Globalization and Developing Countries
Definition of Globalization
Globalization (or Globalisation) refers to the increasingly global relationships of culture,
people, and economic activity. It is generally used to refer to economic globalization: the global
distribution of the production of goods and services, through reduction of barriers to international
trade such as tariffs, export fees, and import quotas and the reduction of restrictions on the
movement of capital and on investment.
The economic case for the benefits of globalization is well documented. Larger, international
markets allow for more efficient, effective allocation of limited human, physical and financial
resources. Global competition fosters innovation and improvements in organizations, goods and
services. Through these market mechanisms, economic globalization leads to economic growth,
international development and, overall, higher standards of living.
Prominent indicators of economic globalization include international trade volumes, levels of
foreign direct investment (FDI), and the growing number of top companies from developing
countries. The share of the world’s largest 500 companies that are based in emerging markets
doubled in just five years, from 8.2 percent in 2005 to 17.4 percent in 2010 according to The
As multinational corporations invest in international operations and expand their global value
chains, intra-firm trade between related subsidiaries in different countries contributes to a
substantial share of the growth in international trade and increase in economic globalization.
Global Work Force and Human Migration
The global work force is more mobile than ever before. Workers move within and across
national borders to take advantage of the ample economic opportunities arising from
international development and economic globalization. In the European Union (EU), workers
move freely between countries to improve their economic prospects by finding the best fit
between their skills and employers’ needs.
In developing countries, many people move to dynamic, growing cities to find more attractive
employment opportunities with local companies serving international markets or foreign
multinational corporations that set up shop to serve the local market. In China, migrant workers’
annual trek home from the cities to visit family for the Spring Festival and Chinese New Year
leads to the world’s largest human migration.
Many workers from developing countries travel to foreign shores to improve their employment
prospects and quality of life. Remittances from migrant workers within and across national
borders improve the living standards of families in distant, less developed hometowns and can
even play significant roles in supporting the national economies of migrants’ home countries.
Science and Technology
Over 35 percent of science research articles are the result of international collaborations among
researchers from different countries, a 40 percent increase from 15 years ago, according to a
2011 study by the U.K.’s Royal Society. The number of internationally co-authored papers has
more than doubled since 1990. Fourteen countries in the Royal Society study experienced more
than a three-fold increase in their standard domestic publication impact by collaborating with one
or more of 22 partner countries.
Developing countries, particularly the BRIC nations of China, India and Brazil, account for a
large portion of the increase in science research publications. From 2002 to 2007, the three BRIC
countries more than doubled their spending on science research, bringing their collective share of
global spending up from 17 to 24 percent.
The Effects of Economic Globalization on Developing Countries
Financial and industrial globalization is increasing substantially and is creating new
opportunities for both industrialized and developing countries. The largest impact has been on
developing countries, who now are able to attract foreign investors and foreign capital. This has
led to both positive and negative effects for those countries.
Increased Standard of Living
Economic globalization gives governments of developing nations access to foreign lending.
When these funds are used on infrastructure including roads, health care, education, and social
services, the standard of living in the country increases. If the money is used only selectively,
however, not all citizens will participate in the benefits.
Access to New Markets
Globalization leads to freer trade between countries. This is one of its largest benefits to
developing nations. Homegrown industries see trade barriers fall and have access to a much
wider international market. The growth this generates allows companies to develop new
technologies and produce new products and services.
Widening Disparity in Incomes
While an influx of foreign companies and foreign capital creates a reduction in overall
unemployment and poverty, it can also increase the wage gap between those who are educated
and those who are not. Over the longer term, education levels will rise as the financial health of
developing countries rise, but in the short term, some of the poor will become poorer. Not
everyone will participate in an elevation of living standards.
The influx of foreign companies into developing countries increases employment in many
sectors, especially for skilled workers. However, improvements in technology come with the
new businesses and that technology spreads to domestic companies. Automation in the
manufacturing and agricultural sectors lessens the need for unskilled labor and unemployment
rises in those sectors. If there is no infrastructure to help the unemployed train for the globalized
economy, social services in the country may become strained trying to care for the new
Driving Forces for Globalization
The phenomenon seems to be driven by three major forces: globalization of all product and
financial markets, technology and deregulation. Globalization of product and financial markets
refers to an increased economic integration in specialization and economies of scale, which will
result in greater trade in financial services through both capital flows and cross-border entry
activity. The technology factor, specifically telecommunication and information availability,
have facilitated remote delivery and provided new access and distribution channels while
revamping industrial structures for financial services by allowing entry of non-bank entities such
as telecoms and utilities.
Deregulation pertains to the liberalization of capital account and financial services in products,
markets and geographic locations. It integrated banks by offering a broad array of services,
allowed entry of new providers and increased multinational presence in many markets and more
In a global economy, power is the ability of a company to command both tangible and intangible
assets that create customer loyalty, regardless of location. Independent of size or geographic
location, a company can meet global standards and tap into global networks, thrive and act as a
world class thinker, maker and trader, by using its greatest assets: its concepts, competence and