Negative Effects of Globalization - Corruption

As developing nations increase their tade relationships and become more involved in the world economy, the strength of their financial and governmental institutions is put to the test. The quailty of these institutions will more or less decide whether a country benefits from globalization or not, how much it benefits, and how the gains are distributed throughout society. If these institutions are strong, the economic gains from globalization is usually great, while if they are weak, the bulk of the gains are lost to the negative effects of globalization - corruption.

The definition of economic or political corruption is the abuse of public office for personal gain. Corruption is particulary and African problem, according to the German think tank Transparency international, which publishes a yearly corruption perception index. In 2007, thirty-six of the fifty-two African countries that was included in the corruption index had a score of two or below(out of ten), indicating that corruption in those countries were rampant. Fourteen of the Afircan countries scored between three and five, indicating that corruption was a serious challenge in those countries. Only two countries, South Africa and Botswana, scored more than five.

In many ways, corruption undermines the potential benefits of globalization. For instance, it increases the risk and cost of doing business in a given country, hence chasing away foreign capital. It also influences foreign aid, which can be cut or even halted by the donor country if too much of it is skimmed by corrupt politicians and bureaucrats. In Uganda for example a study revealed that only twenty-seven cents of every dollar donated for education purposes made its way to the countries schools. The rest was lost to local patronage politics.

A rationalization that is often used is that corruption in developing countries improves income distribution. Traffic policemen, for instance, earn small salaries from their government. These salaries are so small that they could never survive on them alone. Therefore they take small bribes when issuing tickets, which are beneficial for income distribution, it is argued, because it helps the officers survive. The flaws of this argument are clearly evident. The officers' small offense contributes to a much larger culture of corruption that supports crimes like rigged multibillion-dollar privatization auctions, which makes the rich richer and the poor poorer. Countries who integrate globally without first strenghthening domestic institutions run the risk of uplifting the powerful and hurting the rest of the country.

Negative Effects of Globalization: Governmental and financial institutions that are weak provide a breeding ground in which corruption can grow, thereby cancelling out the potential benefits of globalization.

Source: The Bedside Baccalaureate