CHAPTER 2 LITERATURE REVIEW
2.4. G LOBALIZATION AS A THREAT
2.4.1. Increased inequality
According to Kaplinsky (2013), globalization has only helped in propagating the interests of the developed world at the expense of the developing economies. The dismantling of trade barriers in many developing countries over the past 20 years has exposed them to foreign technologies which to some is a blessing while to others is a curse (Docquier & Rapoport, 2012). Kaplinsky (2013) notes that there is a deliberate disregard of developing countries’ contributions when effects of globalization are discussed at various international fora. The IMF (2000) also shares the same view and suggests that the high levels of income inequality across the globe are a direct result of globalization. The reality is that developed countries command a much bigger voice in influencing political and economic policies across the globe;
particularly in many countries across Africa (Kaplinsky, 2013). The situation has been worsened by Multi-national Corporations operating in developing countries (Wei, 2013). According to Robert and Lajtha (2002:185), “these multinational companies take advantage of the cheap labour that can be obtained from developing countries to increase their own competitiveness”. Studies conducted by the World Economic Outlook (2000) indicate that while evidence show a substantial increase in the income per capita recorded in the past decade, a substantial income gap exist between the developed and
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developing countries (IMF, 2000). This evidence exposes the negative effects of globalization (Jaumotte
& Papageorgiou, 2013).
2.4.2. Increased control by developed countries
Trade liberalization has increased the level of control over developing countries by developed countries through their foreign policies (Sassen, 2013). Zedillo (2007:37) also notes that “these policies are often seemingly meant to address particular developing countries’ interests while in fact they are meant to advance the interests of the developed countries.” Unfortunately, developing countries are expected to comply as failure to do so usually result in the withdrawal of financial assistance or other punitive economic moves (Sassen, 2013). Asongu, (2014) notes that countries which receive such aid often do not have the freedom to spend the money in projects of their choice as such decisions are made by the donor country. It has been further noted that “while the concept of dominance is true, it is the example of the struggle for dominance that characterizes societies as one society strives to outdo the other for purposes of achieving dominance” (Joseph, 2003:44). Wei (2013) argues that it can be argued with great conviction that challenges faced by developing countries cannot solely be blamed on globalization but also increased control by donor countries.
2.4.3. Competition and the threat to workforce
Research suggests that the utilization of advanced technology alone is not a guarantee of success in the global market as companies must consider the concept of economies of scale which are better understood by the developed world with access to many cheap resources (Islam & Meade, 2012). This strategically positions global companies at a position to outcompete the developing world through the supply of lowly priced products such as clothing and textiles (Islam & Meade, 2012). Such a development has led to a plethora of unintended consequences, including the closure of many companies in developing countries (IMF, 2000). This exacerbates the current challenges as the development agenda of developing countries now largely depends on the benevolence of developed countries (Ariely, 2012). As noted by Whiteford and Wright-St Clair (2004:45), “companies should rationalize production so as to ensure that they are as efficient as possible to compete with others in the market.” One of the major challenges which affects the growth of developing economies is the simplicity with which individuals are able to move from one country to another (IMF, 2004). This has a direct impact on the human resources pool of developing counties as experienced and qualified personnel are migrating to developing countries in large numbers where they are assured of green pastures (Labedz & Berry, 2013). Globalization has thus created a new international workforce which requires cultural adjustment and functional knowledge on the part of
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management (Akanbi & Itiola, 2013). The high labour mobility has thus created an uneven playing field in the globalization discourse (Akanbi & Itiola, 2013). Consequently, even in cases where corporates want to modernize their operations in the face of globalization, experienced personnel to operate such technologies may not be available from the domestic market, thus finding an opportunity to blame globalization for their current misfortunes (Akanbi & Itiola, 2013).
2.4.5. Globalization and unemployment
Many authors argue that globalization has resulted in an increase in the levels of unemployment as the demand for low skills manpower domiciled in developing countries is declining as many companies instead acquire advanced technology (Spence, 2011; IMF, 2000; Anyanwu, 2013). “The international demand for workers with specialized skills has increased while increasing unemployment to the low skilled labour often found in the clothing and textile sectors of the economy” (IMF, 2000). The reason is that the specialized skilled worker is now in high demand in order to work side by side with the advanced technology which works well in the presence of such highly skilled manpower (Golub & Hayat 2014;
Adams & Sakyi, 2012). Therefore, it can be argued that the process of globalization leads to higher levels of unemployment particularly in developing countries and in industries where low skills have traditionally been in high demand such as in the clothing and textile sector (Golub & Hayat 2014; Monga, 2013).
However, in contrast, Scholte (2000:34) asserts that “it is not certain whether cross border production will lead to the loss of job security and lower wages.” Globalization is thus not necessarily disadvantaging the workers (Scholte, 2000). Beck (2000: 17) also agrees that “it is mainly the labour intensive and lowly skilled workers whose demand is diminishing worldwide due to the competition in the world economy and therefore it can be argued that globalization has led to unemployment in many developing economies.” A research on globalization and its effect on poverty alleviation by Collier and Dollar (2002), noted that due to globalization, levels of poverty across countries in the developing world are likely to decline by half by the end of year 2015. A related study by The World Bank Development Research group (2002) which focused on the effect economic integration and trade liberalization found results which support the assertions by Collier and Dollar (2002). Okeke and Nwal (2013:70) posit that
“despite the notable challenges of unemployment in many African states, increased international trade facilitated by the free movement of international capital helps to reduce poverty and unemployment across the world thus ratifying the importance of globalization.”
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