UNDERSTANDING THE IMPACT OF GLOBALIZATION WITH REGARD TO THE INDONESIAN AND MEXICAN MODEL

TERM PAPER

REHAN NAUSHAD KHAN 0817120 BS (SS) 5-A DYNAMICS OF GLOBALISATION

Globalization is a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology. This process has effects on the environment, on culture, on political systems, on economic development and prosperity, and on human physical well-being in societies around the world. Globalization has opened up broader communication lines and brings more companies or MNC's as well as different worldwide organizations to different countries of world. This provides opportunities for not only workingmen but also women who are becoming a larger part of the workforce. Globalization has also thrown open varied challenges such as inequality and poverty across and within different nations, volatility in financial market spurt open and there were worsening in the environmental situation. Another negative aspect of globalization was that a majority of third world countries stayed away from the entire limelight. Till the nineties, the process of globalization in the least developed countries economy had been guarded by trade, investment and financial barriers. Due to this, the liberalization process took time to hasten up. The pace of globalization did not start that smoothly. (The economist)

Globalization is deeply controversial, however. Proponents of globalization argue that it allows poor countries and their citizens to develop economically and raise their standards of living, while opponents of globalization claim that the creation of an unfettered international free market has benefited multinational corporations in the Western world at the expense of local enterprises, local cultures, and common people. Resistance to globalization has therefore taken shape both at a popular and at a governmental level as people and governments try to manage the flow of capital, labor, goods, and ideas that constitute the current wave of globalization.

The two countries under analysis in this paper that are under focus is Indonesia and Mexico. Both these countries had a very strong impact and deep effects of globalization which I would further discuss in my paper.

Indonesia was in essence exposed to the new global order that is globalization in the early 1980s. The process began with the liberalization of trade and the industry was injected with vast sums of foreign capital along with technology in order to boost efficiency and output within the ailing Indonesian industry.

Globalization minus the negative trends that are present today and have been culminating in the Indonesian economy such as sweat shops etcetera, has had an overall positive affect. The GDP has remained stable for the past decades increasing steadily since 2004 onwards. Increasing the purchasing power parity of the Indonesian populace in turn raising their standard of living with increased consumer and capital development

It is not unfair to say that Indonesia has benefited in its social sphere apart from the economy. Women empowerment might be cited as one of the areas where the impact of globalization might have directly impacted positively. With respect to infant mortality Indonesia might be regarded as a success story with mortality figures dropping drastically from 56.4 (1990) to 29.8 (2009) in the last two decades. Therefore with respect to Indonesian prosperity we see an increase in the economic development nonetheless much improvement is still required within the social sector that is a substantial increase in the Human development Index (HDI).

Indonesia is at the helm of economic affairs amidst the fast paced changing structure of economics in the global arena. The flow of capital, raw material, labor and investment is freely being exchanged into and through Indonesian territory. In addition, Indonesia became the host country of APEC in 1994 in

Bogor, which attended by many leaders from Asian and the Pacific countries include USA, Japan and Australia. Indonesia also becomes a member of World Trade Organization, the IMF and the World Bank. Economic integration becomes ultimate mantra of Indonesian economy which grew to around 8% during the 1990s.

However, due to the recent inter-networked economy, Indonesia has also suffered seriously from globalization. The Asian economic crisis from 1997 to 1998 basically started from a monetary crisis in Thailand which ultimately turned into a domino effect engulfing all the Asian economies like a pandemic. Unfortunately, IMFs formula of introducing Structural Adjustment Programs (SAPs) failed to help in the worst situation in which Indonesia experienced the collapsed of exchange rate (monetary crisis), economic crisis, political and finally security instability. This was the first ever crisis experienced in Indonesia since the globalization era.

Mexico is one country that has been hit very badly due to effects of globalization. Mexico became a member of the North American Free Trade Area in 1989 along with the United States of America and Canada with promises of prosperity, boost in economic trade, decrease in unemployment and a growth in opportunities for the lower class. The circumstances were such during that time that most of the Mexican working population was working outside Mexico in low skilled jobs in America and Canada. This is because there was a high rate of illiteracy in Mexico and a large number of Mexican migrants living outside the country in search of better jobs and lives.

Also, the Peso crisis of the 1980s which devalued the Mexican currency and left the government bankrupt was an open invitation to the Structural Adjustment Programs that were being introduced in all the developing countries which were going through an economic crisis under the banner of

liberalization. These SAPs promised large loans to the Mexican government in return of better developmental projects in areas of infrastructure and development.

As much as treaties like NAFTA and programs like SAPs promised development and growth for the betterment of the Mexican people, they hardly helped at all. The unemployment rate grew even higher, although more Mexican migrants were employed in the US factories, their jobs were only low skilled and paid the least of the wages. The wage rate had fallen and due to the free trade policies of NAFTA, the local producers thrived in the Mexican economy. American Corn is a case for instance. American Corn producers sold corn at much cheaper rates compared to the local Mexican Corn which made the corn industry suffer great losses. The US producers argued that these policies were good for Mexico because this way the Mexican industries that used corn as a raw material (or for tortillas) could easily get it on a cheaper rate. What they failed to recognize was that most of the Mexican producers did not use corn as raw material, rather they produced corn itself.

Thus, we may conclude that the Western powers or liberalizers rather, were just exploiting Mexico for their potential in human resources rather than seriously being committed to helping the economy boost or to develop the infrastructure of the country.

So we can see that both Indonesia and Mexico did not benefit from globalization. Their open economies invited external influence and that hampered their growth and development to such an extent that they became entirely dependent on the SAPs or Western companies or the heavy loans that they took for their survival. These are not the only countries that have had a significant impact of globalization. If we look at the world map today, we can easily tell that most of Africa and Asia are falling prey to this problem.

Globalization may be very good for certain countries. But we must understand that these certain countries are the Western developed ones who only see open trade borders as an avenue of their own economic growth. We live in a realist world today. So it is not surprising that these countries would want to exploit other less developed countries for their own selfish reasons. But doing so, under the pretext of boosting growth and development and promoting trade and culture can be seen as false promises to entrap the weaker nations.

Works Cited:

(http://www.nber.org/digest/apr05/w11027.html n.d.)

(http://www.globalization101.org/What_is_Globalization.html n.d.)

(http://eh.net/encyclopedia/article/touwen.indonesia n.d.)

http://www.city-data.com/forum/mexico/710548-47-4-poverty-population-mexico.html

http://nico-andrianto.blogspot.com/2010/08/impacts-of-globalization-in-indonesia.html

http://www.einnews.com/indonesia/newsfeed-indonesia-security

http://www.casacollective.org/content/globalization-and-mexico

http://www.oppapers.com/subjects/globalization-effects-in-mexico-page1.htm

http://www.einnews.com/indonesia/newsfeed-indonesia-security

http://www.topix.com/forum/world/indonesia/TTJD9OMTSG7PF21O0

http://uk.oneworld.net/guides/globalisation?gclid=CN3O64mE0KUCFQMb6wodJhohkQ

http://www.city-data.com/forum/mexico/710548-47-4-poverty-population-mexico.html