4. The Developing World in the Global Economy

Abstract

This chapter examines the role of developing countries in the contemporary global economy. It first provides an overview of trends in the global economy, taking into account the implications of globalization for the developing world and the question of free trade vs protectionism. It then considers three key features of an increasingly globalized economy and their significance for the developing world: trade, foreign direct investment (FDI), and financial flows. It also discusses the role(s) of developing countries in global trade, the advantages and disadvantages of FDI, and two major components of the global economy that can cause serious economic disruptions: the buying and selling of currencies and stocks and shares in local economies, and the rapid movement of capital across borders. The chapter concludes with an assessment of factors that can reduce the economic well-being of countries in the developing world.