The Effects of Trade on Economic and Social Development
The latter part of the 20 th century witnessed the rise of a new economic era- one of globalization. This economic phenomenon has raised a multitude of questions regarding the ethics of international trade policies of governments. While increasing international trade has bolstered the economies of many first world nations, the economic effects on developing nations have not been completely determined. Furthermore, there is evidence that the social development of these nations may also be vulnerable to the effects of increased international trade.
In general the consensus is that free trade in its most idealistic form is economically beneficial. Numerous studies have show that the economies of countries that open up to international trade, grow much faster than those who do not. Yet sweeping generalizations cannot be made when contemplating the impacts on so many nations that have so many different factors affecting trade. Certain idiosyncratic conditions in a country may not allow for the idealistic conditions needed for successful trade.
One example is land-locked countries’ difficulty of exporting goods at competitive prices. This is due to the high cost of shipping over land and difficulty of shipping through other nations and obtaining use of foreign ports. A large number of countries have more trouble competing in the global market because of this geographical barrier. This problem is also a symptom of the wider issue of poorer nations having a lesser ability to fund efficient trade. The impacts are that lesser-developed nations remain entrenched in poverty, while richer nations reap all trade benefits.
The alleged benefits of international trade are based on the economic idea of comparative advantages. In theory the particular resources of a nation determine that certain goods are more easily and efficiently produced than others. Specialization in developing these particular goods, exporting the surplus beyond the national need, and importing the goods not produced nationally is deemed more efficient than trying to produce all goods. The supposed impact is that every nation is better off than before specialization and trade.
This is, however, a very macroscopic look at economics that does not consider the impacts on individuals, families, social classes or groups. Many experts argue that while international trade may increase national GDP and benefit large numbers of people in many countries, many other groups of people are disadvantaged. One example of this is that in many countries different crops are grown in different regions due to environmental factors. The groups who produce anything but the 'comparative advantage crop’ will lose sales to farmers and corporations in other countries. Additionally, those who are already living in poverty will have less capital to invest in production change than those who are wealthy. The effect of trade on marginalized groups and on the poor versus the rich clearly needs to be taken into consideration.
The need to create a comparative advantage also creates incentive for producers in nations with fewer human rights standards to exploit laborers in order to be competitive on the international market. This is especially likely in lesser-developed nations because they commonly lack the non-labor capital and infrastructure that allows for the higher production of the developed nations with which they are competing. The question that must be asked then is what nations are fit for international trade without having to make sacrifices in human rights and social development?
In a time where economics is emphasized as a major determinant of quality of life, it is easy to forget there are other factors that must be considered when pondering the benefits of trade. Another influence trade has on social development is the enormous potential of globalization to impact culture. Trade allows for peoples previously uninfluenced by dissimilar cultures to be exposed to the material culture of other groups through the introduction and demand of new goods and services. Additionally, because of the need to deal with other groups through the processes of trade, non-material cultural influence becomes a factor as well.
Many argue that this exposure is beneficial. Part of the western culture that most westerners view as favorable is the concept of democracy. In it’s ideal form, democracy aids in protecting human rights and allowing people to have greater control of government- increasing quality of life and general happiness. However, this potential benefit is not alone in its ability to impact culture. In a time where entire cultures are becoming extinct because of the pressure to assimilate, we must consider the negative effects of cultural change that comes with trade.
The idea of advocating free trade in every nation must be carefully weighed with the knowledge that not all countries have the same conditions as those with successful free trade policies. Additionally, for nations in which free trade seems to be net beneficial, analysts argue that none of the advantages of trade will be achieved without other reforms. Unless there are other checks in place to prevent income distribution inequality, human rights abuses and cultural destruction, increased free trade will continue to give globalization a bad name.