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Globalization and Human DevelopmentThe question for acountry like Egypt iswhat the net effect ofglobalization is likelyto be.Countries mustfollow a strategy thatwould maximizebenefits fromglobalizationopportunities andminimize thenegative threats ofglobalization.● Maintaining National Security:Globalization is meant to reduce theprobabilities of warfare and enhance theopportunities for peace. The confidentialityrequired for national security purposes islikely to dwindle, and this process will befurther affected by advanced technology,sophisticated communication devices andthe Internet.. This could createvulnerabilities in the case of conflict;particularly since confrontation andconflict appear to be permanentcharacteristics of our world. For Egyptand the Arab region, as long as no justand permanent peace settlement withIsrael has been reached, conflict willremain a reality, and will require preventativemeasures for national security.The Net OutcomeGiven the opportunities and threats to whichcountries are exposed under globalization,the question arises as to whether countriesshould choose to become isolated fromglobal trends and close their doors in orderto preserve their interests.Given that there is neither a free ride nor afree lunch, the question for a country likeEgypt is what the net effect of globalizationis likely to be. The answer depends on boththe actions of the country in question andthe international community. Countriesmust follow a strategy that would maximizebenefits from globalization opportunitiesand minimize the negative threats ofglobalization. This would require policiescapable of redressing distortions in thenational economy, raising productionefficiency and deepening specialization inthe fields where each country enjoyscomparative and competitive advantages.Improved education, higher productivity,efficient administration and goodgovernance are the main guarantees for anet positive effect from globalization.The influence of globalization depends alsoon the actions of the internationalcommunity, with its various actors: thesuperpowers, international organizations,and the arrangements and agreementsbetween various states, as well as their realcommitment to development goals. Theworld system is not likely to create in thenear future an international body able toredress inequitable income distributionworldwide resulting from globalization, aswould be the case within a nationaleconomy. Further, no state is ready torelinquish part of its sovereignty to such aninternational authority. Given theserealities, can the international communitymake arrangements to coordinate internationaland national interest within the frameworkof a global society? This remains to be seen.Finally, insulation from the world marketdeprives countries of much needed capital,technology, low cost and better qualitygoods and services, as well as theopportunity to create jobs in the exportsectors. However, the unqualifiedintegration of developing countries intoworld markets can be equally costly, as therecent crises in East Asia, Russia and Brazildemonstrate. Capital can fly suddenly,leading to the collapse of nationalcurrencies and a rise in unemployment.Industries may fail to compete in a morecompetitive environment due to excessiveprotection in the past. Wage disparitybetween skilled and unskilled labor mayescalate and developing countries may onlybe able to attract polluting industries.The Extent of GlobalizationHow well connected is the world economy?Is globalization today different fromprevious episodes? These questions areassessed below.Trade in Goods and ServicesFalling trade barriers and advances in thetechnologies of communication andtransportation have brought the world muchcloser. Aggregate data show that the ratio ofexports and imports to GDP has increasedsharply, especially in the period following1972 (Figure1.1). Further, the data tends tounderestimate the extent of worldintegration, in view of the increasing shareof non-traded goods and services (e.g.education, health, finance, insurance, realestate and domestic trade) in the GDP ofmost economies. While developed countriesare trading more with the rest of the world,so are developing countries. Developingcountries are, in addition, now exporting14 -Egypt Human Development Report 2000/2001