GLOBALIZATION | Form four topic

i. Advancement of science and technology. The development of science and technology has enabled the technologists to design and innovate many things like machines which simplify human activities.

It marked the initial stage of integration between Africa and the external world ii. Advancement of education. Education has contributed much to the development of science and technology and integration from the distant areas. Advancement of education marked intensive integration of people in universities, colleges and internal educational conferences. Through these interaction people adopt some culture from other people.

iii.                 Social liberalization. Social liberalization is widely spreading due to the advancement of information and communication technologies. The availability of modern communication devices like Tv, modern mobile phones (smartphones), computers (desk top and laptop) simplified the communication between people in the world through international network (internet)

iv.                 Political liberalization. Politically, the integration of politics in the global scale has fostered the development of globalization. Previously, politics have been undertaken within national political system, but due to globalization, the national governments have ultimately responsible for maintaining the security and economic welfare of their citizens as well as protection of human rights. Nowadays in most African countries which conduct general election there are the presence of external supervisors to watch the process of election if it was conducted free and fair environment.

All these are the driving force for globalization

v.                   Resource and markets. Natural resources such as minerals, natural gas and crude oil make the important contribution in globalization. Many government in Africa, are signed the contract with developed countries to export the natural resources. Example the construction of pipe oil from Hoima in Uganda to Chongoleani, Tanga Tanzania is the good example of driving force for globalization

Aspects of globalization

Globalization as an economic, political and social phenomena is associated with the following major aspects;

i.                    Information and communication technology. Advancement of information and communication technology is one among feature of globalization. This sector has extended drastically within the last few years. People witness global distribution of media images through computers, radio (home theater) mobile phones (smart phones) etc. All these brought the modern communication technologies

ii.                   Movement of people. There has been the increasing of the movement of people from one country to another. The development of air transport enable people such as tourists, business men, scholars immigrant refugees to move from one continent to another and make the world interconnectedness

iii.                 Free Market economy. Globalization has brought the international political economy through international financial institution policies and international trade. In the free market economy system, there is little government interference in the process of buying and selling of goods and services

iv.                 Spread of ideas and ideology. Spread of knowledge ideas, information and ideologies have been integral aspects of globalization. Direct foreign investment bring new skills in the global social, political and economic policies

v.                   Finance. There is the global flow of money often driven by interconnected currency. In foreign purchasing power depend on US dollar. The flow of money is also facilitated by the international monetary fund (IMF) and the world bank. Nowadays the foreign money exchange (FOREX) become the big deal in the different country in the world

vi.                 The rise of intellectual properties. The items like compact disc (CD) flash, memory cards and other properties may resulted from globalization. 

Players of globalization

There are various organs that facilitates the globalization process in the world. However the key players are three, namely, World Trade Organization (WTO), International Monetary Fund (IMF) and World Bank (WB)

World Trade Organization (WTO)

This organization was established on 1^st January 1995 and was given the task to deal with the rules of the trade between the nations. It is the permanent organization with judicial powers to rule on international disputes. Also it administers rule of international trade agreed by its member countries. The headquarter of this organization is at Geneva, Switzerland. WTO took the function of the General Agreement on Trade and Tariffs (GATT) which was formed in order to reduce the trade barriers among the nations after the second world war. So WTO was formed to ensure that, there is no any trade restriction, there are trade negotiation and solve the disputes in the trade between the nations.

International Monetary Fund (IMF)

This is the international financial institution in the world which was formed on 27^th December 1945. Its headquarter is at Washington DC in USA. It was formed in order to perform the following function;

Ø        Promoting international cooperation on international monetary issues among the nations

Ø        Facilitating the balance growth of trade and collaboration

Ø        Sustain the growth of economy in the world

Ø        Promote high employment opportunity band real incomes

Ø        Eliminating foreign exchange restrictions that prevent the growth of world trade

World Bank (WB)

World Bank is the multilateral financial agency in the world tied to the United Nations and it was established on 1945. It was owned by the member governments who exercise their directions through a board of governor, consisting of one governor for each of 185 member countries. Historically, the World Bank was intended to rebuild the Europe after the Second World War when the European nations were totally destroyed after the war. Today, the World Bank has sharpened its focus on the poverty alleviation especially in the third world countries as the overarching goal of all its work

The World Bank is divided into two lending and development institutions which are International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). IBRD focuses on the middle-income and credit worthy poor countries, while IDA focuses on the lowest- income and least credit worthy countries. The World bank provides loans and grants to the developing countries for various projects like improving infrastructures, combating against diseases etc

Both World Bank and IMF provide loans and credit to the third world countries through, the conditions put forward which are known as Structural Adjustment Programs (SAPs)

Structural Adjustment Programs (SAP)

Structural Adjustment Programs are economic policies which were put forward by the World Bank and IMF which countries must follow in order for the developing countries to qualify for a loan.

SAPs encourage countries to focus on the production and export of primary commodities such as sisals, cocoa, coffee etc to earn foreign exchange. But these commodities of course have erratic prices due to some obstacles in global markets which can depress prices just when countries have invested in these so called cash crops

Terms and Conditions of SAPs for Developing Countries

i.                    To devaluate their currencies against US Dollar (USD). Currency devaluation makes products from developing countries cheaper for the foreign market, while foreign import remain expensive

ii.                   To balance their national budgets by reducing government expenditure

iii.                 To restructure foreign debts. The debts restructuring process involves getting lenders to agree to reduce interest rates on loans or to extend repayment dates iv. To cut the size of civil service and introduce cost sharing in social services delivery

             v. To privatize all state-owned enterprises. This targeted to reduce burden of government in running

Parastatals vi. To improve their anti-corruption strategies especially by setting up anti-corruption bureaus. This intended to promote responsibility, accountability in the side of government.

Achievement of SAPs

i.                    Raising living standards. SAPs have enabled countries to privatize their state-owned enterprises and service delivery system. This raise standard of living through improved accessibility of social services

ii.                   Creation of employment opportunities. SAPs have created employment opportunities in developing countries through privatization and foreign investment

iii.                 Increase export of raw materials. SAPs increased the exporting of raw materials from developing countries to developed countries. This is facilitated by the increase of the role of private sectors in economic activities.

iv.                 Increase in importation of manufactured products. Market liberalization has promoted import of essential products from developed countries

v.                   Reduction of government burden in financing social services. Cost sharing policy encourage introduction of user fee in social services. This requires citizens to contribute in social services delivery.

Privatization

Privatization refers to the transfer of management and ownership of a property or business from public sector to private sector. Privatization can be achieved by outright sale of assets of public enterprise or by allowing the private sector to buy some shares in the states owned enterprise. Privatization is conducted through various modes such as selling of shares, direct negotiation, public auction marts, public tender and contracting.

Objectives of Privatization

i.                    To improve efficiency and effectiveness in the public sector through shifting of burden of management of public Parastatals and firms to private sector

ii.                   To reduce or avoid unnecessary government debts which is caused by inefficient services in state owned enterprises.

iii.                 To improve the economy by increasing the productivity and efficiency of privatized state-owned enterprises

iv.                 To create a competitive economy where privatized state-owned enterprises compete with each other

in the market

v.                   To improve and enhance the access to foreign markets, capital and technology vi.          To promote self-reliance among community members, especially in developing countries.

Merits of Privatization

i.                 Enhancing performance and productivity. Privatization allows the privatized enterprise to be more efficient in production. This happens due to the fact that most of private firms are profit- oriented rather than service oriented.

ii.               Improve customer services. Unlike public-owned enterprises that focus more on services, private owned companies tend to focus on profit. They strive to win customers in competitive markets by providing the best customer services

iii.             Creating employment opportunities. Private-owned firms have financial ability through large investments in a wide range of sectors. As a result of these investments particularly in the industrial sector, the number of employment opportunities has been increasing and this enables government to generate revenues through taxes.

iv.              Avoiding unnecessary political interference. Privatization is driven by profit making decisions rather than political decisions. This enables the sector to produce efficiently with the aim of generating profit

v.               Increasing government revenues. Privatization increases the government income through tax payment to the government. In addition, the growth of private sector has led to the improvement of various economic activities with the potential to contribute in government and telecommunication.

Demerits of Privatizations

i.                    Increase of exploitative contracts. Privatization is associated with the signing of long-term and exploitative agreements between government and individuals or private firms.

ii.                   Fall in agricultural sector. The government withdrawal from providing agricultural inputs to small scale farmers has led to a decline in agricultural production and the misuse or abandonment of certain privatized farms have lead to the decrease in agricultural production.

iii.                 Low quality of goods and services. To some corrupt investors, privatization has intensified attempts to reduce quality of goods and services by reducing operating costs in order to maximize profit.

iv.                 Economic dis-ownership to African countries. Privatization has been an opportunity to foreigners and side-lined Africans who own the economy through their government

Trade Liberalization

Trade liberalization refers to the removal or reduction of restrictions and barriers to cross border flow of economic activities such as trade and investment. These restriction include tariffs and non- tariffs barriers such as licensing rules and quotas. Removing or reducing these barriers has been considered as a sep towards promoting free trade.

Advantages of Trade Liberalization

Stimulate growth of domestic technology. Producers within Tanzania struggle to improve technology of production, advertisement and communication in order to win the market against the importations and conquer foreign markets.

ii.               Reduces government expenditure. Trade liberalization increase private sector participation in economic activities and reduces government expenditure on provision of certain goods and services

iii.             Enhances economic growth. Trade liberalization increases trade and investments associated with liberalization due to inflow of capital and investment, hence increase in growth of economy

iv.              Increases of efficiency in production. Trade liberalization has increased external competition. This brings more efficiency in production due to adoption of new technologies and expertise.

v.               Reduces price of goods and services. Trade liberalization reduces costs for a country that traders with other countries and ultimately can lead to lower consumer prices because imports are subjected to lower restrictions such as tax and import duties.

vi.              Increase the flow of goods and services. Trade liberalization promotes free trade and allows countries to trade goods and services with minimal restrictions

Disadvantages of Trade Liberalization

i.                    Decline of market for local producers. Trade liberalization can negatively affect local businesses because of intense competition from foreign producers.

ii.                   Financial, environment and social risks. Trade liberalization can cause financial and social risks if products or raw materials are from countries with environment, social and financial standard.

iii.                 De-industrialization. Trade liberalization can suppress established industries or lead to the failure of newly developed industries due to intense competition in the domestic market created by imported goods.

iv.                 Trade imbalance. This because developing nations are forced to compete in the same market with powerful nations.

v.                   Cultural deterioration. Trade liberalization encourages movements of people within and outside the country. this may lead to disappearance of some cultural values. vi. Decline of domestic technology. Trade liberalization discourages domestic technology because it encourages importation of both technology and ready made goods.

Free Market Economy

Free market economy is the state whereby the economic system is controlled by market forces of demand and supply of goods and services with limited control or intervention by the government. In this system the principles of demand and supply of goods and services provide the basis for voluntary exchange between producers and consumers. Free market economy has become a major economic system in globalized world. The main goal of free market economy is to reduce direct government participation and interference in economic production.

Advantages of Free Market Economy

It helps to reduce prices of goods and services. Free competition in the international market usually forces competitors to reduce the prices of their products to win the customers.

ii.                   Promote economic, political and civil liberties. Free market economy contributes to economic, political and civil liberties because everyone has the right to choose what to produce and what to consume

iii.                 It improves creativity and efficiency in production. Free market economy contributes in improving creativity and efficiency in production which leads to production of better products and delivery of goods and services

iv.                 It facilitates growth of economy. Free market economy facilitates economic growth due to the absence of intervention and bureaucratic procedures from the government, this welcomes foreign direct investments

v.                   It creates employment opportunities. Free market economy contributes in creating employment opportunities for a large number of people, in large and small scale companies

Disadvantages of Free Market Economy

i. May cause risk to the people and environment. Many companies are concerned with making profits regardless of the damage they cause to the environment, workers and consumers. Thus this harm the health of people and environment.

        ii. May lead to the decline of small scale companies and businesses. Free market economy leads to

the decline of small scale companies and businesses that cannot compete in the global markets. This results in unemployment and loss of income to some members of the community

iii. It turns developing countries into dumping place for importation of foreign goods. Free market economy turns the developing countries into dumping places for second-hand goods and equipment from developed countries. This hinders creativity and innovation among people in any developing countries.

Economic Integration

Economic integration is the legal and political process that comprises agreements between countries aiming at eliminating trade barriers, harmonizing monetary and fiscal policies and sharing comparative advantage for mutual benefits so as to fast tract economic growth. Economic integration sometimes is refers as regional integration or cooperation that occurs among the neighbouring countries of a given region. Examples of economic integration in Africa include; East African Community (EAC), Southern Africa Development Community (SADC), Economic Community of West African States (ECOWAS), Common Market for Eastern and Southern Africa (COMESA), Economic Community of Central African States (ECCAS), InterGovernmental Authority and Development (IGAD) and Arab Maghreb Union (AMU)

Stages and Forms of Economic Integration

Free trade area. This is initial stage and form of economic integration that provides more freedom to member states through elimination of trade barriers.

ii.                   Customs union. This is the second stage and form of economic integration in which goods and services are freely traded among member countries as in the first stage. In this stage, the member countries formulate common trade policies that apply to all.

iii.                 Common market. This is the third stage which has similar features as a customs union. In this stage there is mobility of the aspects of production such as labour and capital among member states. In addition, immigration restrictions and cross-border investment are eliminated

iv.                 Economic union. This is another stage which ensures free movement of goods, services and production aspects as well as integration of economic policies particularly monetary and fiscal policies. At this stage member states harmonize monetary policies, taxation and government expenditures. Also at this stage the common currency can be applied to all member states.

v.                   Political union. This is the last stage in which political federation is formed. At this stage member states are integrated into a single economic union and political entity which holds all the political power and authority of all member countries.

Conditions for a Successful Economic Integration

i. Reliable infrastructure. Within and across member stated there should be good and reliable infrastructures such as roads, railways and communication network that connect different regions.

This will facilitate transport of goods from one place to another ii. Political will and commitment. Successful economic integration requires political readiness and seriousness in effecting trade agreements among member countries. This involves harmonizing trade policies, laws, regulations and strategies to create a friendly environment for trading activities

iii.                 Common language. A common language facilitates communication and exchange of ideas, experiences and information among the citizens of the member countries. For example in EAC Kiswahili is a common language and widely spoken by member states.

iv.                 Differentiated goods and services. Economic Integration should be facilitated by differentiated goods and services to provide a sense of complementarily in terms of demand and supply. This means that, goods and services available in one country can acquire market in other member state and vice versa.

v.                   Similar level of development. In order for economic integration to be successful, member states must almost be similar in terms of development. For instance, the EAC is formed by countries with almost similar in terms of development.

vi.                 Common geographical location. Member countries aspiring to succeed in their economic integration should be located in the same geographical location. This is important for exploring and sharing experiences and efforts to address similar geographical threats and trade opportunities.