The globalisation of economic activity can be considered as the integration of the economies of separate nations producing a system whereby countries are interdependent. The impacts of this change on LEDCs can be economic, social or environmental.
As globalisation has occurred many beneficial economic impacts have taken place in LEDCs. Trans-national companies may decide to invest in LEDCs to take advantage of cheaper labour costs, or a supply of natural resources, or less environmental legislation for instance. This can drastically improve a countries economy and provide much sought after employment for instance. The Nike company has factories in many South East Asian countries, including Vietnam and Indonesia, where its jobs are highly valued. Foreign investment can improve LEDCs economic bases and aid development. South Korea developed from a LEDC to a NIC and is now a MEDC with its own TNCs – the Lucky Goldstar company invested in Newport Wales recently at a cost of £1.7 million. This demonstrates that globalisation frequently has beneficial economic impacts on LEDCs.
However, globalisation may also give rise to economic problems. Many LEDCs may become destabilised by economic investment – TNCs frequently pull out and locate elsewhere for instance. Nike which had around 50% of its manufacturing located in South Korea in 1989 for example, had less than 10% there by 1997. By shifting production companies are able to keep costs low.
Furthermore, LEDCs may be economically exploited by MEDCs through globalisation. A situation of dependency has arisen in mnay LEDCs, particularly former colonies, whereby LEDCs export primary goods to the rich MEDC and import manufactured goods. Whereas MEDC prices are largely stable, LEDC prices fluctuate as they are commodities which are affected by supply or demand. More than 50 LEDCs rely on fewer than 3 commodities for more than half of their export income. This is an economically weak position and prices may be cut as MEDCs source out cheaper suppliers. For instance, the Tesco company imports peas from just four farms world wide and therefore can drive down prices. Thirty to Forty percent of peas from its Zimbabwean farm are rejected. Therefore economic impacts on LEDCs can be positive or negative, but certainly tend to be less advantageous than for MEDCs who obtain huge profits at the expense of LEDCs.
Globalisation has also caused a wide variety of social impacts in LEDCs. In areas surrounding the new factories, social improvements can often be seen. In the Nike factory in Vietnam for instance, average wages are three times the national average of $18 a month at $54 a month. This means that locals are able to afford luxury goods such as televisions and has led to a multiplier effect setting in whereby further investment is attracted and more services are made available to local people as they acquire a greater disposable income. Also important are changing gender roles that have been brought about by globalisation. Many of the factories employ nimble fingered females and is therefore often females that earn the increased wages and become the major bread earners.
This change can also be viewed as a negative impact however, and is viewed by many as exploitation. Factory jobs are often perceived very badly, especially in the West. It is true that many operations are exploitative, with shifts being as long as 24 hours in poorly conditioned rooms with no natural light or air conditioning (Gap factory in Indonesia). The social impacts therefore can be considered as negative also. It is important to consider that many regions remain unchanged by the factory developments that tend to occur in the core regions such as Ho Chi Minh City in Vietnam. Many outlying regions remain more socially backward. A further social change that must be considered a negative is the spread of western culture and Americanisation. Local cultures and traditions may be suppressed – in Indonesia for instance western weddings are now very common.
Whereas globalisation leads to both positive and negative social impacts, environmental impacts are generally negative to a greater extent. The environment is frequently degraded by new industries. South East Asia now has the highest rate of deforestation and energy consumption per GDP unit in the world. 20% of vegetated land is degraded. There may be some positive impacts – such as landscaping of surroundings of the big TNC firms, but these are only really in the premises of TNCs that attract widespread attention in MEDCs and only in the core region of development.
In conclusion, the effects of globalisation are wide ranging in LEDCs. Most impacts can be viewed both positively and negatively. Certainly economic and social improvements can be recognised (the life expectancy in Vietnam has now reached 72 and poverty rates have been cut by half in the last ten years), but these changes are only really in NICs. Many LEDCs have been bypassed by change and in the future are unlikely to see vast improvements. Many LEDCs and NICs are also seeing environmental degradation.