Major financial institutions are also being geared to achieve this goal. The International Monetary Fund and the World Bank are being restructured to suit to new conditions. The World Trade Organization (WTO) is facilitating the removal of tariff barriers among the countries and the millennium session of the UN too, focussed on this issue. The thrust of the secretary general’s speech was on the prospects and threats arising out from this phenomenon.
Although, the globalization process is not new. At various stages of economic development and especially after the advent of capitalism, the developed countries have tried to expand their markets and integrate other economies. But this time the situation is quite different. The information technology is the vehicle for this process and the developing countries are striving to integrate with the developed world on fears of being left behind and punished. The centre of the whole process is the US. Presently, it is passing through a unique period. The longer period for which the economic boom has sustained is unprecedented and the analysts attribute it to two factors. The end of the Cold War which has made it possible to devote major chunk of resources, which was previously devoted to the arms race with the former Soviet Union, to the economic development and the other is the emergence of the IT. America’s is the largest economy of the world. Most of the countries owe their prosperity and economic development to the exports of their goods and services to the United States. The current economic and financial crisis of South East Asia proved short-lived only due to the strength of the American economy and its capacity to absorb exports from these countries. According to an estimate the volume of exports to the US is more than $60 billion. In the case of Pakistan, the US is the largest importer. About 22 per cent of the total exports of Pakistan go to the US. Apart from this it has become a centre of innovations in the fields of finance and IT. The other countries of the world are trying not to keep pace with these developments but to provide assistance in the form of cheap skilled manpower in other fields. It is true that the world is integrating but it is gravitating to the USA as Europe and Japan are no match to it at present.
The economic empire of the US is not like the political empires of the past where the power and coercion kept the people of various countries under bondage against their will. Especially, the magic of the IT has penetrated to the grossroot levels and has made the US a dreamland. Like Pakistan various developing countries are training their manpower mainly to export them to the US and other western countries. The exodus of these people is harming these countries on two accounts.
Firstly, these countries are losing their trained and educated manpower and becoming more deprived and secondly, the precious and scarce resources being spent on training these persons are going in vain as far as the social and economic development of these countries is concerned. This over-dependence of these countries on the US creates various problems for them. Any change in the US economy may affect all these countries. As we all know the IT is not in itself an independent phenomenon. Its expansion and growth is inevitably linked to the overall economy of the country. These both affect each other. Any advancement in the field of IT may provide impetus to the other sectors of the economy.
A recent report of the IMF has indicated that the continued rapid growth of the US economy was largely due to the technology-related new economy. It helped to contain inflation and spur the investment in both the US and other parts of the world. However, recently the analysts were also showing apprehensions about the forthcoming recession in the economy. It is believed that it is only a matter of time before the Federal Reserve shifts its policy and drops its current bias toward tightening credit for fear of future inflation. The rates have been raised six times between June 1999 and May 2000 to cool off rapid growth and counter inflationary pressures. The policy makers have repeatedly said that they have remained alert against the inflation risks.
But they are caught in the dilemma. Because the growth rate in the manufacturing sector is slowing down for the fourth consecutive quarter. Also in the third quarter of the current year the US economy expanded only by 2.4 per cent. This is lower than the growth of 4.8 per cent and 5.6 per cent recorded in the first and second quarters of the year respectively. This is the lowest growth in the last four years. According to the forecasting tables of the OECD for 2001, the growth of the US economy may further slow down to 3.5 per cent compared to 5.2 per cent in the year 2000. To arrest this trend a cut in the interest rates is being seriously pondered upon. The analysts are of the view that this may affect the flow of capital adversely. Apart from this the trade deficit of the US with the rest of the world is increasing with enormous proportions. This situation may not continue forever.
But the matter of concern is that what will happen in this case to the whole process of globalization and especially to the developing countries that have attached themselves to this process. There is no doubt that the recession in the developed world has always affected these countries in one way or the other. But the situation will be quite different in the present case. Presently developing countries are attaching themselves in two ways. One is that they are training and exporting their manpower to the developed countries and especially the US. Secondly they are providing facilities for the manufacture of the software. These two consist a major part of the economies of these countries, which may be guessed from the example of Costa Rica whose export of software is about $15 billion compared to its total GNP of $25 billion. The recession in America, therefore, may affect these countries more seriously than previously.
The reversal in American economy may affect the developing countries in many ways. The countries that depend for their exports to the US will be hardly hit because the demand for their goods and services may decline which in result will affect the productivity and employment in those countries. The recession may also hit the technology-related industries and thus slow the pace of progress in the field of the IT. This may also disturb the estimates and the planning of various developing countries in respect of export of manpower and restructuring of their economies as per the requirements of the IT powers. One may wonder that whether the policy makers may think about an alternative.