Blog
Globalization, Marginalization and Development

by S. Mansoob Murshed

The WIDER research project on 'Globalization and the Obstacles to the Successful Integration of Vulnerable Economies' is concerned with the problems faced by marginalized developing countries in the process of globalization. Apart from a number of 'emerging' economies, and the larger, more populous, developing countries (LDCs), the benefits of the increased globalization of trade, investment and finance in the last two decades, have left behind much of the developing world. The gap between richer and the poorest countries appears to be widening.

Table 1 shows the extent of this marginalization, which can be traced back to 1960. It lists 42 developing countries that are growth failures. These countries have recently recovered the standard of living that they had attained between ten and forty years earlier. Graph 1 shows the same information, this time with the countries that are growth failures below the trend growth line. This also tells us that not all countries that were poor in 1960, remain poor today. Contrast Singapore with the Democratic Republic of Congo (DRC), both of whom were poor in 1960. Singapore grew faster and benefited from globalization, whereas the DRC did not.

The Challenges​

So, what policies are necessary to arrest marginalization and achieve sustainable development in an era of globalization? Some specific findings from the project include the following.

First, the WIDER study emphasises that good quality institutions - particularly political rights, the rule of law and government capability - promote growth. Our findings therefore complement the results in WIDER's project on Resource Based Development. Most importantly, reliance on 'point' source natural-resource based products (such as oil) can diminish growth, since resource-rich countries experience greater rent-seeking (and often conflict as well) - which is harmful to productive investment. To increase the benefits of globalization, governments need to increase the skill level of the labour force, thereby assisting the absorption of new foreign technologies.

Second, one of the major obstacles to successful export promotion by developing countries is the manner in which the present WTO rules allow for anti-dumping (AD) actions to be brought. The mere threat of an AD action lowers exports and results in expensive lawsuits for poor countries. Dumping implies injury to the domestic competing sector of the importing country. The present system lacks transparency, and is inherently discriminatory towards LDCs in two respects: the reference price for comparison is often from a richer country, and the practice of cumulating market shares across many small exporters. It would be far better to use safeguard measures as these provide temporary relief from trade related injury. This method would yield a double dividend as it takes into account both the interests of consumers in richer countries and the interests of exporters in poorer nations.

Finally, the WIDER study emphasises the importance of country commitment to the globalization process. It is far superior to seek fairer and more open market access in developed countries than to lobby for special exception to WTO rules requiring reciprocating most favoured nation status. In this regard, LDCs need more technical assistance to cope with WTO rules and regulations.

In these ways, the more marginalized LDCs can benefit from globalization. But they also need greater resource transfers and debt forgiveness, help in building institutional capability and less protectionism towards their goods entering markets in the developed world. These are tough challenges, but they must be faced.
 

Dr Syed Mansoob Murshed is a Research Fellow and the Director of the WIDER project on ‘Globalisation and the Obstacles to the Successful Integration of Small Vulnerable Economies’, and the co-director of the project ‘​Why Some Countries Avoid Conflict while Others Fail’, with Dr Tony Addison.

More information on these projects and related publications are available at: www.wider.unu.edu/research/ research.htm