Globalization and its effect on the South African economy...

1. Introduction Globalization refers to the shift toward a more integrated and interdependent world economy. [Hill, 2003: pg6] South Africa provides a unique opportunity to observe the effects of globalization in that the pre democratic period was a period of very little globalization, which can be contrasted with the democratic period which has been characterised by rapid globalization. This sharp contrast emphasises the effects that globalization has on a country. The essay is a longitudinal study that seeks to understand the impact of globalization on the JSE Securities Exchange, since the democratic elections in South Africa. Firstly this essay will analyse the impact globalization has had on South Africa in general. Then the essay†¦show more content†¦The theory has implications for inequality within a country (Stopler Samuelson) and between countries (Factor Price Equalization). The Stopler-Samuelson theory, which builds on the Heckscher-Ohlin theory, predicts that with increased trade, the nations abundant factor will gain and the scarce factor will lose. In terms of income inequality within a country this means that by increasing trade the lower income group, which control the abundant and cheap factor would realise an increase in income and the higher income group controlling the scarce resources would see a fall in income. The assertion by Stopler and Samuelson that increased trade would cause a decrease in inequality within a country is not strongly supported by empirical evidence. A study by Dollar and Kraay [2001] shows that in the period between 1960 and 1995, inequality has in fact slightly increased within countries that the authors have termed globalizers . The empirical evidence, however, does support the Factor-Price Equalization theorem, which states that the movement of factors between countries is replaced by trade in final goods, thus international trade brings about an equalization of relative factor prices between countries. Dollar and Kraay [2001] use empirical evidence toShow MoreRelatedThe Effects of Credit Management on the Profitability of Manufacturing Companies in Nigeria (a Case Study of Guiness Nigeria Plc3653 Words   |  15 Pagesoptimal allocation of resources across the global economy (Jacob and Madu, 2009). Cai and Wong (2010) posited that having a single set of internationally acceptable financial reporting standards will eliminate the need for restatement of financial statements, yet ensure accounting diversity among countries, thus facilitating cross-border movement of capital and greater integration of the global financial markets. 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