Recent years have seen exchange rate volatility and financial market destabilisation. Votaries of globalisation are still demanding structural reforms to reap the gains and avoid the risks inherent in the free play of market forces.
THE TWENTY-first century opened on a troubled note with terrorism posing the greatest threat to the world since the end of the Second World War 60 years ago, and the nation-state encountering new challenges, both geo-political and economical, not seen in the latter part of the 20th century. The millennium has not ushered in an era of relative peace and harmonious development for humanity, especially for the third of them in the developing world. Insurgency, local conflicts, ethnic cleansing and state tyranny has added to terrorism on the global stage. All these impact normal life of peace-loving people all over the world and inflict considerable damage to human lives and productive assets.
On the economic and social side, recent years have seen a surge in the price of oil, which lubricates the global economy, hurting the economies of oil importing developing countries. The resulting significant rise in domestic costs and spiraling of consumer price has lead to firming up of interest rates which could affect growth. The heavier import bills have caused a drain on foreign exchange reserves of these countries.
Secondly, global imbalance due to oil exports and a few emerging economies, mainly Asian, are raising fear of a sudden unwinding leading to exchange rate volatility and financial market destabilisation.
Thirdly, the spread of globalisation, relying on market forces, has far from creating new growth opportunities for the developing countries, not only accentuated the rich-poor divide but also failed to lower levels of unemployment even if jobs are generated in a few high-tech sectors for skilled professionals. Votaries of globalisation are still demanding structural reforms to reap the gains and avoid the risks inherent in the free play of market forces. It’s time to exercise caution.