What’s in it for us? Globalisation, International Institutions and the Less Developed Countries

Abstract

Globalisation is a relatively undefined concept. While most people have an intuitive notion of what it means, no scholarly consensus yet exists as to its form and parameters. Globalisation concerns the freeing up of the flow of trade and capital as well as the standardisation of products and production processes, and it also increasingly involves an ever more important role for international organisations. It is about making the world a smaller place by ensuring quick and inexpensive transport of people and goods and, very importantly, of information. In a broader and more politicised context, globalisation reflects the dominance of liberal economic processes over political sovereignty. It forces people all over the globe into a mode of living that renders them dependent on market transactions. It forces countries and governments to open their borders for the flow of trade and capital and to submit their trade and financial regimes to the international economic order. Within that order, the World Trade Organisation (WTO) and the International Monetary Fund (IMF) operate as a kind of a 'global government'. It is, therefore, not surprising that these institutions come under close scrutiny with particular regard to content of their economic policies and to the manner in which they account for these policies. Globalisation is generally welcomed by economists who expect significant benefits from free trade and the free flow of capital. Anti-globalists are highly critical of the effects that unrestricted market processes have on the poor people of the world and are highly suspicious of the global institutions that purportedly 'govern' the world economy. Notably, both anti-globalists and advocates of globalisation share at least one set of similar aims, namely to provide higher levels of income and to ensure a greater welfare for the poor in the world. Yet both the sceptics and the supporters of globalisation find themselves advocating radically different policies. This is caused in good measure by their highly conflicting evaluations of the costs and benefits of free market policies. Disputes over issues related to the accountability of the WTO and the IMF arise. Antiglobalists, in particular, accuse these institutions of serving only those parties who have an interest in the broadening of the liberal economic order [i.e. rich Western countries and multinational corporations] and of denying the interests of the so-called developing countries or countries in transition. Globalists, in turn, consider these institutions as guardians of the level playing field. This essay focuses on the effects of globalisation on the developing [i.e. poor] countries, particularly with respect to both trade and finance issues where important roles are reserved for the global economic institutions - the WTO and the IMF. The WTO shapes the platform for international trade while the IMF concerns itself with international financial stability. This essay analyses the benefits and the costs of both free trade and capital flows and will link them to the costs and benefits of relinquishing a portion of sovereignty by participation in the global economy. Further, this essay discusses the importance of economic growth to the challenge of relieving poverty as well as discusses the contributions which free trade and free capital flows can make to economic growth, especially with regard to of developing countries. The author argues that the WTO and the IMF exert a positive influence in the process of establishing the conditions for economic growth in developing countries and that participation in these institutions is the best option for developing countries to advocate and to advance their interests. This essay has four sections. Section 2 first describes the level of development of poor countries and then critically assesses various competing strategies for economic growth. Section 3 concentrates on the consequences of the free trade of goods and the free flow of capital on developing countries, and Section 4 discusses the contribution of the international institutions towards the development of poor countries. Part 5 presents concluding remarks.