Drawbacks Of Unregulated Capitalism

Introduction

Globalization is the integration of the world economy. It has a persistent theme of the past quarter century. Growth of the economic activity has changed the structure of economics. It also makes a change in the phase of the political and social organizations of different countries. The effects of globalization can be measured directly. But the scope and pace can be classified in four keys goods and services, financial blows, movement of people and communication.

Liberalization of countries in the developing markets provides new opportunities for investors to increase their profit. Economic liberalization refers that an opening up to the rest of the world with regarding to the trade, regulations, taxation and other areas that generally affect business in the country. As a whole concept, we can forecast to which degree a country is liberalized economically by how easy it is to invest and to do business in the country. All developed countries have already gone through this liberalization process, whereas emerging countries need to undergo a series of changes.

Discussion

·         Import-Export Substitution leads to Strategic Growth:

     The fault in import substitution strategy of industrial growth to achieve sustained growth forced India and other developing countries to pursue export leads the strategic growth (which is also known as the outward looking strategy of development). It has been argued that by expanding exports to the other countries and getting required imports from them based on their respective comparative costs. Developing countries will be able to achieve faster rate of economic growth.

·        Foreign Capital Inflows:

     The globalization and liberalization of the Indian economy with the world economy is also beneficial because it would give a boost to foreign capital inflows in the form of portfolio investment. The Investment in portfolio will bring valuable foreign exchange currencies in India and free in case of balance of payments difficulties. With sufficient foreign exchange reserves, balance of payments restrictions on accelerating the growth process will be removed. The role of foreign direct investment is more important than portfo­lio foreign investment as it raises the rate of real investment in the economy and helps us to achieve a faster rate of economic growth.

·         Globalization and Transfer of Technology:

      Due to financial constraints, Indian companies are in a position to invest only a small amount of funds on Research and Development. Therefore, it is through globalization of its economy that we can able to get advanced technologies from the developed countries. The technological up-gradation of the Indian industries will lead to higher productivity and help us to achieve a higher industrial growth. It is worth noting that it is the multinational corporations that are carriers of technology to the developing countries through technological and financial integration with domestic enterprises. Globalization makes faster diffusion of new ideas and advanced technologies in the world. This will make possible for the developing countries like India to catch up the developed countries more quickly.

·         Increased Market Access:

      The  market   products can be sold, the greater the benefit that will arise as a result in case of economies of scale and specialization. This will lower unit cost of production and increase the competitiveness of manu­factured products. Thus, globalization will ensure greater profit from trade. In addition, the wider market increases the incentives for investing in new implementations and trends as the potential return on investment in them will increase.

·         Employment Argument:

      An important argument for liberation of trade and capital flows is that it creates more employment opportunities.

First, the growth in exports based on comparative cost advantage and it leads to the creation of employment opportunities.

Secondly, employment opportunities also increase through following the removal of restrictions on capital flows.

The greater capital inflows, especially in the form of foreign direct investment (FDI), create not only more direct employment for employees but they have also a multiplier effect on the growth of employment and output. 

Conclusion

            Globalization is the great economic event of this era. The phenomenon of globalization has captured world attention in various ways. Over the last two decades foreign trade and the cross border movement of technology, labour and capital have been massive. The integration of world economies had put pressure on nations for adapting liberalized economic policies favouring deregulation and liberalisation. Globalisation has also increased the pressure of competition between economies. The new competitive environment has awakened the employers on the need to be competitive, effective and innovative producers of goods and services. Because of the highly protected domestic market and the practical absence of external competition, Indian industry was never under pressure to cut cost, improve quality or to expand to global markets. As a result of the new economic environment, customers and consumers who where accepting inefficiency  and  the cost of inefficiency started demanding quality products and services at cheaper rates.