Allow me to begin this article by simply introducing some basic
definitions. In general, the globalization project is referred to as the
actions taken place by the government to participate in the world
economy, usually through liberalization; giving out freedom of trade and
cutting off custom restrictions. The process of expansion of
international trade and financial flow, as well as flow of production
factors for an economy such as foreign direct investments are the main
acts under the globalization project in an economic sense. Some
statistics available show that this global movement -the globalization
project -has raised the living standards for many, benefitting people
all across the world. But I would have to mention that at the same time,
it also has promoted poverty across the globe (which will be discussed
in this article as it continues). The globalization project has many
aspects to itself which one in particular could be defined as the
development of EPZs, the neoliberal economical approach towards the
global market and adjustments plans such as the ones used at the time of
debt crises.
Since the economic crisis in the west in the 1980s
(will attend to this point as we continue with the rest of the article),
export processing zones have become a very important part of
neoliberalism development strategy, which once again falls under the
globalization project. Entry to the global market appears to be a very
tempting opportunity for many countries since it attracts foreign
markets and raises the GDP, the income of the government through
attraction of foreign currencies and the number of sales of the domestic
goods on a greater scale. The improvements in sales of a country are
relevant to the supply and demand figures for domestic products. The
fact that the consumer demand rises when the market is expanded helps a
country to increase its exports. EPZs are a well known method for the
governments to gain easy access to the global market. Export processing
zones are defined areas of a country that are designed to attract
foreign investments accordingly; based what explained previously. The
efforts start where government regulation, taxes and trade tariffs are
lifted or are reduced. It is believed that through the entry in the
world market, the economy of any country would benefit impressively
without any losses, but when examined, globalization has some negative
aspects towards the such nations. Such examples could be mentioned as:
downgrading the social goals of the national development of a country
and favouring the rich in order to help them earn more profit while the
poor suffer even more. Thus, one could simply say that the acts of
globalization promote poverty indirectly.
Practically, export
processing zones (EPZs) are used as a strategy to promote economic
development; therefore, EPZs are connected to the globalization subject
through the elaboration of such developments. The goal of globalization
is more varied that what it seems it would be. It could have been
addressed to as the development of economy on the global scale, while
the internals, national developments of a country are not much affected
by the project. EPZs are helpful in order to achieve this goal and they
allow countries reach out into the international market despite the
negative aspect of employment and wages that EPZs might bring for the
nations involved. The role of the state in labour-management relations
and the type of workers employed in these export zones is another factor
that could relate the growth of globalization project to EPZs. These
roles are some critical variables which might affect the state's
capability to maximize the economic potential of EPZs, resulting in
earning more money/profit. Then again the lack of regulations in these
trade zones comes at a great cost to workers, affecting their rights,
health issues and security, environmental standards of the workplace and
social protections. Governments might increase their profits, but they
may face some internal issues in the future instead. People at the EPZs
are hired through short term contracts (example would be like three
months contracts) which increases the amount of employee turnover is
such regions. Companies in the EPZs also deny additional trainings for
the workers. Not only this would increase the rage among the employees,
but it would also create unrest; workers would more likely go on riots,
especially since they want to obtain permanent jobs in comparison to a
job that could let them off at any time. Ergo low-grade jobs are created
at these countries. The solution to such a problem would be creating a
production line. If manufacturing takes place, a need for high skilled
employees and personnel would appear that demand higher wages. In this
scenario, a multiplier effect on employment is taking place which
expands the domestic market. This helps out such nations to develop much
quicker and better, just like what the western nations did in order to
achieve independency in their development stage/project.
The
export processing zones/free trade zones tend to be an attraction for
the capitalism ideology. They have minimal custom control and domestic
taxes which help businesses benefit much more from their sales. Another
attraction of EPZs is the negotiation option available to the employees.
EPZs allow labour forces to organize themselves freely and bargain
collectively, but mostly in the favour of the business though. Another
factor would be that multinational firms involved in the globalization
project benefit by collection of large sums of money earned as profit
and are provided immense wealth through EPZs. EPZs encounter countless
opportunities of trade with no limits that corporations could use for
their benefits. As mentioned in "Development and Social Change" by
Philip McMichael, EPZs mean more freedom for the business, but less
freedom for people.
Sometimes EPZs are involved in exportation of
resources and raw materials, a factor that makes the poor countries
involved in the globalization project remain poor. Such nations are
forced into exporting their commodities due to many factors which some
of such reasons are argued about and are mentioned in this article as
the audience follows on reading.
This ideology of neoliberalism
uses a factor called debt. Many developing nations are in debt and
poverty nowadays, partly due to the policies that some international
institutions such as the World Bank or IMF have developed and spread
around the globe. Debt is used by the rich nations around the globe to
get in touch with the poor countries in order to gain access to their
raw materials for cheaper prices. Basically debt management is being
used by the wealthy nations as a tool to take away the poor nations
independencies, and to make the unfortunate regions dependent on loans.
When tariffs are in place, countries focus on the development of
internal industries and they compete in order to increase their sales,
but when in debt, tariffs and other controls are removed which results
in increscent of cheaper exports (especially raw materials) and imports
of finalized products from the other nations. When a country is in debt,
it is forced to sell its products in mass amounts and for cheaper
prices to be able to a pay certain portions of the loan payments as soon
as possible. This strategy has affected the living standards of such
nations for decades. An example of this trend would go back to the 1970s
and 80s, during the "Lost decade". The world experienced a debt crisis
in which highly indebted countries, mostly developing Latin American
nations were unable to repay their international debts. Mexico was the
first to declare inability to pay off its debt, and the scandal spread
to the rest of the world in a blink of an eye. To counter this,
"structural adjustment ideology" (liberalization and privatization) was
administered, run by IMF and the World Bank. Long-term commercial debts
were involved in this situation which was accumulated in the public
sector. The governments of such developing nations such as Mexico were
not able to repay the money, so financial rescue operations were given
priority to and became necessary. The crisis of 1980s was mostly caused
by long-term loans that governments took from foreign forces/banks along
with some official grants and loans that could have assisted out their
nation's private sector.
Also by the beginning of 1980s the world
economy faced recession, and the inflation days were over. USA's
anti-inflation campaign was able to increase dollar's interest rate in
the 1979; therefore, debt service payments rose rapidly. Change in
exchange rates was not the only reason behind the crisis though. As
mentioned the world was facing a recession, so the demand for exports
fell and lower terms of trade was faced. Highly in debt countries faced
payment difficulties as the result and the crisis took place. Banks
stopped lending out money and loans were terminated. That was where the
World Bank and IMF started to financially rescue such nations from their
debt problems. New lines of loans were introduced which later on led to
the adjustment programs. The assumption was that the private sector
would grow strong and would cover up for the debt payments if the role
of the state was removed and industries were privatized. Instead such
strategies led governments to drown further in debt. The crisis of 1980s
was eventually solved though. One factor contributing in solving the
dilemma was the discovery of Latin American niche products in the global
capitalism. The other solution to the crisis was mostly reduction of
the amount of debts owed, or simply cancellation of debts or
rescheduling the payment dates by the World Bank.
When countries
are highly in debt, they are forced to cut off the money supply on
health and other services in order to pay off the debt. Such behaviour
is not recommended since it has negative effect on the living standards
of such nations. But on a second glance at the situation, the results of
such actions seem to favour the western world, so not many people
oppose against them. Prevention of such behaviour would cost the
advanced countries their positions in the global market along with the
other benefits which they may obtain such as enormous amounts of money
they earn; therefore, such systematic strategies are still being used in
the globalization project.
When countries are in debt, they have
limited options to choose from. The IMF and the World Bank tend to
provide financial assistance to the nations seeking it. Their debt
management plan is to apply a neoliberalism economic ideology in order
to retrieve the money loaned. They have come up with structural
adjustment plans such as "liberalization" of the economy and resource
extraction/export-oriented open markets. They have minimized the role of
the state and the have encouraged privatization. The protectionism over
domestic industries is revoked. In some cases even currencies are
devalued. Even at times, EPZs are constructed and introduced which leads
to deregulations, while the standards are reduced or removed. The
impact of such conditions on the poor countries could keep them in debt
forever, leaving them dependent on the developed countries. Such
behaviour towards the poor nations leaves them with no options except
for raising more money through more exports, even though they may not be
ready to enter the global market yet. In this situation, when a
country's insecurity is high, they may apply for another loan after
another. This leads us to observe price wars on a large-scale. The
insecurity also leads the poor regions to sell off their resources for
cheaper. In such a stage, inspection of the situation reveals that high
numbers of exports are also done in order to keep the currencies stable
and earn foreign exchange which would help to pay off the debts. The
results of such actions leave the government facing such disasters such
as social unrest, decrease in the labour value and even depreciation of
capital flow. In the worst case, such nations' economies collapse and
the poor country remains poor, or even becomes poorer.
One of the
effects of structural adjustment programs on the developing countries is
the increase of their exports. Usually commodities and raw materials
are exported by the poor nations in such situations. This would lead
them to lose out in the global business market when they export such
commodities (that are cheaper in comparison to finished goods which
they'll end up importing). Also these nations are effectively blocked or
denied from industrial capital and real technology transfer; therefore,
not only they lose their raw materials, they do not have the technology
to make domestic products neither so they'll end up importing rather
expensive finished products from other nations (due to the added labour
costs to make the product from those commodities that they, themselves
have sold for cheap). In general, this leads in a low turnover of money
for the nation and the country loses cash. The factors mentioned are
some of the main reasons that differentiate between developed
independent economies and poor dependent regions. The former winner of
the Nobel prize for economics and a well-known professor at the Columbia
University - USA, Joseph Stiglitz talks about the structural adjustment
programs as the following: "the World Bank, at the time of frustration,
hands every minister of any poor country the same four-step program
described as the following:
1. Privatization. Some politicians are
corrupted; therefore, they go ahead with some state sell-offs: "Rather
than object to the sell-offs of state industries, they use the World
Bank's demands to silence local critics-happily flogged their
electricity and water companies. 'You could see their eyes widen' at the
prospect of 10% commissions paid to Swiss bank accounts for simply
shaving a few billion off the sale price of national assets."
2.
Capital market liberalization. Stiglitz talks about the capital flows
which may ruin economies as being "predictable," and says that "when
[the outflow of capital] happens, to seduce speculators into returning a
nation's own capital funds, the IMF demands these nations raise
interest rates to 30%, 50% and 80%."
3. Market-based pricing. "A
fancy term for rising prices on food, water and cooking gas which leads,
predictably, to Step-Three-and-a-Half: what Stiglitz calls, 'The IMF
riot.' After such bloody riots, foreign corporations... can then pick
off remaining assets, such as the odd mining concession or port, at fire
sale prices."
4. Free trade. "As in the nineteenth century,
Europeans and Americans today are kicking down barriers to sales in
Asia, Latin American and Africa while barricading our own markets
against the Third World's agriculture, under the guiding hands of IMF
structural 'assistance'. These adjustments have made Africa's income
drop by 23%."
Seems like the well industrialized countries are
forcing open markets on the poor nations, and these attempts are not
helping the global market to develop much; instead the rich countries
are gaining access to gather cheap raw materials while they are selling
off cheap products for higher prices in the poorer regions, making up
false promises of their aid and assistance in economic development for
such areas instead.
This report indicates that some global
institutions such as the World Bank encourage the growth of EPZs since
it helps them dominate the countries that are in debt. Although EPZs
eliminate the trade barriers and allow countries to exchange goods and
money more freely in the global market, they also allow IMF, World Bank
and such institutions to gain power on a larger scale. Such actions
appear to be problematic. Especially since exports of the poor nations
are increased in huge amounts while they do not tend to benefit the
nations as they are intended to. These exportations must become cheaper
because of all the loans and debts that the poor have gathered over
time, to assist the nations to pay off their debts. As a part of
structural adjustment programs, the poor regions are globalized against
their will and are being used by the advanced nations for their needs.
In the conclusion, this kind of scenario benefits the western world and
that is why the governing institutions in the globalization project
encourage the growth of such acts. They also tend to show their support
for the expansion of globalization ideas such as creation of export
zones.
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