Free Trade and Economic Globalization Undermine Development - Essay Example

Essay: Political Science Does free trade and economic globalization undermine development and lead to increasing levels of poverty and inequality? Why or why not?  According to author Joseph E. Stiglitz, it is evident that trade and economic globalization has greatly undermined development and increased poverty index in the general public domain (61). Stiglitz (2006) elucidates that over the past 20 years, the number of individuals living below $1 a day has incredibly fallen by over 200 million (63). According to the author, aspects of globalization has played a significant role in this drop and increased inequality between and within nations. Free trade and economic globalization has undermined development in the sense that there is some aspect of self-interest among those in influential positions who derail the good course of globalization. The rules of the present international economic order have been primarily designed and enforced by the developed nations to serve their own selfish interest for this reason undermining the ability of these concepts of business to in spur development, as they so desire. In as long as the developed nations interfere and manipulate the international trade rules to safeguard their wealth, resources as well as other self-interests and gains, the other countries of the world will remain to languish in abject poverty regardless of the economic globalization. This in turn has led to the increased incidence of inequality among and within states involved. According to Stiglitz, developed countries continue to manipulate the international trade rules with the knowledge of the third-world countries that remain to be the greatest causalities of these amendments (63-64). The countries aim at protecting their factories and farmers from the more proficient producers in the developing countries. The international financial system that is led by the I.M.F has been known to reward the extravagant leaders and penalize the wretched debtors. Such moves are aimed to cover up for the many malicious practices on the international platform that leaves the rich states richer while the poor states more impoverished. As globalization continues to take center stage and implementation of free trade unions, the disparities and economic inequality continues to proceed further unchecked evoking the concept of negative externalities as construed by market analysts and researchers. Interest groups among the developed nations benefit from favorable treatment by their government but these favors do not apply for people from developing countries as they are victimized for becoming a ‘threat’. The same applies on the aspect of free trade that over time undermine development agendas in the way that it compromises trade (Stiglitz 68). When the pursuit of private gain causes social losses, the government has an obligation to force the perpetrators to desist from undertaking the operations so as to salvage the rest of the society for perishing or suffering the consequence of the activities of one particular firm/organization in the industry or rather help repair the damage. For instance if a firm’s activities leads to the pollution of the environment, affecting the micro climate or discharges its waste to the surrounding degrading the land in the region need to be brought to question and asked to undertake their social responsibility to the community in their area of operation. However, things have changed with the advent of globalization (Stiglitz 72). Some firms tend to be perceived as untouchables or above the law and are observed to repeatedly affect a big section of the population following their activities but continue to operate unchecked. When another firm- small company, seen as though to fail to abide some of the ethical and social business codes, have their contracts terminated or their operations put on hold until the matters at hand have been addressed amicably. This then narrows down to aspect of discrimination and unfair practice as the industry players continue to violate rules before the eyes of the public domain but proceed forth with their operations while unknown companies contend with very strict rules (Stiglitz 94). As construed by Stiglitz, the North American Free Trade Ares failed to live to its mandate and duties and became a major disappoint to the trade liberation (65). One of its core mandates was to ensure that they minimize the gap in income levels between Mexico and American States. This move was meant to tackle the huge problem of illegal immigration of Mexican residents into U.S. in search of a better standard of living. However, the disparity levels even increased tremendously during the NAFTA’s first decade in office. The income differences drifted further apart by more than 10 percent. It then emerged that the free trade instead of resulting to a robust growth in the economy of Mexico but it came out that NAFTA made Mexico more dependent to the U.S. economy hence a contributing factor to Mexican poverty in an indirect manner (Stiglitz 64) The poor Mexican corn farmers ended having to stiffly compete with the highly subsidized American corn. A big percent of the population opted for the cheap corn from the neighboring state. A fair trade agreement would have eliminated the huge subsidies placed on America’s agricultural goods hence avoiding unfair trade practices. It is evident that the Americans ended up benefit more and expanding their economy while Mexico continued to languish. This is a clear shown of how free trades gave the more powerful states a bigger bargain over other growing economies. The U.S. sought to manipulate the free trade for its own selfish interest and so derailing NAFTA from achieving its core responsibility of breaching the gap income between the two states (Stiglitz 64). In essence the world needs true development and not empty promises that do not see the light of day. Many developed countries demonstrate interest to assist the growing economies get to their feet but have attached other interests to ensure that the country also gains from the association. All the trade agreements tend to have costs and benefits with countries imposing constrains to the agreements (Stiglitz 97). It is evident that trade liberalization has not lived to its promise of ensuring growth in trade for lack for direction and sense of purpose among the states of the world. From this analysis, there is an evident need for the world to create fairer, pro-development trade regimes that are aimed at achieving the bigger of development in the face of economic globalization. The world has turned their interests in globalization in the context of the world economic regime to have changed to “mutual benefits” rather than addressing the conflicting issues at hand. According to Wade Hunter, the solutions to economic empowerment for the lagging regions mostly in Africa are aspects of a freer international trade and an open financial market 570). This essentially leads to a deeper integration into today’s the world economy. (Wade believes that economies that are more open have proven to be more prosperous. The liberalized economy tends to be experience a faster rate of progress hence affirming to the neoliberal economic theory (Wade 567). In reference to poverty level, Wade believes that the world population living in extreme poverty has remarkably fallen over the past 20 years. The statistics on standards of living of the residents in Chinese and India have demonstrated a clear trend of an overall reduction in the levels of poverty. The author however attests to the fact that the income disparity continues to widen up by the day and will continue for decades as the rich people become richer while drifting further away from the population in poverty (Wade 569). Despite the divergent views from different authors concerning the impact of free trade and economic globalization on development as well as on poverty and inequality levels, it is evident that it has had a big impact on these parameters. From research analysis in literature reviews, western countries have demonstrated vested interest in any project they initiate to build up the economic status of most third world countries. This concept of cost and benefits has significantly undermined development more so for the developing states as the donors tend to be the biggest beneficiaries of the association in the long term. The result of this is that the countries needing assistance become more dependable on the foreign aid hence increasing the levels of inequality and poverty index. The concept of globalization has in its true sense not helped the general international community to solve the chronic problems of high poverty index, evident in most African countries but instead provided an even better platform for the developed countries to use their resources to gain more. They have gone to the extent of amending some regulations and policies such as on free trade to gain more advantage over the helpless states. This is the reason the gap between the two groups keeps widening and this is not bound to change any time soon owing to the dynamics in the international market. 2. Is development assistance (aid) an effective tool for helping countries reduce poverty and achieve economic development? Why or why not? Compare and contrast the views presented by Moyo and Sachs. The developed countries such as the United States have moved to help developing countries achieve the increased development in their economies and reduce poverty. This has mainly been facilitated through provisions of foreign aids that increase the money available for governments in these countries to use in increasing the developments. However, for long time of giving aids there have not been highly significant developments in these countries. For instance, many countries in Africa still experience high poverty levels and little developments in their economies. There is need for evaluating the effectiveness of foreign to enable development of more effective programs. Dambisa Moyo and Jeffrey Sachs have presented varying views regarding the use of foreign aid tool and their discussions provide rich information for assessing effectiveness of the tool. Sachs argues that the use of the foreign aid remains significant in helping the developments of the poorer countries such as in the African continent. He shows that poor governments are incapacitated by lack of adequate funds to spend on development projects and fighting poverty. These arguments are valid for the African countries have very low national income to spend among many areas of development and this leads to low developments. Foreign aid given by other countries would help increase their expenditures in development and consequently attain better economies and low poverty levels. However, Sachs notes that there are low developments despite the United States offering foreign aid to these countries. This shows that the present foreign aid tool is ineffective and does not attain its objectives on the developing countries. This would be due to the allocation of low funds towards foreign investments. Sachs shows that the little fraction of the United States’ foreign investment goes to poor countries, while huge funds are spent on countries with political gains for America. He notes that only about 0.15 percent of the American gross national income (GNI) was spent on foreign aids to poor countries. This was too little expenditure for the government and did not meet its promises as committed to the millennium development goals (Sachs 80). At the same time, huge funds are invested in wars that are capable of improving the developments in developing countries. For instance, the United States spent huge finances in a day in the Pentagon’s wars that were more than the total aid offered to African countries to fight the challenges of HIV/ Aids. More finances of foreign aid are used in other war torn and unstable countries such as Pakistan and Iraq (Sachs 81). From this revelation, the foreign aid is not used effectively to promote developments and combat poverty in developing countries, but rather used for activities that would bring political gains to the United States. He compares expenditures on the wars to the provision of the bed nets to prevent malaria in African countries and reduce malaria by 90 percent while using small expenditure (Sachs 85). The reduction in malaria levels would promote people’s health and enable them to participate in building their economies. In addition, resources directed to treating malaria would be used in achieving increased developments. The foreign aid is poorly managed and this affects the development outcomes in the recipient countries. The foreign aid is given through foreign agencies in the poor countries and this may limit developments since the agencies may not have a better understanding of the systems in poor countries. Following this, the strategies of the foreign spending fail to match with the applications in the recipient countries which lead to failure of achieving substantial development outcomes. Moreover, there are incidences of using the foreign aid in fighting corruption and this reduces the direct funds that go towards the development projects (Sach 83). Consequently, smart and beneficial development projects in the poorer countries lack inadequate funding and this leads to low developments. From this discussion, even though Sachs presents strategies for increasing foreign aid in fighting poverty and promoting economic developments in the poor countries, his discussions portray failed foreign aid systems as applied by the United States. Consequently, the foreign aid tool shows that it is not effective in addressing problems in the poorer countries. Moyo gives a clear perspective concerning the use of foreign aid tool in supporting economies of the developing countries and fighting poverty. He notes that the foreign developed countries have given huge foreign aid to poor countries, but no huge developments have been realized in the past decades. The West has spent over one trillion U.S dollars in the last fifty years in programs related to developments for African countries, but this has borne insignificant improvements (Moyo 31). He urges that even the countries that have received these aids are worse as compared to other countries that used alternative approaches to enhance developments. The author criticizes the present foreign aid systems as making the poor countries poorer. He gives reasons for this trend, saying that the countries receiving aid are entangled in high rates of corruption that leads to reduced funding for tangible developments (Moyo 33). The corruption is experienced in the management of funds given and has lasted for a long time. Consequently, money used in developments has been minimal and hence accounts for low economic developments. The foreign aids also have subjected the African nations to systems that are inappropriate for developing their economies. The foreign aids are normally offered when countries agree to meet certain conditions in their business structures (Moyo 37). The countries that have received these aids have had to attain these conditions that have proved inappropriate. The conditions have led to frequent distortions in the markets besides promoting vicious cycles of poverty. The conditions given in the provision of the aid reflect the development systems for the developed countries and these may not be appropriate for developing countries faced with different challenges and in their population and environment. The author also shows that foreign aid has turned the poor countries to dependents that limit their capabilities to support own development projects (Moyo 32). Most countries that have been receiving aids continually seek to obtain more aid and rather than finding ways to provide funds for their development. Moreover, the aids involve high long-term expenditure in servicing them and this has increased the foreign debts for the countries. Following this, Moyo urges the adoption of a debt aid would be the solution to Africa’s poverty and low developments. Therefore, Moyo’s discussion has shown the foreign aid tool used is ineffective in addressing the problems of poverty and low development unless changes are adopted in the policies used. In conclusion, the findings of this paper show that the foreign aid tool is not effective in addressing poverty and promote economic developments for developing nations. Works Cited Moyo, Dambisa. Dead Aid (New York: Farrar, Straus and Giroux, 2009), Chapter 3 ("Aid Does not Working"), pp. 29-47 Sachs, Jeffry. The Development Challenge. Foreign Affairs, 84, 2, March/April 2005, pp. 78-90. Stiglitz, E, Joseph. Making Globalization Work(New York:W.W. Norton and Company, 2006), Chapter 3 ("Making Trade Fair"), pp. 61-102. . Robert Wade, "Is Globalization Reducing Poverty and Inequality?" World Development, 32, 4, 2004, pp. 567-589. Read More