To what Extent can Growing Poverty be Blamed on the Advance of Globalisation - Essay Example

To what Extent can Growing Poverty be blamed on the Advance of Globalisation? For decades, globalisation and international trade have been ever present. In recent years, may nations have opened up their borders for international trade where countries are open to sharing of resources via signed trade agreements (Eswar, Rajan and Arvind, 2007). The resources – labour, land, enterprise and capital - to be shared between these nations are limited and scarce and as a result trade between them arises. For a nation to maximize benefits of trade for its citizens, a host of policies that govern and or manage its resources have to be drawn where governments make huge decisions regarding policies that determine the extent of its involvement, as well as the details of its trade with other countries. Globalisation is defined by Pugel (2004:5) as the “process of an increased relationship between national economies through international trade, foreign direct investments by multinational firms, and international financial investments”. Increased inter-nation trade results in the increased need for the redistribution of pricing and goods in a way that will ensure market place equilibrium is arrived at. As a result, nations may undergo periods of unemployment, reduced prices of their nations’ natural resources, as well as poor standards of life. On the other hand, Pugel (2004) argues that some countries undergo periods of inflation, increased employment demand, as well as increased living standards; thus there will be both gains and losses as a result of wealth redistribution. In order to establish comparisons between poor and rich nations, definition and measurement of inequality is vital. Once determined, it is possible to evaluate and measure the effects of globalisation on the nation’s status. According to Birdsall (2002), inequality is the disparity of people’s living standards and their income in different countries. In addition, the World Bank categorises those in developing nations living under a dollar per day and those in medium economies living under two dollars a day as poor (Eswar, Rajan and Arvind, 2007). In contrast, the trio posits that a person in the more developed economies of the US, Japan, and Europe trying to live on under a thousand dollars is relatively poor as the cost of life is these economies is far greater than this amount. There is a rising increase in the income gap between the rich and the poor with many regions worldwide recording figures of 25% or more people living on less than a dollar a day (Ikubolajeh, 2002). According to Pranab (2007), poor people with less income have limited and or less access to the global wealth. A 2003 research revealed that the richest fifth of the global population garnered 85% of the globe’s income whereas the poorest fifth managed only 1.4% of the globe’s income (Eswar, Rajan and Arvind, 2007). Comparing the GDP between poorest and richest nations across the globe over the past century results in a constantly increasing and or widening income gap; an indicator that the gap of income has augmented and has continued with the same trend. Apart from income, the standards of living can also be used to measure a country’s level of poverty. Sri Lanka shares impressive social indicators as those of developed nations, for instance, life expectancy, literacy rates, mortality rates and population growth rate in the country is same as that of developed nations. Despite this, the country has a low income. Poverty of a country can be measured by fourteen major indicators that have been further subdivided into four sections namely infrastructure for development, growth and poverty reduction, human development, and governance and investment climate (Pugel, 2004). A number of factors can be used to drive economic growth and development, for instance increased educational standards and economic policies such as openness to international trade. Inequality exists in terms of living conditions and standards of living; a scenario which has been a subject of talk by rich nations where they come in by distributing aid packages to address certain needs of poor countries. These packages include food handouts, academic programs and health programs; however, this is still proving to be ineffective as more people are still living in poverty across the whole world. One thing that needs to be sunk is that rich nations were not born rich; rather, they have been in stable governments with the ability to accumulate affluence for long years. In addition, these nations have been able to establish strong and meaningful relationships with neighbouring trade partners (countries) via establishment of non-corrupt governments and reduction of trade barriers (Pugel, 2004). Nations that have committed themselves to international trade are in a good position to increase their general growth rate. The twentieth century saw close to all countries record supreme growth in their economies as the global GDP augmented nearly five-fold. This period was accompanied by immense and hasty growth as well as increased trade (IMF, 2000). It is the help of international trade that sees economies recover at an alarming rate after series of wars, economic crisis and natural disasters. Suitable examples are economies of India, China and Mexico that represent in excess of three billion people have implemented policies that see people living in these nations take advantage of globalisation and the result is that their economies are in the chasing park towards rich economies (Rodri, 2007). International trade has had a huge impact in the success of these countries’ economies. Some countries have been rigid in opening up to international trade and as a result their economies have stagnated or have slow economic growth. Least globalised countries like North Korea, Iran and Pakistan have suffered from declining or stagnated incomes in the recent past (Pranab, 2007). As a result, Pranab (2007) argues that nations with little or no opening to international trade have limited potential of economic growth and development. A close examination of rich and poor nations’ per capita income reveals that other factors work against poor nations. Aid packages offered to poor countries keep shady political leaders in power hence a detriment to economic development (Ikubolajeh, 2002). The sole purpose of foreign aid is to help poor governments establish institutions and develop infrastructure that will aid them become self-sufficient. Poor nations have been given considerable sums of aids in the past half century yet most of them still remain in poverty. People living in these nations fail to benefit from the aids given to their governments due to corrupt institutions and leaders. Most poor nations are led by corrupt leaders who invest less in infrastructure and social services that its people need. Instead, they are concerned with keeping their positions and reward those who help them retain their positions. Developing nations are poor because the inefficient and corrupt governing systems redistribute the economic pie to top government officials rather than growing it via suitable economic policies. These nations sometimes spend much of their income on worthless military missions and projects that have no benefits to the public’s poor state. A suitable example is the government of North Korea’s heavy spending on military nuclear weapons when its people are languishing in poverty (World Bank, 2004). Spending government money on such initiatives does not serve the people in provision of education, health care, clean water and other basic facilities and or services that enable people of a given country move out of poverty and miserable lives. A statement by World Bank read that “when governments’ incentives are for political patronage rather than development; aid supports incompetent but politically connected schoolteachers, builds schools without textbooks, and roads that attract crooked contractors but little maintenance” (World Bank, 2004). In the absence of foreign trade, foreign aid is the unconventional choice in helping elevate levels of wealth in developing nations yet many still live in poverty as a result of corrupt, inefficient governments and poor distribution of resources. According to a report by Transparency International, nine from ten developing countries are inefficient and corrupt to an extent that when aid is given to these governments, little of the sum given finds its way to its targeted destination – the people (World Bank, 2004). However, some governments who are opponents of foreign aid have managed to convince their people that limiting foreign aid and international trade is necessary to ensure continued growth. Many poor nations are obliged to comply with economic reforms before they can receive any foreign aid and many of them are reluctant due to the belief that these services have a negative impact on the culture of the country. These reforms are usually viewed as favouring the rich nations in terms of poor countries’ resource access. The International Monetary bodies have established lending policies that are viewed by poor nations as beneficial to the rich nations by leaving the poor nations with a hefty burden to pay. In addition, Bradford, Grieco and Hufbauer, (2006) opine that many poor nations think that participation in globalisation will deteriorate their culture and lose their identity. This is all wrong as globalisation’s aim is not to destroy local customs and civilisation; instead, it aims at proliferating individual culture via the use of contemporary technology such as televisions and the World Wide Web so as to ensure that no culture is limited by location (Kutting, 2003). Globalisation does not destroy cultural identity; instead, it only encourages poor nations to remain in poverty. Poor nations remain poor not because of globalisation but because their culture has a high rate of ;population growth, it is not growth oriented, misconception that wealthy nations impose conditions on the aid given to them for their own benefits as well as low levels of education. Of the least developed nations, the major concern is not being impoverished by international trade and or globalisation; instead, these countries suffer the threat of being eliminated from the globalisation process at large. In 1997, 0.4% of the poorest nations across the globe recorded waning trade with international partners, which is half the figure of 1980s (Bradford, Grieco and Hufbauer, 2006). Their access to foreign investment is insignificant and has limited the access of the outside world to their economies hence limiting their economic development. In essence, the four aspects that developing poor nations should take into consideration to help in their elevation from poverty and become more self-sufficient include capital movements, trade, spread of technology and education, and movements/interaction of people (IMF, 2000). Nations which adhere to these policies have reaped benefits from globalisation and international trade and as a result have flourished immeasurably (World Bank, 2004; Martell, 2010). Conclusion Globalisation is no way a contributor to the global poverty rates, instead, the governments in these developed nations that are inefficient and corrupt and are led by political elites with selfish interests of satisfying their personal needs as well as retaining their political positions rather than establish and implement suitable economic policies that will help get its poor people out of poverty and ensure a healthy and productive nation. In conclusion, it is incorrect to say that advancement in globalisation has had a hand to play in the increasing poverty levels across the globe as all it does is encourage economic growth and development. References Birdsall, N. (2002) That silly inequality debate. Brookings institute. Retrieved April 9, 2013 from . Bradford, S.C., Grieco, P.L.E. & Hufbauer, G.C. (2006) “The Payoff to America from Globalisation,” The World Economy, vol. 29, no. 7, pp. 893-916. Eswar, P., Rajan, R. & Arvind S. (2007) “Foreign Capital and Economic Growth,” Brookings Paperson Economic Activity 1. Ikubolajeh, L.B. ed. (2002) Globalisation, the third world state, and poverty-alleviation in the twenty-first century, Aldershot, UK, Ashgate. IMF staff (2000) Globalisation: threat or opportunity? International monetary fund. Retrieved April 9, 2013 from http://www.imf.org/external/np/exr/ib/2000/041200.htm#III Kutting, G. (2003) “Globalisation, Poverty and the Environment in West Africa: Too Poor to Pollute?” Global Environmental Politics, vol. 3, no. 4, pp. 42-60. Martell, L. (2010) Sociology of Globalisation. Polity Press. Pranab B. (2007) Inequality in India and China: Is Globalisation to Blame? Internal forces, technological change and problematic policies spur growing inequality. Journal of Development Economics. Yale Center for the Study of Globalisation. Pugel, T.A. (2004) International economics. McGraw Hill, p. 5, 62, 69. Rodri, D. (2007) ‘How to save globalisation from its cheer leaders’ The Journal of International Trade and Diplomacy, vol. 1, no. 2, pp. 1-33. World Bank staff (2004) Globalisation: foreign investment and foreign aid. World Bank. Retrieved April 9, 2013 from . Read More