Globalisation Causes Poverty - Essay Example

Globalization Causes Poverty of the Institute Appears Here Appears Here Table of Contents Introduction 3 Discussion 3 Conclusion 7 References 9 Introduction Globalization refers to the expansion and harmonization across the world of interdependence among nations, human activity. Globalization affects people in all parts of the world and relates to transfers, international trade in goods, labor and knowledge. The term globalization is often used to describe economic globalization and changes caused by the diffusion of information throughout the world (Bordo and Murshid, 2006). The significance of globalization cannot be overstated since it relates to increasing global interdependence in all areas including economy, politics, culture, environment, communication, etc. This consolidation of global relationships is at the level of individuals, companies, institutions and countries. The main causes of the process of globalization are the technical progress in the communications and transportation sections, as well as, the political decisions on liberalization of world trade (Mishkin, 2009). Economic globalization refers to the acceleration in global trade in goods and services made ​​possible by the progressive removal of trade barriers under the GATT and the WTO since 1995 and the development of transportation and communication means (Schmukler and Vesperoni, 2006). Economic globalization has also been termed by theorists as market globalization or corporate globalization. There is a close link between globalization and incidences of poverty across the globe. During the twentieth century, global average per capita income rose strongly but with considerable variation across countries. Clearly, the income gap between rich and poor countries has been growing for decades (Cline, 2010). The output per capita has increased substantially over the globe but income distribution between countries is more unequal than at the beginning of the century. The paper critically evaluates the argument that globalization causes poverty in third-world countries of the world by reviewing research evidence. Discussion Poverty is a painful reality for hundreds of millions of people worldwide. The link between globalization and poverty has been debated among policy makers and economists for decades. There is a continuous discourse on the fight against poverty of international financial organizations and there are political elements in this debate, as well. Arguments against Poverty caused by Globalization According to Basu (2006) globalization and poverty are two different concepts. Globalization has almost become an indefinable term due to its ubiquity while the world poverty is a reality, the real causes of which are still hidden in large part. Basu (2006) argues that poverty does not come from globalization. Globalization only increases the degree of integration between countries. The policies adopted by governments of these countries causes poverty. Collier and Dollar (2002) supports the view by pointing out that European Union is also a form of globalization, which has not increased incidences of poverty among member countries, rather decreased it. According to Collier and Dollar (2002), it is agreed by economists that governments must eliminate barriers to free trade and overcome protectionism of the past. The real cause of poverty within the third world countries is above all the overpopulation phenomena (Collier and Dollar, 2002). Collier and Dollar (2002) argues that causation of poverty is the fact that contraceptive devices are denied to the masses in these countries. Rather than holding globalization accountable, funds in these countries should primarily be used to create family planning centers to enable these people to have only maximum two children as is the case in Western countries (Cline, 2010). According to Cline (2010), barring globalization or resorting to philanthropy cannot solve this problem of poverty in third-world countries. The other phenomenon which has increased with the globalization is world population. There are already over 6 billion people on the planet (Obadan, 2006). The major cause of poverty is that irreplaceable raw materials are running out permanently – for instance, coal, oil, gas, drinking water, etc. The population increases by increasing the continuing destruction of nature, and demand for raw materials is increasing with the increase of the population (Obadan, 2006).  In view of Chossudovsky (2003) income does not explain everything. A broader measure of economic well-being should take into particular consideration the social dimension which shows that poor countries have made considerable progress. For example, some social indicators of low-income countries – like Sri Lanka – are impressive. According to Chossudovsky (2003) if we compare countries using the Human Development Index (HDI) of the United Nations, taking into account the education and life expectancy, the results are very different from what suggest that the income data alone. Chossudovsky (2003) states the gap between rich and poor countries have partly been filled. One of the striking conclusions of the study is the contrast between what might be called the "income disparities" and "HDI gap" (Chossudovsky, 2003). Today, income - adjusted for inflation - in poor countries is still higher than what it was in developed countries in 1870s. Even if the income gap has widened, the HDI of the poorer countries are much better than those of large countries in 1870s (Rose, Prasad and Terrones, 2009). This result is essentially that life expectancy has increased significantly thanks to medical advances and improved living standards. Harrison (2007) there are several examples of poverty reduced by globalization. China is a prime example. In less than 25 years, the standard of living of the Chinese has increased fivefold and the proportion of people living in absolute poverty fell from 64 to 17% (Harrison, 2007). India shows a similar performance. As for Hong Kong, Singapore, Taiwan, Malaysia and South Korea, they are models of growth, because it only took about forty years to leave the group of poorest countries and join one of richest countries due to globalization (Harrison, 2007). The Korean case is telling because the partition made in 1948 has allowed North Korea and the South to choose their political and economic systems. This is by choosing open policies that South Korea today enjoys a standard of living 14 times higher than its northern neighbor, which has imposed protectionist policies and stood against globalization (Harrison, 2007). Bordo and Murshid (2006) argue that the phenomenon of globalization is not of Western origin, nor new. For several thousand years, globalization has made ​​a valuable contribution to the progress of the world by various means, including science and technology. The difference is that in the past, the expansion of science, technology and mathematics went from east to west instead of west to east (Bordo and Murshid, 2006). For example, in the year 1000 BC high-tech inventions such as gunpowder, paper, newspapers, the vault, the compass, and the mill wheel were common in China but virtually unknown in other parts of the world. It is globalization that has spread throughout the world, including Europe. The decimal system was developed in India between the second and sixth centuries, and was used by Arab mathematicians and then to be introduced in Europe during the last third of the tenth century, where he played an important role in scientific revolution that has transformed this continent (Bordo and Murshid, 2006). Today the same principle of globalization is underway, and is now the center for western expansion. It should not then be interpreted as an essentially Western phenomenon or be rejected because of poverty across the world (Thorbecke and Nissanke, 2006). Schmukler and Vesperoni (2006) state that never in the history of mankind there was an economic system so extensive and so deep in geographically with its influence on multiple areas of life that the system of global capitalism(Salvatore, 2007). The changes that this system has created and continues to occur in human life and the ecology of planet earth are so radical that it would not be an exaggeration to say that humanity certainly falls in a global era without precedent (Rose, Prasad and Terrones, 2009). Rose, Prasad and Terrones (2009) state that a correct understanding of what is happening in the world in general and in nation-states in particular, and that affects the poor, requires an analysis of the basic ideas of the system of global capitalism. Comprehensive discussion of this subject is not possible but the ideas can easily be identified by the arguments used by advocates of global capitalism in the defense of their position (Ravallion, 2006). Among economists, the most common idea is that integration of local economies into the global capitalist system is the path to progress. It benefits both consumers and producers. In addition, it stimulates competition by sharing technological knowledge, which thereby increases at all levels beyond productivity and the accumulation of profits (Moshirian, 2003). Such integration of the removal of barriers to free movement of trade and capital, which in turn sets limits on the role of government and reduces the possibility of corruption, stagnation and bureaucracy. If globalization continues to take place, even poor countries will be among the rich countries in the world, and their populations will be able to experience the exhilaration of the consumer society (Mendoza and Quadrini, 2010). The basic ideas of global capitalism can be interpreted as expressions of modernity and modernization.  Arguments for Causation of Poverty by Globalization there is view held by thinkers that the third world suffers from poverty because his riches were plundered by the West and continue to be so. This group of thinkers believes that globalization and poverty are closely related. James (2002) argues that globalization promotes the development of the First World at the expense of developing countries. More and more companies are leaving the industrial countries to settle in Asia or Latin America. These companies are leaving the industrialized countries to seek more profits possible in poor countries, creating unemployment rates that are increasing year by year which creates poverty (James, 2002). Also, the misuse of workers in underdeveloped countries is commonplace by paying minimum wages to make even more profits (James, 2002). This creates huge social injustices that affect the population greatly and makes it even more vulnerable and poorer. Moshirian (2003) states globalization exists because capitalism exists. This system of globalization and capitalism is created for the benefit of large companies so that they can even have greater power than governments. This system is based solely on increased sales and of course the increase in share value in the stock market to satisfy the shareholders in rich countries (Moshirian, 2003). The HDI gap narrows in the long run, too many people are losing ground. Life expectancy may have increased but the quality of life has hardly improved, with many people who still live in abject poverty (Bardhan, 2006). Finally, the spread of AIDS throughout Africa over the past decade reduced life expectancy in a large number of countries (Bardhan, 2006). The above mentioned factors have brought new urgency to adopt policies specifically designed to fight against poverty. Countries whose growth is robust and pursuing the right policies, can expect sustained poverty reduction, since recent evidence suggests that at least one automatic relationship between globalization and poverty (Kaplinsky, 2005). If strong policies against poverty are continued, for example well-targeted social spending, and then there is a chance that globalization may result in reduction of poverty (Thorbecke and Nissanke, 2010). This is one reason why those responsible for economic policy, including the IMF, must take into account more explicitly the objective of poverty reduction. According to figures from the World Bank, extreme poverty has increased in sub-Saharan Africa where 46% of the population lives on less than U.S. $ 1 per day, even though these countries have all taken advantage of business opportunities offered by globalization (Dinopoulos, 2008). Therefore, this school of thought insists on a causal relationship between globalization and poverty. Conclusion The paper critically evaluated the argument that globalization causes poverty in third-world countries of the world by reviewing research evidence. It is concluded that globalization refers to acceleration in global trade in goods and services made ​​possible by the progressive removal of trade barriers. It is found that majority of researchers and economists agree that globalization does not cause poverty; rather the phenomenon which has increased with the globalization is world population. It is concluded that due to globalization the gap between rich and poor countries have partly been filled. Globalization only increases the degree of integration between countries and reduces incidence of poverty rather than increasing it. Arguments in favor of causation between globalization and poverty are based on isolated examples related to multinational influence and exploitation of cheap labor. References Bardhan, P. (2006) Globalization and rural poverty , World Development, vol. 34, no. 8, pp. 1393-1404. Basu, K. (2006) Globalization, poverty, and inequality: What is the relationship? What can be done? , World Development, vol. 34, no. 8, pp. 1361-1373. Chossudovsky, M. (2003) The Globalization of Poverty and the New World Order, Ohio: Global Research. Collier, P. and Dollar, D. (2002) Globalization, Growth, and Poverty: Building an Inclusive World Economy, New York: Oxford University Press. Dinopoulos, E. (2008) Trade, Globalization and Poverty, Canada: Routledge Publishing. Harrison, N. (2007) Globalization And Poverty, Issue, Chicago: University of Chicago Press. James, J. (2002) Technology, Globalization and Poverty, London: Edward Elgar Publishers. Kaplinsky, R. 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