Accelerated World Trade, Unprecedented Economic Growth and Poverty Elimination - Article Example

Globalisation: Accelerated World Trade, Unprecedented Economic Growth and Poverty Elimination Introduction Globalisation, a widely debated topic, which impacts differ on developed countries as against developing countries has sharply divided the world into two diametrically opposing views. Expectantly, the West – the precursor of globalisation and the domain of TNCs (Trans-National Corporations) and international organisations such as the IMF-WB, WTO, and GATT, which role is dominant and key to the whole process of globalisation– has nothing but praises to it claiming that it has resulted to an unprecedented development ever happened in the history of mankind. On the other side are its critics, coming mainly from developing countries, which are victims of unfair trading, have seen globalisation as “the major source of inequality, poverty and, indeed, general societal dissonance” (Higgot & Robotti 2001: 9). Both positions of course have their own basic premises. And these are what this paper would like to delve on in order to see the merit of the statement that “Globalisation should be encouraged as it stimulates world trade and economic growth, which is the only effective way to eliminate poverty in the developing countries.” If this is so, then why is it that “the gaps between rich and poor countries, and rich and poor people within countries have grown” (IMF Staff, 2000: 2)? To answer this, a brief discussion on what globalisation is – its basic principles and basic operations, shall provide the premise of the discussion. Then, a discussion on the positive and negative effects of globalisation shall follow, consciously answering the whys related to these. Finally, the paper concludes on its judgment on the merit of the above statement. Globalisation: One World, One Market Globalisation is “the process by which all countries of the world come together to form one entity” (The book “Globalisation and the New Realities,” n.d.: 1). It is an economic order by which “nation-states become more economically, financially and culturally integrated by the economic actions of transnational actors” (Dicken 1998 & Jones 2000, cited in Kilbourne 2004: 123) as efficiently powered by the “new information revolution” (“Globalisation, Information Revolution…” n.d.: 2). Such integration is “based on an ideology – often called ‘economic rationalism’ or ‘neo-liberalism’ – which argues that private profit is the highest value, and that economic efficiency and growth should reign supreme” (Global Trade Watch 2006: 4) as expressed in its underlying principles: “integration, liberalisation and privatisation” (Cogburn & Adeya 1999, cited in “Globalisation, Information Revolution and Higher Education in Nigeria,” n.d.: 4) – the so-called free-trade or free-market. Concretely, globalisation is seen as “a process by which national governments have removed protections for local manufacturers and farmers, and given up power to set policies to international organisations and multinational companies” (Global Trade Watch 2006: 4). Some demystify globalisation viewing it simply as “a relatively new term used to describe a very old process” (Datta n.d.: 1), because international trading has been practiced a century ago. Undeniably however, what makes globalisation different and most striking is the speedy “integration of financial markets [worldwide] made possible by modern electronic communication” (IMF Staff 2000: 2) as these are “reshaping, if not reconstituting the modern world” (Kilbourne 2004: 122). Thus the modern world can be described as: More integration of markets for goods and services. More privatization of government services and industries. More flow of capital around the world in shorter and shorter time spans (in 1998, $1.5 trillion of foreign exchange was traded on world markets every day). More technology. More trade between countries and regions, and more consumers and consumption. In short, more money and, for some, more opportunities to make money. (MacDonald 1999: 25) Furthermore, globalisation operates in four aspects: trade, capital movements, movement of people and spread of knowledge and technology (3). Thus, it is said that globalisation is multifaceted and multidimensional, making it hard to be defined in a single perspective only as it diversely affects life. Globalisation: Accelerated World Trade, Tremendous Economic Growth Historically, trade has been a crucial impetus of economic growth because it has “become the principal determinant of social production” (Wood 2002, cited in Kilbourne 2004: 128) that has consequentially created jobs, income, and profits, thus benefiting society. With globalisation liberalising the market and removing trade barriers (Kilbourne 2004: 132), trading between the rich and poor countries around the world has tremendously increased and accelerated paving the way to an unprecedented economic growth. In fact, for the last 50 years, “globalisation has played a key role in the unprecedented increase in prosperity… now spreading from the United States and Europe to include many formerly poor [Asian] countries… China and India” (Schifferes 2007: sec. 2, par. 3). Data showed that, “since 1950, world trade has increased more than nineteen-fold, and world output has increased by six times – a massive increase in economic ‘welfare’” (Global Trade Watch 2006: 5), “with world trade in manufactured goods increasing more than 100 times (from $95bn to $12 trillion)… much faster than the overall growth of the world economy” (Schifferes 2007: sec. 4, par. 1) and that the “world GDP per capita has increased dramatically” (Csaba, as cited in Higgot & Robotti 2001: 29). As the expansion in trade, made possible by current technology, creates more economic opportunities further activating the market, the Association for European Transport and Contributors (2006) foresaw that this would simultaneously bring development to the transportation industry as well. As globalization brings production to growing Asian economies that may result to their instantaneous population and production growth, an economic agglomeration much greater than that of the US and Europe will possibly be created, dramatically affecting freight flows directions and volumes of world trade (2). In fact, “advances in transportation, information and communications are part of a wider range of technological innovations which have resulted in unprecedented leaps in productivity, economic expansion and increased international trade” (“Global outlook,” n.d.: 19) In the U.S. alone, the total amount of its exports and imports for the year 2003 has led into “the movement of $6.9 billion in goods and services into and out of the United States everyday… roughly $288 million every hour… accounted… 23 percent of America’s $11 trillion output” (“Trade and Globalisation,” n.d.: 3). “The tremendous growth of international trade over the past decades” (“Trade and Globalisation,” n.d. : 2) primarily due to globalisation “has spurred tremendous economic growth across the globe – raising incomes, creating jobs, reducing prices, and increasing workers’ earning power..” (Ibid). “In sum, global economic integration has supported poverty reduction” (Stern 2001: xi) “because more integrated economies tend to grow faster” (Collier, Dollar & Word Bank 2001: 1). According to figures from World Bank (2002) report: From 1981 to 2001… the number of people living on $1 a day or less declined from 1.5 billion to 1.1 billion in absolute terms… [and] the percentage of people living on less than $2 a day has decreased greatly in areas affected by globalisation, whereas poverty rates in other areas have remained largely stagnant. In East-Asia, including China, the percentage has decreased by 50.1% compared to a 2.2% increase in Sub-Saharan Africa. (cited in “Globalisation,” n.d.: 10) Globalisation: Unprecedented Growth, Widened Inequality It has long been believed that economic growth is in fact not only “always and necessarily good” (Kilbourne 2004: 130), but also the only effective way to eliminate poverty. However, the impact of the massive wealth of global economy showed otherwise. … in 2005, more than 800 million people do not have enough food to eat, more than 10 million children died before their fifth birthday, and more than 1 billion people are forced to survive on less than $1 a day. (Global Trade Watch 2006: 5) Furthermore, findings from a study revealed, “trade liberalisation and increased international trade corresponded with increasing poverty in most countries” (UN 2004, cited in Global Trade Watch 2006: 5). While, a comparative study on the degree of development of 175 countries before (1960 and 1980) and during globalisation (1980 and 2005) found that “the latter period of economic liberalisation, privatisation and deregulation had sharply reduced rates of both economic growth and social progress for most countries” (US Centre for Economic and Policy Research, cited in Global Trade Watch 2006: 5). On the other end of the spectrum are the developed countries and the TNCs almost in full control of world trade wherein “the world’s largest 500 corporations control over 70% of world trade” (Global Trade Watch 2006: 7) further widening “the gaps between the rich and poor countries and poor people within countries” (IMF Staff 2000: 2). Between 1994 and 1998, the 200 richest people in the world more than doubled their net worth to more than $1 trillion… [and] in 1960, the income gap between the richest fifth of the world’s population and the poorest fifth was 30 to 1; in 1997 it was 74 to 1. (Ibid) A study on the dynamics of globalisation would show that its basic flaw lays in its very nature: “the market is about maximising profits and not ‘a social organisation to cure social ills” (“The book ‘Globalisation and the New Realities’, n.d.: 4). Thus, unsurprisingly, “the very same people who advocate for freedom of speech and rights of expression ‘are the very same to clamp down and hard on what they see as dissenting views on their brand of globalisation” (Ibid). This makes free trade not free at all, creating an unequal playing field and jeopardising the poor countries – “… the very rich and the very empowered to be the biggest winners in the game while the very poor and the much disempowered are the biggest losers (Ibid: 2) Conclusion Globalisation has truly resulted to unprecedented growth, but sadly it did not eliminate poverty instead widened disparity between the rich and the poor nations and people within nations. Many blame this incongruence of growth to “the dynamics of the globalisation process… [as] shaped, to a large extent, by the fact that the actors involved are on an unequal footing” (“Global outlook,” n.d. : 17). Such view misses the very important point that the philosophy of neo-liberalism being spawned by globalisation carried with it its basic flaw, which is also the impetus of the market that is in fact the root of the problem – the quest for bigger profit – which means economic power. Aside from this, although technology has dramatically changed the landscape of international trading, globalisation has a long way to go if its essence is to be realised, and that I think is for nation-states to truly transcend from their shells and begin to act as one, working together as one people in checking the abuses of big corporations that denies the people of their equal share of the growth. Not unless, globalisation means this way, economic growth would remain in the hands of the few and instead of eliminating poverty, it would worsen it as what is happening today. 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