Impact of Liberalization, Privatization and Globalization on Governance

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<<–2/”>a >h4>Liberalization-2/”>Liberalization

The leading economists of the country differ in their opinion about the socioeconomic and ecological consequences of the policy of liberalisation.Liberalization has led to several positive and negative effects on Indian economy and Society. Some of the consequences of liberalisation have been briefly described here:

1. Increase in the Direct Foreign Investment: The policy of liberalisation has resulted in a tremendous increase in the direct foreign investment in the industrial and infrastructural sector (roads and electricity).

2. Enhancement in the Growth of GDP: There is a significant growth in the Gross Domestic Product (GDP). Prior to the liberalisation, the growth rate of GDP was around 4 per cent which rose to around 10 per cent in 2006-07.

3. Reduction in Industrial Recession: The Industrial Sector of India was passing through a period of recession prior to the policy of liberalisation. The foreign and private investment has checked the recession trend. This happened because of the massive investment in modernisation, expansion, and setting up of many new projects. Industries like automobiles, auto-components, coal-mining, consumer electronics, chemicals, food-processing, Metal, petrochemicals, Software, sport-goods, and textiles have undergone a growth rate of about 25 per cent. In addition to these, other industries, like crude-oil, construction, fertilisers, and power generation have shown an increase of about 15 per cent.

4. EMPLOYMENT: The heavy investments in industries and Infrastructure-2/”>INFRASTRUCTURE by the Indian and foreign investors have generated great employment opportunities for the professionals, and skilled and unskilled workers.

5. Development of Infrastructure: Prior to the liberalisation, the infrastructure (roads and electricity) were in a bad shape affecting the industrial growth and Economic Development of the country adversely. Heavy investment in infrastructure has improved the efficiency of the industrial sector significantly.

6. Rise in Export: There is a phenomenal increase in export after liberalisation. Simultaneously India is importing raw materials, machinery, and finished products. Despite heavy imports, there has been a tangible improvement in the Balance of Payment.

7-Increase in Regional Disparities:The policy of liberalisation and New Industrial Policy (1991) could not reduce the regional inequalities in economic development. In fact, investments by the Indians and foreign investors have been made in the states of Andhra Pradesh, Gujarat, Haryana, Karnataka, Maharashtra, Rajasthan, Tamil Nadu, and West Bengal. The states like Bihar, Himachal Pradesh, Jammu and Kashmir, Kerala, Meghalaya, Mizoram, Nagaland, Orissa, Tripura, Uttar Pradesh, and Uttarakhand are lagging behind. This has accentuated the regional imbalance and has lead to north south devide. The maximum investment so far has been done in Maharashtra, Gujarat, Andhra Pradesh, West Bengal, and Tamil Nadu. This uneven industrial development has resulted into many socioeconomic and political problems. The Naxal Movement, ULFA, and political turmoil in Jammu and Kashmir may be partly explained as being caused due to the less industrial and economic development of the regions.
8. Damage to Cottage and Small Scale Industries:Liberalisation in a country like India has adversely affected the traditional cottage and small scale industries which are unable to compete with the large-scale industries established by the multinationals. The cottage and small scale industries need protection in the form of subsidies, technology, technical access, funds, and Network to export their products, Indian traditional workers such as silk workers of bihar are threatened by the imported synthetic silk.

9.Sophisticated Technology: The latest technology, being sophisticated, replaces labour and thus results in Unemployment. This may be counter productive and detrimental to our industrial structure.

10. Comparatively Little Direct Investment: The foreign investors are more inclined to portfolio investment rather than direct investment. The former may be withdrawn at will at the slightest of hurdles giving a jolt to the economy of the country  and it may create instability to Indian economy.

11. Investment in Selected Industries: Most of the foreign investment comes to white-goods and not to wage-good sector. Hence, it may be fruitful in improving the high priority sector and bringing in the latest technology. This will be counter productive. India is blessed with demographic dividend and the selective investment has failed to harness it.

12. Economic and Political Freedoms are at Stake: The over-enthusiasm of liberalisation to attract more investors and Foreign Exchange might lead to gradual handling over of the whole economy to the multinationals. This will affect adversely our economic and political freedom.

13. Inflation: Since the new industrial policy and liberalisations, the rate of inflation is continuously increasing. A section of the society is becoming more rich and adopting the lifestyle of consumerism. As opposed to this, the absolute number below the POVERTY line is also increasing. The gulf between the rich and the poor may be the cause of numerous social problems resulting in social tension.

Privatization/”>Impacts of Privatization

Privatization in generic terms refers to the process of transfer of ownership, can be of both permanent or long term lease in nature, of a once upon a time state-owned or public owned property to individuals or groups that intend to utilize it for private benefits and run the entity with the aim of profit maximization.
ADVANTAGES OF PRIVATIZATION
Privatization indeed is beneficial for the growth and sustainability of the state-owned enterprises.
• State owned enterprises usually are outdone by the private enterprises competitively. When compared the latter show better results in terms of revenues and efficiency and productivity. Hence, privatization can provide the necessary impetus to the underperforming PSUs .
• Privatization brings about radical structural changes providing momentum in the competitive sectors .
• Privatization leads to adoption of the global best practices along with management and motivation of the best human talent to foster sustainable competitive advantage and improvised management of Resources.
• Privatization has a positive impact on the financial Health of the sector which was previously state dominated by way of reducing the deficits and debts .
• The net transfer to the State owned Enterprises is lowered through privatization .
• Helps in escalating the performance benchmarks of the Industry in general .
• Can initially have an undesirable impact on the employees but gradually in the long term, shall prove beneficial for the growth and prosperity of the employees .
• Privatized enterprises provide better and prompt Services to the customers and help in improving the overall infrastructure of the country.

DISADVANTAGES OF PRIVATIZATION
Privatization in spite of the numerous benefits it provides to the state owned enterprises, there is the other side to it as well. Here are the prominent disadvantages of privatization:
• Private sector focuses more on profit maximization and less on social objectives unlike public sector that initiates socially viable adjustments in case of emergencies and criticalities .
• There is lack of transparency in private sector and stakeholders do not get the complete information about the functionality of the enterprise .
• Privatization has provided the unnecessary support to the Corruption and illegitimate ways of accomplishments of licenses and business deals
ADVANTAGES AND DISADVANTAGES OF PRIVATISATION IN INDIA

  • Privatization loses the mission with which the enterprise was established and profit maximization agenda encourages malpractices like production of lower quality products, elevating the hidden indirect costs, price escalation etc..
    • Privatization results in high employee turnover and a lot of investment is required to train the lesser-qualified staff and even making the existing manpower of PSU abreast with the latest business practices .
    • There can be a conflict of interest amongst stakeholders and the management of the buyer private company and initial resistance to change can hamper the performance of the enterprise .
    • Privatization escalates price inflation in general as privatized enterprises do not enjoy government subsidies after the deal and the burden of this inflation effects common man

 

 

Impacts of Globalisation:-

Definition of Globalization/”>Globalization-3/”>Globalization :- Its a process(not an outcome) characterized by increasing global Interconnections by gradual removal of barriers to trade and investment between nation and higher economic efficiency through competitiveness.

Various economic, political, social and cultural effects of globalization are as follows:-

Economic:-

  • Breaking down of national economic barriers
  • International spread of Trade, Financial and productive activities
  • Growing power of transnational cooperation and International financial Institutions(WTO, IMF)Through the process of:-

1- Liberalization- relaxation of restrictions, reduction in role of state in economic activities,decline in role of govt in key industries, social and infrastructural sector.

2- Privatization- Public offering of Shares and private sale of shares, entry of private sector in public sector and sale of govt enterprises.

3- FDI

4- International regulatory bodies(WTO,IMF)

5- MNC’s

6- Infrastructural development

7- Expansion of Communication-technology/”>Information and communication technology and birth of information age.

8- Outsourcing of services- ie BPO and Call Centres.

9- Trade related Intellectual Property Rights(TRIPS)- product based patent rather than process based.

Social effects:-

  • Withdrawal of National govt from social sectors ie declining share of govt in public spending, reducing social benefits for worker(social dumping,pension cuts,subsidies reduction)
  • Labor  reforms and deteriorating Labor welfare:-
    • Labour Market deregulation:-
      • Minimum wage fixing
      • Employment security
      • Modifying tax regulation
      • Relaxed standards of security
    • Increased Mechanization demands skilled labour and thus loss of job for unskilled labour
    • Loss of jobs for traditional workers for example bihar silk workers due to imported Chinese- Korean silk
  • Feminism of Labour ie increased Women participation specially in soft industries
  • Trickle down theory of poverty reduction has limited success and in agricultural nations poverty has infect increased.
  • Unsustainable development practices such as:- excessive use of Fertilizers, Irrigation, fish trawling by mnc’s(Protein flight ),Exploitation of Natural Resources by MNC’s.
  • Migration and Urbanization have lead to problem of slums
  • Commercialization of indigenous knowledge:- patenting
  • Rising inequality in wealth concentration

 

Cultural:-

  • Increased pace of cultural penetration
  • Globalization of culture
  • Development of hybrid culture
  • Resurgence of cultural nationalism ie shivsena opposing valentine day

 

Political:-

  • Globalization of National Policies- Influenced by International agencies
  • Reducing economic role of govt
  • Political lobbying

 

Positive effects of Globalization

  • Increased competition
  • Employment generation
  • Investment and capital flow
  • Foreign Trade
  • Spread of technical know how
  • Spread of Education
  • Legal and ethical effects
  • Improved status of women in the society
  • Urbanization
  • agriculture:- greater efficiency,productivity, use of HYV seeds, Future contracts and Cooperative Farming
  • Higher standard of living

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Liberalization, privatization, and globalization are three major trends that have had a significant impact on governance in recent decades. These trends have led to a number of changes in the way that governments operate, including increased competition, reduced government control, increased transparency, increased accountability, reduced government ownership, increased private sector participation, increased efficiency, increased competition, increased interconnectedness, increased interdependence, increased complexity, and increased challenges.

Impact of liberalization on governance

Liberalization is the process of removing restrictions on economic activity. This can include deregulation, trade liberalization, and financial liberalization. Liberalization has a number of potential impacts on governance. First, it can lead to increased competition. When businesses are free to enter and exit markets, they are more likely to compete on price and quality. This can lead to lower prices for consumers and higher quality goods and services. Second, liberalization can lead to reduced government control. When governments remove restrictions on economic activity, they are also giving up some control over the economy. This can be seen as a positive development, as it can lead to more efficient markets and less corruption. Third, liberalization can lead to increased transparency. When businesses are required to disclose more information about their activities, it becomes easier for governments and citizens to hold them accountable. This can lead to a more efficient and accountable government. Fourth, liberalization can lead to increased accountability. When businesses are subject to more competition, they are more likely to be responsive to the needs of their customers. This can lead to higher quality goods and services and better customer service.

Impact of privatization on governance

Privatization is the process of transferring ownership of assets from the public sector to the private sector. This can include the sale of state-owned enterprises, the contracting out of public services, and the introduction of private sector competition into public services. Privatization has a number of potential impacts on governance. First, it can lead to reduced government ownership. When governments sell state-owned enterprises, they are also reducing their ownership of assets. This can be seen as a positive development, as it can lead to a smaller government and less government intervention in the economy. Second, privatization can lead to increased private sector participation. When governments contract out public services or introduce private sector competition into public services, they are giving the private sector a greater role in the provision of these services. This can lead to more efficient and innovative service delivery. Third, privatization can lead to increased efficiency. When businesses are given the responsibility for providing public services, they are more likely to be efficient in their operations. This can lead to lower costs for taxpayers and better quality services for citizens. Fourth, privatization can lead to increased competition. When businesses are competing to provide public services, they are more likely to be innovative and efficient in their operations. This can lead to lower costs for taxpayers and better quality services for citizens.

Impact of globalization on governance

Globalization is the process of increasing interconnectedness between countries and people. This can be seen in the growth of international trade, the movement of people, and the spread of information and technology. Globalization has a number of potential impacts on governance. First, it can lead to increased interconnectedness. When countries are more interconnected, they are more likely to be affected by the actions of other countries. This can make it more difficult for governments to control their own economies and societies. Second, it can lead to increased interdependence. When countries are more interdependent, they are more likely to need to cooperate with each other. This can make it more difficult for governments to act unilaterally. Third, it can lead to increased complexity. When countries are more complex, it is more difficult for governments to understand and respond to the challenges they face. This can lead to a loss of control and a decline in the effectiveness of government. Fourth, it can lead to increased challenges. Globalization has created a number of new challenges for governments, such as the rise of transnational crime, the spread of infectious diseases, and the threat of terrorism. These challenges can be difficult to address, and they can strain the resources of governments.

In conclusion, liberalization, privatization, and globalization are three major trends that have had a significant impact on governance in recent decades. These trends have led to a number of changes in the way that governments operate, including increased competition, reduced government control, increased transparency, increased accountability, reduced government ownership, increased private sector participation, increased efficiency, increased competition, increased interconnectedness, increased interdependence, increased complexity, and increased challenges. These changes have both positive and negative implications for governance, and it is important to carefully consider the potential impacts of these trends before making decisions about how to respond to them.

What is liberalization?

Liberalization is the process of removing restrictions on economic activity. This can include things like deregulation, privatization, and trade liberalization.

What is privatization?

Privatization is the process of transferring ownership of assets from the public sector to the private sector. This can include things like selling state-owned enterprises, contracting out public services, and devolving power to local governments.

What is globalization?

Globalization is the process of increasing interconnectedness between countries and people. This can include things like the growth of international trade, the spread of technology, and the movement of people.

What is governance?

Governance is the process of managing a country or organization. This includes things like setting policy, making decisions, and implementing programs.

What is the impact of liberalization, privatization, and globalization on governance?

Liberalization, privatization, and globalization can have a significant impact on governance. They can lead to changes in the way that governments operate, the way that public services are delivered, and the way that citizens participate in decision-making.

What are some of the positive impacts of liberalization, privatization, and globalization on governance?

Liberalization, privatization, and globalization can lead to:

  • Increased efficiency and productivity: By removing restrictions on economic activity, liberalization can lead to increased competition and efficiency. This can lead to lower prices and higher quality goods and services.
  • Increased innovation: By opening up markets to foreign investment and competition, privatization can lead to increased innovation. This can lead to new products and services, as well as new ways of doing business.
  • Increased economic growth: By increasing trade and investment, globalization can lead to increased economic growth. This can lead to higher incomes and more jobs.
  • Increased access to information and technology: Globalization can lead to increased access to information and technology. This can help people to learn new skills, find jobs, and participate in decision-making.

What are some of the negative impacts of liberalization, privatization, and globalization on governance?

Liberalization, privatization, and globalization can also lead to:

  • Increased inequality: By increasing competition, liberalization can lead to increased inequality. This is because some businesses will be more successful than others, and the gap between the rich and the poor will widen.
  • Reduced government revenue: By privatizing public services, governments can lose revenue. This can make it difficult for governments to provide essential services, such as education and healthcare.
  • Loss of Sovereignty: By opening up their markets to foreign investment, governments can lose some of their sovereignty. This is because foreign companies may have more power than the government in some areas.
  • Environmental damage: Globalization can lead to increased environmental damage. This is because businesses may be more likely to pollute if they are not subject to strict environmental regulations.

What are some of the challenges of managing the impact of liberalization, privatization, and globalization on governance?

One of the biggest challenges of managing the impact of liberalization, privatization, and globalization on governance is ensuring that the benefits are shared widely. This means that governments need to put in place policies that protect the poor and vulnerable from the negative effects of these trends.

Another challenge is ensuring that governments are able to regulate the private sector effectively. This is important because the private sector can have a significant impact on the economy and society. Governments need to be able to ensure that the private sector operates in a way that is fair and responsible.

Finally, governments need to be able to adapt to the changing needs of their citizens. This is because globalization is constantly changing the way that people live and work. Governments need to be able to respond to these changes in order to provide effective governance.

Question 1

Which of the following is not a characteristic of globalization?

(A) Increased trade and investment between countries
(B) The spread of technology and ideas
(C) The rise of multinational corporations
(D) The decline of national sovereignty

Answer
(D) The decline of national sovereignty is not a characteristic of globalization. In fact, globalization can lead to an increase in national sovereignty, as countries are able to cooperate more effectively on issues of common interest.

Question 2

Which of the following is not a benefit of globalization?

(A) Increased economic growth
(B) Increased innovation
(C) Increased choice for consumers
(D) Increased inequality

Answer
(D) Increased inequality is not a benefit of globalization. In fact, globalization can lead to an increase in inequality, as the benefits of globalization are not evenly distributed.

Question 3

Which of the following is not a challenge of globalization?

(A) Environmental Degradation
(B) Social unrest
(C) Loss of jobs
(D) Increased crime

Answer
(D) Increased crime is not a challenge of globalization. In fact, globalization can lead to a decrease in crime, as countries are able to cooperate more effectively on law enforcement.

Question 4

Which of the following is not a way to mitigate the challenges of globalization?

(A) Investing in education and training
(B) Promoting social safety nets
(C) Regulating the financial sector
(D) Increasing tariffs on imports

Answer
(D) Increasing tariffs on imports is not a way to mitigate the challenges of globalization. In fact, increasing tariffs on imports can make the challenges of globalization worse, as it can lead to higher prices for consumers and less choice.

Question 5

Which of the following is the most important factor in determining the impact of globalization on a country?

(A) The country’s level of development
(B) The country’s political system
(C) The country’s culture
(D) The country’s natural resources

Answer
(A) The country’s level of development is the most important factor in determining the impact of globalization on a country. Countries with a higher level of development are better able to adapt to the challenges of globalization and reap the benefits of globalization.

Question 6

Which of the following is the most important way for countries to prepare for the challenges of globalization?

(A) Investing in education and training
(B) Promoting social safety nets
(C) Regulating the financial sector
(D) All of the above

Answer
(D) All of the above are important ways for countries to prepare for the challenges of globalization. Investing in education and training will help countries develop a skilled workforce that can compete in the global economy. Promoting social safety nets will help countries protect their citizens from the negative effects of globalization, such as job losses. Regulating the financial sector will help countries prevent financial crises, which can be a major cause of economic instability.

Question 7

Which of the following is the most important way for countries to reap the benefits of globalization?

(A) Investing in infrastructure
(B) Promoting trade and investment
(C) Developing a skilled workforce
(D) All of the above

Answer
(D) All of the above are important ways for countries to reap the benefits of globalization. Investing in infrastructure will help countries connect to the global economy and make it easier for businesses to operate. Promoting trade and investment will help countries access new markets and resources. Developing a skilled workforce will help countries compete in the global economy.