3.5.1 Meaning and Parameters of Globalisation
Globalisation is the result of liberalisation and privatisation policies, signifying the integration of a country’s economy with the global economy. In India, globalisation gained momentum with the policy reforms of 1991. It involves growing economic interdependence concerning technology, capital, information, goods, and services.
Globalisation has four parameters:
1.Reduction of trade barriers to allow the free flow of goods and services across national borders.
2.Creation of an environment facilitating the free flow of capital, enabled by organizational networks and electronic technologies.
3.Creation of an environment for the free flow of technology among nation-states.
4.Creation of an environment enabling the free movement of labor across different countries.
While proponents limit globalisation to three parameters (free trade flows, capital flows, and technology flows), critics argue that unrestricted labor movement is also crucial for a comprehensive understanding.
However, the process of globalisation is underway and irreversible, as borders cannot be closed, flows cannot be stopped, and ideas cannot be prevented from motivating people.
3.5.2 Case in Favor of Globalisation
Global economic integration, a prominent late-twentieth-century development, is justified by advocates for various reasons:
1.Adoption of new, flexible production methods leading to increased allocation efficiency.
2.Restructuring production and trade patterns based on a country’s factor intensity.
3.Attraction of foreign capital for technological upgrades.
4.Quality improvement to withstand competition.
5.Increase in employment opportunities through integration between sectors.
6.Enhancement of banking and foreign sector efficiency.
7.Creation of a new world order and adoption of structural adjustment programs.
8.Acceleration of human development through improved education and skill training.
9.Reduction of poverty through micro-credit programs prioritizing the needs of the poor.
10.Enhanced integration through diversified goods and services for increased trade and capital flows.
3.5.3 Case Against Globalisation
Critics, particularly from Latin America, parts of Asia, and Africa, argue that globalisation has more drawbacks than benefits:
1.Devastation of local producers unable to compete with cheap imports.
2.Mounting worker unrest due to issues like low wages and poor working conditions.
3.Detrimental effects on public employees through budget cuts and privatization.
4.Adverse impact on small businesses from the fall of public subsidies and floods of cheap imports.
5.Decline in income, particularly affecting the poor.
6.Weakened social safety net provisions as governments struggle to address the victims of globalisation.
7.Increased depth of inequality, creating a divide between the haves and have-nots.
3.5.4 Outsourcing
Outsourcing involves obtaining goods and services from an outside source, especially with the growth of information technology. India has become a favorite outsourcing destination due to a ready supply of skilled manpower at lower wages and the advantage of time difference. The country has integrated into the world economy, benefiting significantly from the outsourcing of services, particularly in the IT-enabled services sector.
Bretton Woods Institutions
1. International Monetary Fund (IMF)
Established in 1945, the IMF aims to promote international monetary cooperation, facilitate balanced growth of international trade, promote exchange stability, expand international liquidity, and address balance of payments disequilibrium. It plays a crucial role in ensuring the stability of the international financial system.
2. The World Bank or International Bank for Reconstruction and Development (IBRD)
The World Bank, operational since 1946, finances productive projects to further the economic development of member nations. Its objectives include protecting the environment, investing in basic health and education, promoting social development, assisting private businesses, and maintaining equilibrium in balance of payments.
3. World Trade Organization (WTO)
Formed in 1995, the WTO succeeded the General Agreement on Tariffs and Trade (GATT) to ensure free trade and stimulate international trade by reducing tariff and non-tariff barriers. It serves as a permanent watchdog of international trade, addressing trade disputes and promoting a unified package of agreements among its 153 member countries. Despite its functions and objectives, the WTO faces criticism for perceived loss of autonomy in policy-making for developing countries and an agenda shaped by developed nations.
Objective Type Questions
1.What is a key aspect of globalisation as mentioned in the passage?
A. Reduction of environmental regulations
B. Integration of a country’s economy with the global economy
C. Increase in trade barriers
D. Promotion of autarky
Answer: B. Integration of a country’s economy with the global economy
2.Which of the following is not mentioned as a parameter of globalisation in the passage?
A. Reduction of trade barriers
B. Free flow of labor
C. Creation of an environment for technology flow
D. Increase in national borders
Answer: D. Increase in national borders
3. According to critics, what is a drawback of globalisation mentioned in the passage?
A. Quality improvement
B. Increase in employment opportunities
C. Weakened social safety net provisions
D. Adoption of flexible production methods
Answer: C. Weakened social safety net provisions
4. What is the main advantage of outsourcing mentioned in the passage?
A. Decrease in the availability of skilled manpower
B. Limited benefits of time difference
C. Access to a ready supply of skilled manpower at lower wages
D. No impact on the global economy
Answer: C. Access to a ready supply of skilled manpower at lower wages
5. When did globalisation gain momentum in India according to the passage?
A. 1980
B. 1991
C. 2000
D. 2010
Answer: B. 1991
6. What is the main objective of the International Monetary Fund (IMF) mentioned in the passage?
A. Protecting the environment
B. Ensuring stability of the international financial system
C. Financing productive projects
D. Promoting social development
Answer: B. Ensuring stability of the international financial system
7. What does the World Bank focus on, according to the passage?
A. Reducing balance of payments disequilibrium
B. Promoting exchange stability
C. Financing productive projects for economic development
D. Serving as a watchdog of international trade
Answer: C. Financing productive projects for economic development
8. What is a criticism mentioned regarding the World Trade Organization (WTO) in the passage?
A. Overloaded agreements
B. Lack of international privileges
C. Inability to address balance of payments issues
D. Absence of a unified package of agreements
Answer: A. Overloaded agreements
9. According to advocates, what is an expected outcome of globalisation in terms of employment?
A. Decline in employment opportunities
B. Mounting worker unrest
C. Rise in employment opportunities
D. Weakened social safety net provisions
Answer: C. Rise in employment opportunities
10. What is mentioned as a distinctive feature of India in the outsourcing sector in the passage?
A. Lack of skilled manpower
B. Disadvantageous time difference
C. High costs of outsourcing
D. 65% share of the global offshore market
Answer: D. 65% share of the global offshore market