation.   Benefits of globalisation Problems of globalisation 1.     Economies of countries that engage well with the international economy have consistently grown much faster than those countries that try to protect themselves. Well managed open economies have grown at rates that are on average 2 ½ percentage points higher than the rate of growth in economies closed to the forces of globalisation. There are social and economic costs to globalisation. Trade liberalisation rewards competitive industries and penalises uncompetitive ones, and it requires participating countries to undertake economic restructuring and reform. While this will bring benefits in the long term, there are dislocation costs to grapple with in the immediate term, and the social costs for those affected are high. 2.       Countries which have had faster economic growth have then been able to improve living standards and reduce poverty. India has cut its poverty rate in half in the past two decades. China has reduced the number of rural poor from 250 million in 1978 to 34 million in 1999. Cheaper imports also make a wider range of products accessible to more people and, through competition, can help promote efficiency and productivity. Some countries have been unable to take advantage of globalisation and their standards of living are dropping further behind the richest countries. The gap in incomes between the 20% of the richest and the poorest countries has grown from 30 to 1 in 1960 to 82 to 1 in 1995. 3.     Improved wealth through the economic gains of globlisation has led to improved access to health care and clean water which has increased life expectancy. More than 85 percent of the world's population can expect to live for at least sixty years (that's twice as long as the average life expectancy 100 years ago!) Increased trade and travel have facilitated the spread of human, animal and plant diseases, like HIV/AIDS, SARS and bird flu, across borders. The AIDS crisis has reduced life expectancy in some parts of Africa to less than 33 years and delays in addressing the problems, caused by economic pressures, have exacerbated the situation. Globalisation has also enabled the introduction of cigarettes and tobacco to developing countries, with major adverse health and financial costs associated with that. 4.     Increased global income and reduced investment barriers have led to an increase in foreign direct investment which has accelerated growth in many countries. In 1975, total foreign direct investment amounted to US$23 billion while in 2003 it totalled US$575 billion. The increasing interdependence of countries in a globalised world makes them more vulnerable to economic problems like the Asian financial crisis of the late 1990's.   5.     Improved environmental awareness and accountability has contributed to positive environmental outcomes by encouraging the use of more efficient, less-polluting technologies and facilitating economies' imports of renewable substitutes for use in place of scarce domestic natural resources. The environment has been harmed as agricultural, forest, mining and fishing industries exploit inadequate environmental codes and corrupt behaviour in developing countries. Agricultural seed companies are destroying the biodiversity of the planet, and depriving subsistence farmers of their livelihood. 6.       Increasing interdependence and global institutions like WTO and World Bank, that manage the settlement of government-to-government disputes, have enabled international political and economic tensions to be resolved on a "rules based" approach, rather than which country has the greatest economic or political power. Importantly it has bolstered peace as countries are unlikely to enter conflict with trading partners and poverty reduction helps reduce the breeding ground for terrorism. The major economic powers have a major influence in the institutions of globalisation, like the WTO, and this can work against the interests of the developing world. The level of agricultural protection by rich countries has also been estimated to be around five times what they provide in aid to poor countries 7.     Improved technology has dramatically reduced costs and prices changing the way the world communicates, learns, does business and treats illnesses. Between 1990 and 1999, adult illiteracy rates in developing countries fell from 35 per cent to 29 per cent. Trade liberalisation and technological improvements change the economy of a country, destroying traditional agricultural communities and allowing cheap imports of manufactured goods. This can lead to unemployment if not carefully managed, as work in the traditional sectors of the economy becomes scarce and people may not have the appropriate skills for the jobs which may be created. 8.     Modern communications and the global spread of information have contributed to the toppling of undemocratic regimes and a growth in liberal democracies around the world.   Modern communications have spread an awareness of the differences between countries, and increased the demand for migration to richer countries. Richer countries have tightened the barriers against migrant workers, xenophobic fears have increased and people smugglers have exploited vulnerable people. 9.       The voluntary adoption by global companies of workplace standards for their internationalised production facilities in developing countries has made an important contribution to respect for international labour standards. Wages paid by multinationals in middle- and low-income countries are on average 1.8 to 2.0 times the average wages in those countries. Globalised competition can force a 'race to the bottom' in wage rates and labour standards. It can also foster a 'brain drain' of skilled workers, where highly educated and qualified professionals, such as doctors, engineers and IT specialists, migrate to developed countries to benefit from the higher wages and greater career and lifestyle prospects. This creates severe skilled labour shortages in developing countries.   10.   International migration has led to greater recognition of diversity and respect for cultural identities which is improving democracy and access to human rights. Indigenous and national culture and languages can be eroded by the modern globalised culture.   Source: AusAID, 2004, http://www.ausaid.gov.au/ Source: The World Bank, 2004, http://www.worldbank.org/ United Nations Development Programme, 2004 http://www.undp.org/ Balancing the globalisation scales Globalisation has costs and benefits. There have been examples of poorly managed globalisation (eg when countries opened their economic borders before they had the capacity to respond well) but there are also examples of well managed engagement with the international community. Like it or not, globalisation is a reality. Many countries have committed themselves to reducing poverty through the Millennium Development Goals (MDGs) and are cooperating together to work out smart ways to manage globalisation. Australia's response Australia is an example of a country that has benefited from globalisation, both in terms of exports (wool, wheat and minerals) and as a borrower of international capital. The standard of living Australians enjoy now can be attributed to its 'open' and, therefore competitive, economy. Australia lives in a region surrounded by populous developing countries and a significant proportion of our exports either go to, or pass through, developing countries. Through its aid program, Australia provides technical assistance, capacity building initiatives and investment, and information communication technologies to promote active participation in the global community. Australia is working to maximise the benefits and minimise the challenges presented to developing countries by globalisation. Virtual Colombo Plan (VCP) The Virtual Colombo Plan, a $200 million joint initiative of the Australian Government and World Bank, assists developing countries to access knowledge networks and improved education. It has provided: a high-speed broadband connection for the University of the South Pacific video-conferencing and internet centres in China, East Timor, PNG and Vietnam an internet portal to maximise the interchange of information about sustainable development and poverty reduction http://www.developmentgateway.com.au/ Trade and Development Australia is providing technical advice to developing countries to engage in trade negotiations and improve trade facilitation through more efficient port, customs and quarantine systems. Australia is also helping developing country economies maximise benefits from free trade opportunities, for example, by reform of domestic policy on trade related aspects of intellectual property rights. Australia also provides tariff and quota free access for all goods produced in the 49 Least Developed Countries. http://www.ausaid.gov.au/publications/pubout.cfm?ID=8919_7048_6624_3702_4235 http://www.dfat.gov.au/

International Monetary Fund (IMF) URL:  http://www.imf.org/external/index.htm The official site for the International Monetary Fund (IMF). The IMF is a sister institution to the World Bank in the United Nations system. It shares the same international membership and the same goal of raising living standards in its member countries. It works to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth and reduce poverty. Contents of the site include a clear explanation of the role of the IMF, a FAQ, the Annual Report 1998, member nations, current issues on world finance and a range of interesting articles. Site relevant for Upper Secondary students studying Economics, Accounting, Politics and History. Suitable for Secondary, Teacher Reference. World Bank URL:  http://www.worldbank.org/ The World Bank Group's mission is to fight poverty and improve the living standards of people in the developing world. It is a development bank which provides low-interest loans, interest-free credit, grants, policy advice, technical assistance and knowledge sharing services to low and middle-income countries to reduce poverty. The Bank promotes growth to create jobs, and to empower poor people to take advantage of economic opportunities. The Bank is strongly committed to the Millennium Development Goals which target poverty, school enrolments, child mortality, maternal health, disease, and access to water. It is currently involved in more than 1,800 projects, in virtually every sector and developing country. World Social Forum (WSF) URL:  http://www.forumsocialmundial.org.br/index.php?cd_language=2&id_menu= The World Social Forum (WSF) is an amalgamation of many political/social movements from around the world. It was created to openly discuss alternatives to the model for globalisation formulated by the World Economic Forum, large multinational corporations, national governments, IMF, the World Bank and the WTO. It is working to demonstrate that the path to sustainable development, social and economic justice lies in alternative models for people-centred and self-reliant progress, rather than in neo-liberal globalisation. World Trade Organisation URL:  http://www.wto.org/ The World Trade Organization (WTO) is a global international organisation dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world's trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their business.

Computer technology has made long distance learning an everyday reality for these students in Ningxia Province, China My Thuan Bridge, Mekong River, near Vinh Long, southern Vietnam Customs Officers in their new AusAID-funded computer room in the Customs Department offices in Apia, Samoa

Global income is more than $31 trillion a year but 1.2 billion of the world's population earn less than $1 a day