Globalization is not without dangers and risks. Stakes of poor countries like India are much higher for pursuing pro-globalization policies. The historical experience of the colonial period shows that free trade and capital inflows helped imperialist countries more than the poor under developed countries. With help of free trade and capital investment in some particular spheres, the developed countries exploited the poor countries which happened to be their colonies and drew away resources from them. With achievement of independence by developing countries, though the situation today is vastly different but the developed countries have not shed their behaviour of promoting their own interests at the cost of developing countries. In fact, as has been stressed by Joseph Stiglitz, a Nobel Laurate in economics that while US and European countries preach free trade and globalization, they actually practice protectionist policies to safeguard their domestic industries. Imposition of developed countries such as the USA to protests around the world is a shining example of such double standards.
An important disadvantage of globalization is the danger posed by free flows of capital, especially portfolio capital, which are highly volatile and are a source of great macroeconomic instability. When there are large capital inflows into a country, the currency of a country appreciates which makes its exports costlier and therefore cause reduction in them which not only adversely affects its current account balance of payments but also adversely affects its levels of GPP and employment. Besides, excess capital inflows in an economy lead to the expansion on money supply and if not sterilized by the RBI will add to the inflationary pressures in the economy. On the other hand, when there are large capital outflows from an economy, they cause depreciation of the national currency which though tends to increase its exports but carry some risks. First, depreciation makes the imports more expensive and therefore leads to the rise in the prices of commodities and raw materials imported from abroad and cause cost-push inflation in the economy. Further, depreciation of a national currency, say the Indian Rupee, will raise the burden of external debt as more rupees are required to pay for a US dollar.
Therefore, in view of the present author, though the case for globalization is theoretically quite sound, but it carries with it many risks and dangers. If promoted in its true spirit by all countries, it would lead to rapid economic growth in both the developed and developing countries. But, the developed countries are interested in promoting their own interests even at the cost of the poor developing countries on whom they impose policies of liberalization and globalization through their greater say in World and IMF.
What are Dangers and Risks of Globalization
Author: Dr. Arti Upadhyay