Impact of Globalisation on Developing Countries and India

Impact of Globalisation on Developing Countries and India by Chandrasekaran Balakrishnan

Chandrasekaran Balakrishnan for The 2004 offatt !ri"e in #conomics Introduction: Globalisation is the new buzzword that has come to dominate the world since the nineties of the last century with the end of the cold war and the break-up of the former Soviet Union and the global trend towards the rolling ball. he frontiers of the state with increased reliance on the market economy and renewed faith in the private capital and resources! a process of structural ad"ustment spurred by the studies and influences of the #orld $ank and other International organisations have started in many of the developing countries. %lso Globalisation has brought in new opportunities to developing countries. Greater access to developed country markets and technology transfer hold out promise improved productivity and higher living standard. $ut globalisation has also thrown up new challenges like growing ine&uality across and within nations! volatility in financial market and environmental deteriorations. %nother negative aspect of globalisation is that a great ma"ority of developing countries remain removed from the process. ill the nineties the process of globalisation of the Indian economy was constrained by the barriers to trade and investment liberalisation of trade! investment and financial flows initiated in the nineties has progressively lowered the barriers to competition and hastened the pace of globalisation
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1efinition: Globalised #orld - #hat does it mean: 1oes it mean the fast movement of people which results in greater interaction: 1oes it mean that because of I revolution people can be in touch with each other in any part of the world: 1oes it mean trade and economy of each country is open in ;on-Intrusive way so that all varieties are available to consumer of his choice: 1oes it mean that mankind has achieved emancipation to a level of where we can say it means a social! economic and political globalisation: hough the precise definition of globalisation is still unavailable a few definitions worth viewing! Stephen Gill: defines globalisation as the reduction of transaction cost of transborder movements of capital and goods thus of factors of production and goods.Guy $rainbant: says that the process of globalisation not only includes opening up of world trade! development of advanced means of communication! internationalisation of financial markets! growing importance of 9;,<s! population migrations and more generally increased mobility of persons! goods! capital! data and ideas but also infections! diseases and pollution
Impact on India:

India opened up the economy in the early nineties following a ma"or crisis that led by a foreign e'change crunch that dragged the economy close to defaulting on loans. he response was a slew of 1omestic and e'ternal sector policy measures partly prompted by the immediate needs and partly by the demand of the multilateral organisations. he new policy regime radically pushed forward in favour of amore open and market oriented economy. 9a"or measures initiated as a part of the liberalisation and globalisation strategy in the early nineties included scrapping of the industrial licensing regime! reduction in the number of areas reserved for the public sector! amendment of the monopolies and the restrictive trade practices act! start of the privatisation programme! reduction in tariff rates and change over to market determined e'change rates. =ver the years there has been a steady liberalisation of the current account transactions! more and more sectors opened up for foreign direct investments and portfolio investments facilitating entry of foreign investors in telecom! roads! ports! airports! insurance and other ma"or sectors. he Indian tariff rates reduced sharply over the decade from a weighted average of >6.?@ in +AA+-A6 to 6B.0 in +AA0-A>. hough tariff rates went up slowly in the late nineties it touched 2?.+@ in 6--+--6. India is committed to reduced tariff rates. *eak tariff rates are to be reduced to be reduced to the minimum with a peak rate of 6-@! in another 6 years most non-tariff barriers have been dismantled by march 6--6! including almost all &uantitative restrictions. India is Global: he liberalisation of the domestic economy and the increasing integration of India with the global economy have helped step up G1* growth rates! which picked up from ?.0@ in +AA--A+ to a peak level of >>.C@ in +AA0-A>. Growth rates have slowed down since the country has still bee able to achieve ?-0@ growth rate in three of the last si' years. hough growth rates has slumped to the lowest level B.2@ in 6--6--2 mainly because of the worst droughts in two decades the growth rates are e'pected to go up close to >-@ in 6--2--B. % Global comparison shows that India is now the fastest growing "ust after ,hina. his is ma"or improvement given that India is growth rate in the +A>-<s was very low at 2@ and G1* growth in countries like $razil! Indonesia! 8orea! and 9e'ico was more than twice that of India. hough India<s average annual growth rate almost doubled in the eighties to ?.A@ it was still lower than the growth rate in ,hina! 8orea and Indonesia. he pick up in G1* growth has helped improve India<s global position. ,onse&uently India<s position in the global economy has improved from the Cth position in +AA+ to Bth place in 6--+. #hen G1* is calculated on a purchasing power parity basis. Globalisation and *overty: Globalisation in the form of increased integration though trade and investment is an important reason why much progress has been made in reducing poverty and global ine&uality over recent decades. $ut it is not the only reason for this often unrecognised progress! good national polices ! sound institutions and domestic political stability also matter. 1espite this progress! poverty remains one of the most serious international challenges we face up to +.6 billion of the developing world B.C billion people still live in e'treme poverty. $ut the proportion of the world population living in poverty has been steadily declining and since +ACthe absolute number of poor people has stopped rising and appears to have fallen in recent years despite strong population growth in poor countries. If the proportion living in poverty had not fallen since +AC> alone a further 6+?million people would be living in e'treme poverty today. India has to concentrate on five important areas or things to follow to achieve this goal. he areas like technological entrepreneurship! new business openings for small and medium enterprises! importance of &uality management! new prospects in rural areas and privatisation of financial institutions. he

manufacturing of technology and management of technology are two different significant areas in the country. here will be new prospects in rural India. he growth of Indian economy very much depends upon rural participation in the global race. %fter implementing the new economic policy the role of villages got its own significance because of its uni&ue outlook and branding methods. 4or e'ample food processing and packaging are the one of the area where new entrepreneurs can enter into a big way. It may be organised in a collective way with the help of co-operatives to meet the global demand. Understanding the current status of globalisation is necessary for setting course for future. 4or all nations to reap the full benefits of globalisation it is essential to create a level playing field. *resident $ush<s recent proposal to eliminate all tariffs on all manufactured goods by 6-+? will do it. In fact it may e'acerbate the prevalent ine&ualities. %ccording to this proposal! tariffs of ?@ or less on all manufactured goods will be eliminated by 6--? and higher than ?@ will be lowered to C@. Starting 6-+- the C@ tariffs will be lowered each year until they are eliminated by 6-+?. G1* Growth rate: he Indian economy is passing through a difficult phase caused by several unfavourable domestic and e'ternal developmentsD 1omestic output and 1emand conditions were adversely affected by poor performance in agriculture in the past two years. he global economy e'perienced an overall deceleration and recorded an output growth of 6.B@ during the past year growth in real G1* in 6--+-6 was ?.B@ as per the Economic Survey in 6-----+. he performance in the first &uarter of the financial year is?.C@ and second &uarter is 0.+@. E'port and Import: India<s E'port and Import in the year 6--+--6 was to the e'tent of 26!?>6 and 2C!206 million respectively. 9any Indian companies have started becoming respectable players in the International scene. %griculture e'ports account for about +2 to +C@ of total annual of annual e'port of the country. In 6-----+ %gricultural products valued at more than US F 0million were e'ported from the country 62@ of which was contributed by the marine products alone. 9arine products in recent years have emerged as the single largest contributor to the total agricultural e'port from the country accounting for over one fifth of the total agricultural e'ports. ,ereals Gmostly basmati rice and non-basmati riceH! oil seeds! tea and coffee are the other prominent products each of which accounts fro nearly ? to +-@ of the countries total agricultural e'ports. #here does Indian stand in terms of Global Integration: India clearly lags in globalisation. ;umber of countries have a clear lead among them ,hina! large part of east and far east %sia and eastern Europe. Iets look at a few indicators how much we lag. =ver the past decade 41I flows into India have averaged around -.?@ of G1* against ?@ for ,hina ?.?@ for $razil. #hereas 41I inflows into ,hina now e'ceeds US F ?- billion annually. It is only US F Bbillion in the case of India ,onsider global trade - India<s share of world merchandise e'ports increased from .-?@ to .->@ over the pat 6- years. =ver the same period ,hina<s share has tripled to almost B@. India<s share of global trade is similar to that of the *hilippines an economy 0 times smaller according to I94 estimates. India under trades by >--C-@ given its size! pro'imity to markets and labour cost advantages. It is interesting to note the remark made last year by 9r. $imal Jalan! Governor of 3$I. 1espite all the talk! we are now where ever close being globalised in terms of any commonly used indicator of globalisation. In fact we are one of the least globalised among the ma"or countries - however we look at it.

%s %martya Sen and many other have pointed out that India! as a geographical! politicocultural entity has been interacting with the outside world throughout history and still continues to do so. It has to adapt! assimilate and contribute. his goes without saying even as we move into what is called a globalised world which is distinguished from previous eras from by faster travel and communication! greater trade linkages! denting of political and economic sovereignty and greater acceptance of democracy as a way of life. ,onse&uences: he implications of globalisation for a national economy are many. Globalisation has intensified interdependence and competition between economies in the world market. his is reflected in Interdependence in regard to trading in goods and services and in movement of capital. %s a result domestic economic developments are not determined entirely by domestic policies and market conditions. 3ather! they are influenced by both domestic and international policies and economic conditions. It is thus clear that a globalising economy! while formulating and evaluating its domestic policy cannot afford to ignore the possible actions and reactions of policies and developments in the rest of the world. his constrained the policy option available to the government which implies loss of policy autonomy to some e'tent! in decision-making at the national level.

Opportunities and Risks of Globalization

,haired $y Iord ,allaghan of ,ardiff +C-6- 9arch +AA> #ashington! 1.,. Introduction +. Since the +A>-s! the far reaching changes that have taken place in the world economy have been collectively called globalization. his term describes the e'tension of the traditional patterns of international economic activity to high levels and to new areas: technology! trade! production! finance! investment! and information. ;ew regions of the world have been embraced. 6. he first ma"or development is the dramatic advances which have been achieved in information technology in the past two decades. %s telecommunications and computers have become more sophisticated! the flow of information between geographically distant parts of the globe has dramatically increased. International enterprises are able to disperse production world-wide whilst retaining tight day by day control. 2. he second ma"or development and! to a considerable e'tent! a corollary of this

information revolution! is the acceleration and intensification of international financial flows. =ver the last two decades! we have seen a progressive shift from segmented national finance markets to a single global finance market characterised by an enormous pool of highly mobile funds. B. he third ma"or development! again heavily influenced by the information revolution! is the incorporation of new regions of the globe into the open world economy. he ongoing transition of 3ussia from state socialist to capitalist market economy! the increasing marketization of the ,hinese economy! and the liberalisation of many less developed economies! has for the first time lent the open market system a truly global scope! and added a huge new labour force to the world market. ?. hese developments have acted to integrate the world economy! and at the same time to intensify competition between individual countries as both the number of players! and the size of the stakes! have increased. his intensification of competition has &ualitatively changed the nature of the market place! necessitating a radical shift in economic policies and business strategies. 0. hese developments are unstoppable and offer significant opportunities to raise aggregate living standards across the world in the long term. Economies in %sia! and increasingly in Iatin %merica! which have embraced this shift and pursued e'port oriented! open market strategies! have succeeded in capturing vital foreign investment and vital market share! and thus attained high levels of growth. In the medium term this will increase their political influence. >. Globalization will not of itself improve a nation<s economic well-being. he new conditions have created the potential for serious problems in the world economy. hese problems can be categorised in terms of: GaH % danger that the scale of capital movements and the lack of regulation may permit a serious dislocation to occur within financial markets with serious ramifications for the world economy as a whole. GbH % danger that! whilst many countries have succeeded in taking advantage of the opportunities of globalization! others! most noticeably in sub-Saharan %frica! have failed to do so! and are becoming increasingly marginalised in what has become a two track world economy. GcH % danger that developed economies will fail to ad"ust to the increased competition in the world economy! leading to a backlash against globalization and a s&uandering of the opportunities offered by it.

C. Such risks must be managed and overcome. It is essential that we do not allow the reality of globalization to persuade us that nothing can be done to address the challenges that it poses. #hilst nation states may have declined in power! they retain a considerable scope for action within their own boundaries! and they can recover many of their previous capabilities by multilateral cooperation. Globalization is an opportunity we must take advantage of! not an alibi for inaction. he future welfare of all the world<s peoples cannot become a mere handmaiden of impersonal international market forces. $old and enlightened leadership! and close co-operation will be re&uired. *tabilising the international financial system A. he scale of current international financial flows! the impact of speculative movements! and the rapidity with which such movements take effect and spread across the globe! raise the danger of a serious dislocation occurring in financial markets. .et the decline of the $retton #oods system! and! more broadly! of the capability Gand readinessH of the US to play the role of hegemonic stabiliser! has deprived the markets of the regulation necessary to control such dislocations and minimise the danger of their destabilising other sectors of economic activity. +-. In this conte't! the contemporary failure to cooperate on financial matters recalls the failure to cooperate on trade matters in the +A2-s! with all of its attendant conse&uences of depression! widespread unemployment! and even social disorder. It is evident now that there is a disconnection between the competitive economic strength of some countries and their e'change rates. #hilst attempts to manipulate e'change rates and ta' levels in order to capture investment opportunities may seem beneficial to individual states in the short term! such a stance will inevitably have negative ramifications at a systemic level in the long term. ,ooperation between the ma"or groups of economies is an essential prere&uisite for successful management of the changes implied by globalization. ++. he e'isting framework of international institutions is inade&uate for the needs of the ne't century! and should be overhauled and strengthened. 4ormerly e'cluded powers must be swiftly and fully incorporated into its structure. %s regards the G>! the e'pansion of 3ussia<s role is a positive move! and this status should also be e'tended to ,hina. $oth should also be permitted! and assisted! to fulfil the obligations that will enable them to participate as full

members in all world institutions. In its early days the Group of > fulfilled a useful co-ordinating and informing purpose and it could once more fulfil such a role if it were to abandon its present practice when the leaders meet! of a formalistic e'change of bureaucratic positions uttered largely for the benefit of domestic audiences. Such meetings need a much smaller bureaucratic involvement and hopefully a much reduced media presence. *articipation should eventually be e'tended to nations such as India and $razil! and the dynamic economies of the %sian community! as they grow. +6. % single European currency! as envisaged by the 9aastricht treaty! would go a long way towards establishing a more stable e&uilibrium between the United States! Japan! and the European Union! as the controllers of the three ma"or reserve currencies! imposing a disciplining effect on individual states! and providing the basis for genuine cooperation to address systemic problems. +2. *rudent domestic policy is an essential prere&uisite for e'change rate stability! but it is not of itself sufficient. here is a need for urgent consultation and co-ordination on the e'tent to which any country is able to manipulate e'change rates for domestic purposes. GiH #hilst recognising the difficulties involved! we reiterate the recommendation to e'plore the possible use of target zones! put forward in the Inter%ction ,ouncil report << o create a stable international financial system!<< GGeneva! 9arch +AA0! para 66H. GiiH he ability of countries to carry their foreign debt in their own currencies should be curbed. his has permitted certain states to escape the conse&uences of unsound fiscal policy by destructive e'change rate policies. hey have been able to run up e'cessive debts! and yet e'port the burdens to other countries by devaluation. +B. % further area of concern is the growth of derivative trading. #hilst such instruments undoubtedly perform a useful role in the international financial markets! participants can be e'posed to unacceptable losses when they are improperly used! with serious spill-over conse&uences for markets. %reas which demand immediate attention are how far non-banks should be permitted to trade! the re&uirement by law of larger margins! and the regulation of over-the-counter trades. +eintegrating developing economies into the ,orld economy +?. 9any developing countries are ill positioned to take advantage of the opportunities offered by globalization. he problems caused by their inade&uate educational provision!

widespread health problems! e'cessive population growth! and low population welfare levels! prevent them from attracting the foreign investment necessary to development. =ther factors such as large international debts! high military e'penditure! weak government structures! and endemic corruption! also inhibit their healthy development. %s a result! certain regions! most noticeably sub-Saharan %frica! are becoming increasingly marginalised in what is fast becoming a twin track world economy. he most important challenge facing us today in regard to these developing economies is to reintegrate them into the world economy. +0. 1evelopment *olicy: 4ast sustainable growth is a top priority and should be an essential part of I94 and #orld $ank policy. #hilst! for e'ample! fiscal concerns! environmental concerns! and the role of women! are priority issues! the elimination of poverty will not be achieved by these in isolation. he rural population constitutes a ma"ority in all of these countries! and giving priority to a reasonable financial return for their produce would do much to stimulate faster growth. he constant switch of donor priorities in the past has been a ma"or obstacle to consistent development! a constant shifting of goal posts which has prevented any coherent! long term strategy from emerging. he tendency to subordinate growth to other ob"ectives has ignored the fact that! without it! other problems are liable to remain insoluble. =nly if the overall ob"ective of growth is prioritised will developing economies gain the resources to solve their problems for themselves. +>. Investment: ,entral to achieving fast sustainable growth is the ability to attract foreign investment. 9ultilateral institutions have a vital role to play in creating an environment attractive to such investment! by fostering efficient government! legal reform! banking reform! and the development of capital markets. +C. =fficial 1evelopment %ssistance G=1%H remains an essential tool for promoting such growth! but it is not without its problems. hree reforms are necessary: GiH =1% should be targeted with much greater selectivity. he current scatter gun approach to much of it is too indiscriminate to produce results. GiiH =1% should be cut off from those countries which refuse to cut e'cessive defence spending. =therwise! aid becomes little more than a substitute for resources directed to the defence sector. GiiiH =1% should be focused on those countries which make ade&uate efforts to control

population growth and raise population welfare levels. Unless this problem is addressed! real growth in per capita incomes will be e'tremely difficult to achieve regardless of the level of aid. (our central areas should be given greater emphasis in -D$. GivH Education: if developing economies are to participate fully in the world economy it is essential that they be e&uipped with the skills necessary to meet foreign competitors on an e&ual footing. GvH 1isease control: in sub-Saharan %frica! for instance! infectious diseases Gespecially %I1SH and parasitic diseases Gespecially 9alariaH cause ?2@ of all deaths between ages +? and BB. In addition to current health assistance! biomedical support would seem to hold out the possibility of considerable gains. GviH he role of women: In order for family planning programs to succeed it is vital that they be preceded and accompanied by ade&uate education! especially for women! and legal reform to permit women to engage in business in their own right. GviiH Social protection: In addition to family planning programs! attention to social protection might enable us to address some of the root causes of the population growth! enabling people to have fewer children without fearing that they would be left unprovided for in old age. +A. rade: he current terms of trade discriminate against many developing economies! particularly sub-Saharan %frican states. here is a serious danger that! as the world increasingly organises into preferential blocs! and privileged hinterlands! such states will find themselves effectively e'cluded from the international trading system. his ine&uity must be addressed and fairer terms of trade established. In particular! given that the highest proportion of the population is employed in agriculture in such economies! developed states could make a great contribution to development by reducing and then eliminating the subsidies they currently provide to their own agricultural sectors. hese subsidies not only undermine developing economies but also represent a serious distortion within their own societies. #hilst it must be recognised that this might have a detrimental impact on rural areas! this could be more than offset by transferring a portion of the money saved to rural regeneration pro"ects. +estructuring developed economies to meet the challenge of globali"ation 6-. 9any developed economies are failing to ad"ust to the new conditions created by globalization. Sectors of economies in a number of countries are handicapped by infle'ible

labour practices and inade&uate educational and training provision! making new investment less attractive. ,onse&uently! although these countries are undoubtedly benefiting in aggregate terms from the new conditions! these benefits are tending to be distributed unevenly! and an increasingly large! predominantly unskilled! section of their societies is becoming marginalised. %t the same time! many of these states! particularly those in #estern Europe! are finding it harder to finance ade&uately the welfare services which represented the basis of the social contract with their societies during the post war period. his raises the prospect of a backlash against globalization which may s&uander the opportunities offered by it. 6+. he first step in addressing this situation must be for the political leaders of developed economies to refrain from using competition from low wage economies as a scapegoat for their domestic problems. here is currently insufficient data to support the purported connection between competition from low wage economies and rising ine&uality and unemployment in the developed world. Indeed! the general correspondence between wage levels and productivity levels suggests that such a connection is unlikely to materialise in a ma"ority of economic sectors. 1eveloped world problems should be seen first and foremost as products of developed world conditions. 66. he central task which confronts these states is therefore! not to protect their economies from low wage competition! but rather to raise productivity levels ahead of wage levels. =nly if productivity levels can be so raised will developed economies regain their competitiveness. his implies: GiH %n effort to restructure labour markets in order to create a more fle'ible system of employment practices. GiiH %n attempt to enhance basic educational and vocational training capabilities! particularly in the use of new technologies. 62. %t the same time! however! there should be an effort to alleviate some of the worst conse&uences of the transition! offset the rising ine&ualities between skilled and unskilled labour within developed countries! and mitigate the shift in power which is occurring between increasingly mobile capital and largely static labour. Governments must provide both a safety net for those left unemployed by this shift! and retraining opportunities to enable them to reenter the "ob market. 6B. It is essential that these measures be placed into a broader conte't of an effort to build a new industrial democracy! based on social understanding and the fostering of consensus. he

social contract which has underlain the advanced industrial democracies for the last fifty years needs to be redesigned to accommodate the changed circumstances produced by the process of globalization. Some form of contract is not merely an essential bulwark against e'tremist reactions to globalization! but also an essential foundation of a continuation of consensual politics in those countries. he counterpart to demanding responsible wage settlement on the part of labour! for instance! must be a recognition of the responsibility to support those adversely affected by the process of globalization on the part of the state. Conclusion 6?. It must be noted! by way of conclusion! that it is ultimately impossible to consider the economic issues posed by globalization in isolation from the broader geopolitical conte't in which they rest. If we are to take advantage of the opportunities of globalisation! a relatively stable strategic environment is an essential precondition. .et this is by no means as secure as much of the triumphalism associated with the end of the ,old #ar would seem to suggest. In many regions of the world! such as the former Soviet Union! $alkans! 9iddle East! Indian Sub-continent! and East %sia! there remains a potential for conflict which! if allowed to develop unchecked! could have serious implications for our chances of meeting the challenge of globalisation. It would therefore seem essential that the structure of economic governance proposed here be supplemented by an enhanced structure of security governance. he precise shape which such a structure might take is beyond the scope of this working group! involving! as it would! the future of the United ;ations and the Security ,ouncil! the relationship of ;% = with 3ussia! the settlement of the 9iddle East! and other regional problems. $ut we are clear that there is a need for urgent consultation and cooperation to enhance stability in these parts of the world.

Panel 1: Economic Development, Economic Growth and International Trade Carnegie Endowment for International Peace Globalization and the Developing Countrie : The Ine!ualit" #i $ Remarks at Overseas Development Council Conference, Making Globalization Work, International Trade Center, Was ington, D!C!, Marc "#, "$$$ %anc& 'irdsall nbirdsall(ceip!org M& task is to talk about globalization and ine)ualit& in developing countries, *it emp asis on +atin ,merica! I ave a simple point to make- globalization puts developing countries at risk of increasing income ine)ualit&! T e increase in ine)ualit& in t e .nited /tates over t e last 01 &ears 2during * ic t e income of t e poorest 03

percent of ouse olds as fallen in real terms b& about "1 percent4 as been blamed, rig tl& or *rongl&, on c anges in trade, tec nolog& and migration patterns associated *it increasing economic integration *it ot er countries! 5or developing countries, an& risk of increasing ine)ualit& associated *it active participation in t e global econom& is even greater, if onl& because of t e greater in erent institutional *eaknesses associated *it being poor! +atin ,merica as a special disadvantage- its istorical legac& of alread& ig ine)ualit&! Ine)ualit& t at is alread& ig complicates t e task of effective conflict management, * ic Dani Rodrik as 6ust reminded us is a critical input to managing open economies! In t e past, for e7ample, ig ine)ualit& combined *it t e politics of redistribution led to periodic bouts of populism in +atin ,merica 8 ineffective and counterproductive efforts to manage t e conflicts provoked b& t e dangerous combination of ig ine)ualit& and ard times! +et me start *it t*o prefator& remarks! 5irst, globalization 8 t at is t e trend of increasing integration of economies in terms not onl& of goods and services, but of ideas, information and tec nolog& 8 as tremendous potential benefits for developing countries! %ot ing I sa& s ould suggest ot er*ise! T e c allenge is to realize t e potential benefits *it out undertaking uge offsetting costs! /econd, not all ine)ualit& is a bad t ing /ome ine)ualit& represents t e ealt & outcome of differences across individuals in ambition, motivation and *illingness to *ork! T isconstructive ine)ualit& provides incentives for mobilit& and re*ards ig productivit&! /ome *ould sa& constructive ine)ualit& is t e allmark of t e e)ual opportunit& societ& t e .!/! s&mbolizes! Increases in t is constructive ine)ualit& ma& simpl& reflect faster gro*t in income for t e ric t an t e poor 8 but *it all s aring in some gro*t ! 'ut of course it can also be true t at ine)ualit& is destructive, * en for e7ample it reflects deep and persistent differences across individuals or groups in access to t e assets t at generate income 8 including not onl& land 2* ic is e7tremel& une)uall& distributed in +atin ,merica4 but, most important in toda&9s global information age, t e asset of education! Obviousl& t is destructive ine)ualit& undermines economic gro*t and efficienc&, b& reducing t e incentives for individuals to *ork, to save, to innovate and to invest! ,nd it often results in t e perception if not t e realit& of in6ustice and unfairness 8 *it t e political risk in t e s ort term of a backlas against t e market reforms and market institutions t at in t e long term are t e critical ingredients of s ared and sustainable gro*t ! I ave t ree parts to m& remarks- first, on ine)ualit& and market reforms: second, on ine)ualit& and t e recent financial crisis: t ird, on * at to do, or more grandl& on polic& implications! %n Ine!ualit" and &ar$et #eform Consider some e7amples of o* t e market reforms associated *it globalization can affect ine)ualit& in developing countries! 5irst, trade liberalization! On t e one and, trade liberalization makes economies more competitive and t us is likel& to reduce dise)ualizing rents to insiders! T e end of import substitution programs and associated rationing of access to foreign e7c ange as probabl& been t e greatest single factor in reducing t e corrosive effects of corruption and rent;seeking in +atin ,merica! Trade liberalization can also generate ne* labor;intensive 6obs in agriculture and manufacturing 8 raising t e incomes for e7ample of t e rural poor! ,nd trade liberalization implies c eaper imports, reducing t e real costs of consumption for t e urban poor 8 * o after all unlike t e ric use most of t eir income for consumption! On t e ot er and, recent evidence s o*s t at trade liberalization leads to gro*ing *age gaps bet*een t e educated and uneducated, not onl& in t e O<CD countries but in t e developing countries! 'et*een "$$" and "$$1 *age gaps increased for si7 of seven countries of +atin ,merica for * ic *e ave good *age data! T e e7ception is Costa Rica, * ere education levels are relativel& ig ! ,pparentl& t e combination of tec nolog& c ange *it t e globalization of markets is raising t e demand for and t e *age premium to skilled labor faster t an t e educational s&stem is suppl&ing skilled and trainable *orkers! In +atin ,merica education levels ave been increasing, but painfull& slo*l& 8 *it for e7ample onl& "!1 &ears of additional education added to t e average education of t e labor force in t ree decades 2in contrast to t*ice t at increase in /out east ,sia4! ,nd t e distribution of education, t oug improving slo*l&, is still ig l& une)ual, meaning t at man& of toda&9s *orkers ave even less t an t e current average of about =!# &ears of completed sc ooling! In s ort, t e effect of trade liberalization on ine)ualit& depends 8 including on t e e7tent to * ic a countr&9s comparative advantage lies in 6ob;using agriculture or manufactured e7ports, and on t e e7tent to * ic education as been increasing and is alread& broadl& s ared! In Costa Rica, *it good education and a ig

proportion of t e relativel& poor engaged in small older coffee production, trade liberalization as ad e)ualizing effects! 'ut in Me7ico, * ere t e rural poor are concentrated in food production and education levels are still lo* and une)uall& s ared, income declined bet*een "$#> and "$$> for ever& decile of t e income distribution e7cept t e ric est, * ere it increased b& "1 percent! .nfortunatel& Me7ico is probabl& more t&pical t an Costa Rica! 5or t e region as a * ole, t oug trade liberalization is likel& to increase average incomes, it is also likel& to increase ine)ualit&, at least in t e near future, because education efforts ave lagged and because t e region9s comparative advantage 2ot er t an in Costa Rica and .rugua&4 is in capital;intensive rat er t an 6ob;creating natural resource;based production! , second e7ample is privatization! ?rivatization of utilities 2po*er, *ater, telecommunications4 as been good ne*s for t e lo*er deciles of t e income distribution all over t e developing *orld! W &@ 'ecause it as dramaticall& increased access to services! ?rior to privatization, publicl& managed utilities *ere c ronicall& insolvent financiall& and t us t eir services *ere ig l& rationed! T e ric ad access to *ater to fill t eir s*imming pools 2and often at artificiall& lo* prices meant to protect to t e poorA4 * ile t e poor paid 03 times t e unit cost to purc ase *ater from private trucks! On t e ot er and, it is increasingl& obvious t at privatization poses grave risks of concentrating *ealt unless done *ell and *it t e full complement of regulation! In small economies *it limited competition and ig concentrations of political and economic po*er, even privatization of firms t at in larger settings *it more arms; lengt and transparent market rules *ould face t e discipline of competition, can end up locking in rat er t an eliminating private privileges! In a recent poll in +atin ,merica, respondents agreed b& t ree to one to t e general statement t at Ba market is bestC! 'ut in ,rgentina, ?eru, Colombia, .rugua& and ?anama, fe*er t an alf supported t e idea t at privatization ad been beneficial 8 apparentl& because of t e *idespread perception t at t e ig costs of ne*l& privatized services reflect lack of real competition! Russia is of course t e most e7treme e7ample of t e danger t at corruption *ill infect t e privatization process! T ose of &ou familiar *it t e saga of t e privatization of banks in Me7ico in t e earl& "$$3s, and t e subse)uent political fallout in "$$# 2* en a sound proposal from t e tec nical point of vie* *as nearl& derailed b& t e political effects of t e "$$1 rescue of man& insider bank o*ners and borro*ers4 *ill recognize t e political risks associated *it a privatization process t at ends up reinforcing rat er t an diffusing initial ine)ualit& of *ealt and privileges! T e risks of privatization arise because developing and transitional economies, almost b& definition, are andicapped b& relativel& *eak institutions, less *ell;establis ed rules of transparenc&, and often, not onl& ig concentrations of economic and political po*er but a ig correlation bet*een t ose t*o areas of po*er! T ese conditions combine to make it difficult indeed to manage t e privatization process in a manner t at is not dise)ualizing! T ird- financial liberalization! On t e one and, t ere is little doubt t at lo*; and middle;income consumers and small and medium businesses *ere t e biggest losers in t e "$#3s *it t e repressed banking s&stems of +atin ,merica! Controls on interest rates reduced t eir access to an& credit at all, and government;run credit allocation favored small enterprises onl& on paper! /imilar arrangements almost surel& penalized t e middle class and t e poor in ,frica! In t e medium term, elimination of financial repression and t e increased competition of a modern and liberalized financial sector *ill increase access to credit for small enterprises and raise t e return to t e banking deposits * ic are t e principal ve icle for small savers! T e advantages for small business in turn is likel& to generate more good 6obs and raise *ages for t e *orking poor! Do*ever in t e s ort run at least, financial liberalization tends to elp t ose most * o alread& ave assets, increasing t e concentration of *ealt * ic undergirds in t e medium term a ig concentration of income! 5or one t ing, liberalization increases t e potential returns to ne* and more risk& instruments for t ose * o can afford a diversified portfolio and t erefore more risk, and * o ave access to information and t e relativel& lo*er transacting costs t at education and *ell;informed colleagues provide! In +atin ,merica, *it repeated bouts of inflation and currenc& devaluations in t e last several decades, t e abilit& of t ose *it more financial assets to move t em abroad 2often * ile accumulating corporate and bank debt t at as been socialized and t us eventuall& repaid b& ta7pa&ers4 as been particularl& dise)ualizing! In Me7ico bet*een "$#> and "$$> small savers * o kept t eir assets in bank savings accounts lost about 13 percent, * ile t ose able to invest in e)uit& instruments realized modest gains! T ose * o moved t eir assets into dollars or dollar;inde7ed instruments before t e "$$=;$1 devaluation did best of all in terms of local purc asing po*er!

%n Ine!ualit" and the 'inancial Cri i T e recent financial crisis as ig lig ted o* volatilit& associated *it global capital markets can compound t e problem of destructive ine)ualit& in developing countries! 5or e7ample, ig inflo*s of capital generate inflationar& pressure and urt labor;intensive agriculture and manufactured e7ports, especiall& but not onl& under fi7ed e7c ange rate regimes! In ,sia and +atin ,merica, Gini coefficients of ine)ualit& increased during t e boom &ears of ig capital inflo*s in t e mid;"$$3s, as portfolio inflo*s and ig bank lending fueled demand for s ort;term inelastic assets suc as land and stocks, favoring t e ric ! In bot regions t e poor gained less during t e boom, and t en lost more *it t e bust! During t e bust, *it capital fleeing, t e ig interest rates countries are forced to impose to protect t eir currencies 2again, * et er t e e7c ange rate is fi7ed or floating4, urt small capital; starved enterprises and t eir lo*;*age emplo&ees most, and of course reduce emplo&ment in general! In +atin ,merica, a ig ;interest environment also tends to benefit net savers and urt small debtors, *it a regressive impact: t is as certainl& been t e effect in Me7ico and 'razil! Delmut Reisen as recentl& pointed out t e additional regressive impact of t e fiscal cost of bank bailouts in developing countries, simpl& because t e redistributive impact of public debt tends to be negative! De recalls Ee&nes9 Tract on Monetar& Reform, * ere Ee&nes reminds us t at public debt implies a transfer from ta7pa&ers to rentiers! Worst of all in +atin ,merica9s istoricall& inflation;plagued economies 2t oug t is is notabl& muc less t e case t e toda&4, t e poor old cas , t e non;interest bearing part of t e debt * ic as been sub6ect to considerable inflation ta7! T e problem emerging markets face is a broader one! 'ecause global market pla&ers doubt t eir commitment to fiscal rectitude at t e time of an& s ock, t e& are forced into tig t fiscal and monetar& polic&, to re;establis market confidence, at precisel& t e moment * en in t e face of recession t e& *ould ideall& implement counter; c&clical fiscal and monetar& measures in order to stimulate t eir economies! T e austerit& policies t at t e global capital market demands of emerging markets are precisel& t e opposite of * at t e O<CD economies can afford to implement 8 suc relativel& automatic Ee&nesian stabilizers as unemplo&ment insurance, increased availabilit& of food stamps, and public *orks emplo&ment programs, t e ingredients of a modern and effective social safet& net! 5urt ermore *e kno* no* t at t e effects of unemplo&ment and bankruptc& on t e poorer alf of t e population can be permanent: in Me7ico increases in c ild labor force participation and reduced enrollment in sc ool during t e "$$1 do*nturn ave not been reversed! /imilarl& a collapse in emplo&ment opportunities for labor force entrants can ave lifetime effects on 6ob possibilit& and income;earning potential for t e affected co orts! %n (hat to Do: )re There Polic" Implication * T ere are implications for domestic polic&, and for international economic polic& as *ell! On t e domestic polic& side, one obvious implication of t e vulnerabilit& of emerging market economies to volatilit& in global capital availabilit& is to reduce reliance on foreign capital! Dani Rodrik emp asizes t e centralit& of a locall& financed investment pus to t e success of small open developing economies, impl&ing t e need to increase private andFor public savings! T e recent crisis ig lig ts, for a different reason, t e importance of public savings! If public spending in developing countries is to pla& a sociall& and economicall& efficient counterc&clical role during a do*nturn, public savings in t e form of a prior and precautionar& fiscal surplus as to ave alread& created t e necessar& fiscal space to finance safet& net programs! Toda& 'razil as virtuall& no suc fiscal fle7ibilit&, and is pa&ing a price in increasing ine)ualit&! C ile does ave space, and an& increase in ine)ualit& *ill be lo*er! Of course, maintaining and insulating politicall& a fiscal surplus is no eas& task 8 as t e current politics; of; t e;surplus debate in t e .!/! s o*s! In addition, t e developing countries face t e same problem as t e O<CD countries- raising revenue to finance a social safet& net re)uires ta7ing t e public! In a global econom&, t ere is some evidence t at it is increasingl& difficult to ta7 footloose capital 2and even to ta7 t e income of ig l& educated and internationall& mobile labor4! David Dale noted t is morning t at /ingapore and /out ,frica ave recentl& reduced corporate ta7es! /o countries ironicall& need to ta7 most in good times t ose * o are most vulnerable in bad times 8 and to t e e7tent t ese are t e innocent b&standers to t e e7cesses of t e boom and bust c&cles, t e impression if not t e realit& of unfair burden s aring is eig tened! ,ssured revenue for an effective safet& net minimizes t e *elfare and uman capital losses t e poor ot er*ise suffer *it economic or ot er s ocks! 'ut in t e medium run, t e best vaccine against ine)ualit& is *idespread

access to good education! In toda&9s global information age, education is t e people9s asset: t e more t ere is of it, t e lo*er t e ine)ualit& of real total *ealt in t e long run! It is still unfortunatel& t e case t at in man& countries of +atin ,merica, education is a ve icle for reinforcing rat er t an compensating for initial differences across ouse olds in income and *ealt ! I ave *ritten and spoken else* ere about t e need for aggressivel& targeted public programs to bring good education to t e poor! .nfortunatel& in a vicious circle, education for t e poor is a political and tec nical task made all t e more difficult * ere ig current income ine)ualit&, as in +atin ,merica, constrains effective demand of poor ouse olds and generates resistance of ric ouse olds to use of t e public fisc to finance effective basic sc ooling! , t ird ke& ingredient of domestic polic& to counter ine)ualit& is * at mig t be called an aggressive <O5 bias, i!e! constant and vigorous <)ual;Opportunit& 5ine;tuning of economic policies! 5or e7ample, if macroeconomic e)uilibrium re)uires ig interest rates, temporar& measures to ensure e)ual access to credit for small and micro enterprises ma& be *arranted! If a ma6or restructuring of t e financial sector is re)uired, distributional considerations demand t at bank s are olders assume t eir s are of losses: not all t e costs s ould be passed to depositors and ta7pa&ers! ?rivatization sc emes can make special provisions under * ic small investors can bu& small lots of s ares, and can borro* at reasonable rates to purc ase available s ares 8 as as been tried in ?eru: or can be arranged to generate *idel& distributed benefits for all citizens in t e form of future pension assets, as in 'olivia! W at about international economic programs and policies@ 5irst, t e international financial institutions could pa& muc more attention to t e political realit& of ine)ualit& of assets and income in developing countries! Conditionalit& associated *it international lending and grants could be muc more e7plicitl& focussed on slas ing subsidies t at benefit t e ric , on encouraging and financing market;consistent land reform, and most important, on ensuring t at t ere is effective public education, on * ic t e poor so eavil& depend if t e& are to 6oin in t e benefits of a market econom&! /econd, t e O<CD countries could revisit t eir trade stance as it affects t e poor in developing countries! ?rotection of agriculture and of te7tiles discriminates against t e poor *it in countries! T e ead of t e World Trade Organization as proposed elimination of tariffs on all imports of t e *orld9s 13 poorest countries! T is *ould reduce income ine)ualit& not onl& across but *it in poor countries! T ird, t e poor and vulnerable in developing countries mig t *ell benefit from some international financing of counterc&clical safet& net programs in emerging market economies t at are it b& global li)uidit& crises! Ma7 Corden as set out t e conditions t at *ould make suc financing appropriate, * ic include a solid record of sound fiscal polic& in recipient countries: t e political capacit& to mount suc programs *it out corruption and to un*ind t em * en t e crisis recedes: and t e long;run fiscal capacit& to service an& resultant e7ternal debt! T ese are stringent conditions, but t e fact is t at Me7ico in "$$1 and Eorea in "$$# could ave )ualified, and could t us ave reduced t e tremendous and terrible costs to uman *elfare and t e permanent losses of uman capital associated *it t e impact of financial crises on t ose Goe /tiglitz as called t e innocent b&standers! International financing is no* used during li)uidit& crises to build reserves 2and t us market confidence4 and to finance imports! W & do *e kno* so little about t e potential costs 2e!g!, effects on inflation4 and benefits of e7ternal financing earmarked for temporar& increases in spending on social insurance and safet& net programs@ H H H H H H H

In conclusion, t e developing countries face special risks t at globalization and t e market reforms t at reflect and reinforce t eir integration into t e global econom&, *ill e7acerbate ine)ualit&, at least in t e s ort run, and raise t e political costs of ine)ualit& and t e social tensions associated *it it! T e risks are likel& to be greatest in t e ne7t decade or so, as t e& undergo t e difficult transition to more competitive, transparent and rule;based economic s&stems *it more *idespread access to t e assets, especiall& education, * ic ensure e)ual access to market opportunities! During t at transition, more emp asis on minimizing and managing ine)ualit&, on making t e market game as nearl& as possible a fair one, even in t e s ort run, *ould minimize t e real risks of a protectionist and populist backlas ! , backlas *ould be a s ame, as in a perverse t*ist, it *ould undermine t e benefits t at more open and more globall& integrated economies and polities can deliver to all t e people of t e developing *orld!

Globalization pulls the countries out, from their detachment into the competitive world. A journey towards new collaborations and unity, it has changed the world into a global village. Both distance and isolation have been terrifically reduced. Globalization integrates trade, technology, investments, and the mobile factors of production like labor and capital. All types of goods ranging from Coca Cola, !prite, "ouis #hilippe shirts, $arie Claire bags, #olice sunglasses, to Adidas and %ike shoes are all available in every market globally, all credit to globalization. Globalization has been &uite a debatable subject. 'hile some are of the opinion that it has a lot of ill effects upon the society, there e(ists others who feel e(actly the opposite. !ome opine that it has made life e(tremely easier and comfortable. )t has however affected the consumers and businesses differently. *or a better picture, let us take a look at some of the advantages and disadvantages of globalization. Advantages of Globalization +mployment Considered as one of the most crucial advantages, globalization has led to the generation of numerous employment opportunities. Companies are moving towards the developing countries to ac&uire labor force. ,his obviously caters to employment and income generation to the people in the host country. Also, the migration of people, which has become easier has led to better jobs opportunities. +ducation A very critical advantage that has aided the population is the spread of education. 'ith numerous educational institutions around the globe, one can move out from the home country for better opportunities elsewhere. ,hus, integrating with different cultures, meeting and learning from various people through the medium of education is all due to globalization. -eveloping countries or labor intensive countries have benefited the most. #roduct .uality ,he onset of international trade has given rise to intense competition in the markets. %o longer does one find limited number of commodities available. A particular commodity may fetch hundreds of options with different prices. ,he product &uality has been enhanced so as to retain the customers. ,oday the customers may compromise with the price range but not with the &uality of the product. "ow or poor &uality can adversely affect consumer satisfaction. Cheaper #rices Globalization has brought in fierce competition in the markets. !ince there are varied products to select from, the producer can sustain only when the product is competitively priced. ,here is every possibility that a customer may switch over to another producer if the product is priced e(orbitantly. /Customer is the 0ing/, and hence can dictate the terms to a very large e(tent. ,herefore, affordable pricing has benefited the consumer in a great way. *ree $ovement of Capital Capital, the backbone of every economy, is of prime importance for the proper functioning of the economy. ,oday, transferring money through banks is possible just by the click of a button, all due to the electronic transfer that has made life very comfortable. $any huge firms are investing in the developing countries by setting up industrial units outside their home country. ,his leads to *oreign -irect

)nvestment, which helps in promoting economic growth in the host country. Communication )nformation technology has played a vital role in bringing the countries closer in terms of communication. +very single information is easily accessible from almost every corner of the world. Circulation of information is no longer a tedious task, and can happen in seconds. ,he )nternet has significantly affected the global economy, thereby providing direct access to information and products. ,ransportation Considered as the wheel of every business organization, connectivity to various parts of the world is no more a serious problem. ,oday with various modes of transportation available, one can conveniently deliver the products to a customer located at any part of the world. Besides, other infrastructural facilities like, distribution, supply chain, and logistics have become e(tremely efficient and fast. )nternational ,rade #urchase and sale of commodities are not the only two transactions involved in international trade. ,oday, international trade has broadened its horizon with the help of business process outsourcing. !ometimes in order to concentrate on a particular segment of business it is a practice to outsource certain services. !ome countries practice free trade with minimal restrictions on +1)$ 2e(port import3 policies. ,his has proved beneficial to businesses. G-# )ncrease Gross -omestic #roduct, commonly known as G-#, is the money value of the final goods and services produced within the domestic territory of the country during an accounting year. As the market has widened, the scope and demand for a product has increased. #roducers familiarize their products and services according to the re&uirements of various economies thereby tapping the untapped markets. ,hus, the final outcome in terms of financial gain enhances the G-# of the country. )f statistics are of any indication, the G-# of the developing countries has increased twice as much as before. -isadvantages of Globalization 4ealth )ssues Globalization has given rise to more health risks and presents new threats and challenges for epidemics. A very customary e(ample is the dawn of 4)56A)-!. 4aving its origin in the wilderness of Africa, the virus has spread like wildfire throughout the globe in no time. *ood items are also transported to various countries, and this is a matter of concern, especially in case of perishable items. ,he safety regulations and the standards of food preparation are different in different countries, which may pose a great risk to potential health hazards. "oss of Culture Conventionally, people of a particular country follow its culture and traditions from time immemorial. 'ith large number of people moving into and out of a country, the culture takes a backseat. #eople may adapt to the culture of the resident country. ,hey tend to follow the foreign culture more, forgetting their own roots. ,his can give rise to cultural conflicts. 7neven 'ealth -istribution )t is said that the rich are getting richer while the poor are getting poorer. )n the real sense, globalization has not been able to reduce poverty. )nstead it has led to the accumulation of wealth and power in the hands of a few developed

economies. ,herefore the gap between the elite and the underprivileged seems to be a never ending road, eventually leading to ine&uality. +nvironment -egradation ,he industrial revolution has changed the outlook of the economy. )ndustries are using natural resources by means of mining, drilling, etc. which puts a burden on the environment. %atural resources are depleting and are on the verge of becoming e(tinct. -eforestation is practiced owing to the non availability of land, thereby drastically reducing the forest cover. ,his in turn creates an imbalance in the environment leading to climate change and occurrence of natural calamities. -isparity ,hough globalization has opened new avenues like wider markets and employment, there still e(ists a disparity in the development of the economies. !tructural unemployment owes to the disparity created. -eveloped countries are moving their factories to foreign countries where labor is cheaply available. ,he host country generates less revenues, and a major share of the profits fall into the hands of the foreign company. ,hey make humongous profits thereby creating a huge income gap between the developed and the developing countries. Cut throat Competition 8pening the doors of international trade has given birth to intense competition. ,his has affected the local markets dramatically. )n recent times the standard of living has improved. #eople are therefore ready to shell out e(tra money for a product that may be available at a lower price. ,his is because of the modern marketing techni&ues like advertising and branding. ,he local players thereby suffer huge losses as they lack the potential to advertise or e(port their products on a large scale. ,herefore the domestic markets shrink. Conflicts +very economy wants to be at the top spot and be the leader. ,he fast paced economies, that is the developed countries are vying to be the supreme power. )t has given rise to terrorism and other forms of violence. !uch acts not only cause loss of human life but also huge economic losses. $onopoly $onopoly is a situation wherein only one seller has a say in a particular product or products. )t is possible that when a product is the leader in its field, the company may begin to e(ploit the consumers. As there e(ists no close competitors, the leader takes full advantage of the sale of its product, which may later lead to illegal and unethical practices being followed. $onopoly is disastrous as it widens the gap between the developed and developing countries. )n the current scenario, the key to international success is global marketing. Global marketing is the competency of an economy to market its product in almost every country. )t is of utmost importance if the product has to make a mark and sustain globally. A car manufacturer in one country will manufacture its product in a different way than a car manufacturer in another country. But if both the manufacturers want to sell their car in a third country then it must have a global appeal. Global marketing has made known to the customer the e(istence and benefits of a product in the market giving the product an identity. At the same time, it has failed to keep in mind the wants and needs of every consumer, which are unlimited and several. Advantages of Global $arketing

 "ower $arketing Costs9 )f we are to consider the lump sum cost, then it is obviously high, but the same cost sky rockets if the company has to market a product differently in every country. Global marketing has lowered the cost of marketing as there e(ists a uniformity in selling the products. Global !cope9 ,he scope of global marketing is so large that it becomes a uni&ue e(perience. *ull credit to the modern day technology, the scope and reach of a product has become e(tremely wide. Brand )mage9 Consumers today are more brand conscious. Global marketing allows to have a consistent image in every region where the product e(ists. ,his aids the consumers who are e(tremely brand loyal with respect to certain products. .uick and +fficient 7se of )deas9 )n this fast paced world, only a global entity that is able to use a marketing idea and design it into a strategy, to implement on a global scale, can be successful. -isadvantages of Global $arketing )nconsistency in Consumer %eeds9 Global marketing must be able to adapt to the needs of consumers located in different countries. ,he needs of an American consumer will be different from a !outh African consumer. A difficult call, failure to address it leads to bad marketing skills. Consumer :esponse )nconsistency9 Consumer responses are different and vary from consumer to consumer and country to country. A consumer in one country may react differently compared to a consumer in another country. Country !pecific9 A ;apanese might like a product to have a traditional touch, whereas an American might like to have a retro modern look to it. )n this case, a global strategy for the same product is difficult to devise. ,he "aws of the "and9 ,he company policies may be according to the laws of the host country. ,hus the overseas laws may conflict with the company policies. )nfrastructural -ifferences9 )nfrastructural facilities in one country is different from another country. ,his could hamper the process in one country and accelerate in another. Global strategy cannot be consistent in such a scenario. "ike a coin having two sides, globalization too has its pluses and minuses. Currently, globalization is at its peak. )ndustries tapping the new markets need to keep in mind the local culture and sentiments of the people. $onopoly by giant players must not be practiced and the local players must not be stifled. *air trade dealings and ethical practices when followed, would always prove that globalization is a boon and not a bane to society. :ead more at Buzzle9 http966www.buzzle.com6articles6advantages and disadvantages of globalization.html