How Trade and Globalization Can Help the Poor in Both Developed and Developing Countries - Example

Education Name Institution Date Discuss how trade and globalization can help the poor in both developed and developing countries Introduction: Trade is the handing over of possession of goods and services from one person (seller) to another (buyer) in exchange for another good, service or money. Trade is at times closely referred to as financial transaction or commerce. A market forms a network that allows trade to take place. Trade originally started from barter, exchange of goods and services for other goods and services. With time, one side of the barter was in form of precious metals (coins), paper money and bill. Modern traders, as an alternative, negotiate through a medium of exchange, for example money (William Bernstein, 2008) Trade can either be bilateral or multilateral. Bilateral trade occurs between two traders while multilateral trade takes place between more than two traders. Globalization is the process by which social relations are extended across the globe. This comes about as a result of movement of ideas, things and people throughout the world space. It can also be defined as the transformational process of local institutions into global institutions, a process that unifies all people within the globe into one unified society that functions together. Globalization involves interaction across the beliefs of social forces. Such social forces include politics, religion and economics. It also involves the exchange of cultures and even economies. The distinctiveness of a social group can be worn out by the influence of globalization (Ann Harrison, 2007) Poverty is the lack of ability to effectively participate in basic social issues i.e. not having enough food to feed ones family, clothes, no clinic or school to attend etc. Poverty ensures deprivation of human basic needs and hence causing them to suffer. Trade and globalization have been some of the ways put forward to see to it that poverty levels are adversely reduced so as to ensure that human survival is made easier, though they may have their various setbacks. How trade and Globalization can help the poor Trade and globalization have various benefits to the poor in both the developing and developed nations in various ways as trade creates an avenue for exchange of goods or services that one (a trader) produces for whatever he or she is in need of while globalization ensures that the whole world is unified into one global village thus increasing mobility and accessibility of resources thus benefiting the poor (William Bernstein, 2008) Though trade and globalization may have such setbacks as exploitation of developing nations by the developed ones, dumping of goods by the developed nations into the developing and underdeveloped nations, overdependence by the underdeveloped nations on the developed ones etc., they have seen to it that the level of poverty throughout the globe is greatly reduced through various means as follows: Trade liberalization is a contributor to poverty alleviation as it enables people to exploit their productivity, pulling all their energy into production and as a result improve their economic status. Trade also assists the buyer to acquire whatever he or she is in need of or does not produce at all. Trade is therefore an indispensable part of development in both the developed and developing nations in various ways as follows; Trade encourages specialization and division of labor and thus encouraging producers to concentrate in a single line of production and thus mass production of such a commodity and hence increased revenue generation from the same. This encourages development in both the developed and developing nations and as a result making the livelihood of the poor better (Paul Collier and David Dollar, 2001) Trade aids in mutual dependence among nations. Trade takes place between two nations as different regions exhibit different comparative advantage and hence the need for trade. As a consequence of that, the two or more regions, whether developed or developing, benefit from the same. The poor are generally producers of raw materials and hence, when trade is encouraged even beyond national boundaries, they can benefit adversely from it and as a result reducing their hardships. Foreign trade encourages the participating countries to make maximum utilization of the natural resources they locally have and hence propelling them to success. Such trade enhances competition and thus minimizing wastage of national resources, and thus encouraging development, sustainability and stability among the developed and developing nations within the globe. When the national resources are properly utilized, it is mostly the poor who benefit from such government incentives, subsidies, health facilities that come about as a result of gains from foreign trade (William Bernstein, 2008) Foreign trade also enables countries to obtain goods that they cannot produce and also provides a ready market for those that they produce and hence generation of national income and thus making the individual country’s economy to be flourish. This enables the poor to obtain whatever they never produce at a subsidized cost when it is imported by the government in bulk than by individuals in smaller quantities. Trade acts as a media for interaction among countries and people and hence encouraging borrowing of technology and other forms of knowledge. This allows the participating countries to develop their industries, in turn creating employment for the poor within such countries (Paul Collier and David Dollar, 2001) Foreign trade can trigger competition and as a result leading to production of goods that are of high quality at the minimum possible cost. This is of greater advantage to the poor within such developed and developing nations as they are able to get the goods and services at an affordable cost (William Bernstein, 2008) Globalization can generate more interdependence of cultural and economic activities through various advances in infrastructure, transport and telecommunication which in turn benefit the poor in such developed or developing countries. Globalization through open international trade alleviates poverty. When states open up to commerce, they grow faster and hence improving the living standards of the inhabitants who are generally poor in both the developed and developing countries as the benefits of the improved growth trickle down through such avenues as health services, social amenities etc. to the poor people within such a nation. Globalization can also alleviate poverty when appropriate institutions and policies are properly situated, as export growth and the received foreign investment through international trade lead to reduced poverty in both the developed and developing countries (Ann Harrison, 2007) The poor share the benefits of globalization when the laborers have maximum and free mobility within the expanding sectors of a nation’s economy within the developing and developed countries hence poverty eradication. Globalization also aids in eradication of poverty through such globalization triggered developments as when poor farmers have right to credit facilities, social safety nets as income assistance( such as in Mexico) and even food aid ( in some countries such as Ethiopia). Globalization enables the developing countries to engage with the rest of the world and thus experiencing an increase in their economic growth, thus solving the poverty problem within the country. Globalization has increased the accessibility of aid, both financial and economic. The International Monetary Fund allows countries to lend money that they can use in development and thus alleviating poverty. Globalization has led to increased economic growth and thus improving life expectancy and living standards of the poor. With an increase in the national wealth, a country is able to provide to its inhabitants better educational and health facilities, services and sanitation. Thus the poor will be able to access such health and educational facilities to acquire treatment and education. Reduction in illiteracy and diseases leads to reduced poverty levels within such countries (Ann Harrison, 2007) Conclusion: There is a complex relationship between globalization and poverty, it does not depend on trade alone but on the interaction between globalization and the economic environment; investments, infrastructure, credit and technical aids to farmers, governance, economic stability and exchange rates. There may not be a clear cut cause and effect relationship between poverty and globalization but statistics prove that with development of globalization over the last 20 years through an integrated world trade, poverty rates throughout the world has fallen steadily (Ann Harrison, 2007) Any country can benefit from trading with other country so as to improve the living standards of their inhabitants. It all depends on their approach to the international trade. A country can make a better use of its comparative advantage so as to ensure mass production at the lowest opportunity cost than the other competing countries so as to minimize their cost of production while maximizing their produce to the world market (William Bernstein, 2008) Trade and globalization has seen many countries within the globe rise to greater economic, fiscal and social heights in both the developed and developing nations and thus alleviating the levels of poverty that could have been flourishing in such countries before they came into existence. Bibliography: Ann Harrison. 2007. Globalization and Poverty. NBER Books. Paul Collier and David Dollar. 2001. Globalization, Growth and Poverty. Building an Inclusive World Economy. William Bernstein. 2008. A Splendid exchange: How Trade Shaped the World. London: Atlantic Books Read More