Advances in transport, telecommunications, computerization and internet are defining characteristics of globalization.

With the dismantling of the iron curtain and the virtual economic collapse of communist countries including Soviet Russia, there has been a welcome shift in economic policies of most developed and developing countries from Plan to Market or from statism to laissez faire. While classical economists recommended laissez faire or market economy as an ideal path to follow, globalization, which is essentially based on the cornerstone of Adam Smith's concept of laissez faire and Ricardian theory of comparative cost advantage, has now become the order of the day in most developed and developing countries. Globalization marks a paradigm shift in economic thinking on the part of economic philosophers and policy-makers and represents an on-going process of change and adaptation which is in no small measure aided by recent advances in means of transport, telecommunications, computerization and internet.

Globalization marks a paradigm shift in economic thinking on the part of economic philosophers and policy-makers and represents an on-going process of change and adaptation.

One often hears, ‘the world has now become a global village' thanks to narrowing down of geographical distances and of barriers in thinking patterns between developed and developing countries. Globalization essentially means opening up of the economy and its integration with the other economies of the world. It involves deregulation and adoption of the policies of economic liberalization and economic reforms which are calculated to encourage the growth of private enterprise. Globalization implies change in external economic policy as well and involves abandonment by a country of protectionist stance in commercial policies and dismantling of tariff walls and encouragement of free and fair trade between nations. Globalization also essentially involves pursuit of economic policies which encourage free and fair competition inter se among public enterprises and among private and public enterprises as well. Globalization involves release of the forces of competition within the economy which promote economic efficiency and result in an optimum allocation of resources. Globalization requires a country to promote consumer welfare and adopt customer-centric polices intended to give him the best deal.

Globalization is no bed of roses and requires the country's economic statesmanship to pursue a comprehensive reforms programme and set up appropriate administrative machinery to execute a series of economic tasks. The success of a country's globalization programme depends on how it takes suitable steps to improve the investment climate domestically and is also able to attract foreign capital. If globalization has to succeed, the country has of necessity to build suitable financial architecture which involves banking and insurance sector reforms. Although globalization is no magic wand its success has to be assessed in terms of its impact on the growth of GNP and alleviation of the deep-seated problems of poverty and unemployment.

The success of a country's globalization programme depends on how it takes suitable steps to improve the investment climate domestically while attracting foreign capital.

Way back in 1996 at a two-day seminar organized under the auspices of Indian Economic Association, a young American professor of Indian origin questioned Indian Government's wisdom in going whole-hog with a bold programme of globalization, ‘Should India globalize at all and give up its Five-Year Plans', he thundered. Today that question is no longer relevant. Both India and China can count on numerous benefits they have reaped from globalization programme. Today when the rest of the world is globalizing, an individual country cannot sit back in isolation. It has no choice but to globalize. But then it can well take its cue from India and China and ensure that it proceeds with reforms at its own pace and combines them with its own native model of economic development and also establishes systems of corporate Governance.




Contributed by Shrinivas Thakur, graduate of Mumbai University with a Ph.D. in Development Economics.

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