ABSTRACT
Globalization is transforming the world into a single market that is likely to lead to a more efficient allocation of resources. However, the benefits of globalization are available only if countries give up some measure of independence and autonomy in decision making. The full benefits of globalization cannot be enjoyed unless free movement of goods, services, labor, and capital across borders is supplemented by the development of common economic institutions. The failure of the recent World Trade Organization (WTO) talks in Cancún centered around the fundamental question of equitable distribution of gains from free trade indicates that the aim of efficient allocation of resources worldwide will not be achieved anytime soon. Developing countries believe that trade liberalization is likely to lead to relatively greater benefits to the developed countries. Nonetheless, the form of contemporary opposition to free trade and globalization means that its success would likely result in increasingly nationalist economic policies and politicians. Deteriorating economic conditions may lead to social pressures that might result in protectionism, thereby canceling all steps that have been taken to open up worldwide markets. The opponents of globalization have argued that it can widen inequality, increase poverty, and increase social exclusion. It is therefore necessary for governments to take steps to check the widening gap between the rich and the poor. The Asian financial crisis of 1997–98 suggests that the unregulated free flow of capital can convert an export-led economy into an import-led (and poorer) economy if policy regimes are badly handled.
