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Globalization and International Finance

Autor:   •  June 8, 2012  •  Research Paper  •  3,493 Words (14 Pages)  •  1,100 Views

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Globalization and international finance has helped and severe financial crises in emerging market economies. Globalization has a very large impact on the structure and the practices of international public finance. It is widely used term that can be defined in many different ways and has various aspects, which affect the world in several different ways such as: industrial, financial, economic, political, informational, language, competition, cultural, technical, social and legal/ethical. Where as, international finance studies the dynamics of exchange rates, international projects, and foreign investment and how this effect international trade.


Many believe that the globalization of the world's economy is not only something that is best for everyone, but nothing can stop it from happening either. Globalization has reduced barriers between countries, thereby resulting in intensification of economic competition among nations, dissemination of advanced management practices and newer form of work organization. On the other hand, globalization has also contributed to unemployment, increase in contingent labor force and a weakening of labor movements (Ali, 2005, p.1). According to globalization supporters free trade and increasing foreign direct investment will increase employment and earnings in advanced and developing countries. Critics believe that negative effects on wages, employment, and working condition are resulting from competition of multinationals and selective opening of markets to international trade in favor of industrially advanced countries (Ali, 2005, p. 2).

Rudra argues that greater integration into the global economy has caused developing countries to cut back on social spending due to their fragmented labor market institutions and middle classes are the one that has been most affected by such cuts. She believes that the higher levels of international trade in developing countries with weaker labor market institutions are associated with making larger cutback in social security and welfare spending. The welfare policies in most developing countries have been biased toward protecting the middle classes, as opposed to the poor because governments in developing countries have frequently relied on the middle classes for political support. This strong relationship has institutionalized the counties welfare policies, which have benefited the middle classes and made it essentially impossible for the poor to overhaul their country's welfare regime in a way that would allow spending to be more progressive overall (Cramer, 2008, p.1).

To resolve this issue, there are three main types of social expenditures according to Rudra: "first is productive, created to assist domestic businesses in their participation in export markets, emphasizing the commodification of labor, and


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