Effects of Globalisation on poverty - Essay Example

 Effects of Globalisation on poverty Effects of Globalisation on poverty Globalization can be described as the practices that result in the transport and sharing of goods and services, resources, human resources, information and philosophies across nations. It impacts greater unification of economies and people. Globalisation has made remarkable developments in the recent past and is largely perceived as an inexorable aspect of the contemporary world. There are, apparently, important potential advantages of globalization. Liberal market, for instance, can create immense opportunities for direct investment by foreign firms. This can lead to economic growth by enhancing domestic capital value, efficiency and viability of local industries, following greater employment of technological advancements. Additionally, liberalized flows of capital may enhance prospects for the diversification of portfolio risk and the harmonisation of consumer needs through access to credit services; and producers who have the capacity to demystify risks on global capital markets may venture into riskier businesses with more returns, thereby enhancing the level of economic development of a country. This paper explores the impacts of globalization on poverty. Openness of trade Better use of the local financial industry by foreign financial institutions may develop the effectiveness of the intermediation programs between people who are interested in saving and those that need credit services, thereby reducing the costs that come with the provision of such services in banking. Further, foreign investments also lead to a reduction in the expenditures that come with investment processes, eventually triggering a rise in the rate of economic growth. And to the level at which financial liberty contributes the solution of asymmetric flow of information, and the reduction of the standard costs related with small-scale credit services, it can extend opportunities for the lower-end population to seize the benefits of the formal modern financial mechanisms (Meidani, & Zabihi 2012, pp120-126). On the same note, Cassidy (2005, pp72-77) avers that openness to business may trigger remarkable benefits, both static and transformational. Static economic benefits, according to conventional trade theory, are pegged on the greater liberalization of trade, as a way through which beneficial resources are rechanneled to projects that require their use in a fairly higher effectiveness and their removal from less effective operations. Such industries include those that deal with import-substitution or real-estate management services. Despite the benefits of globalisation in regard to the expansion of the financial resource to the lower end, researchers have increasingly acknowledged that the globalization process involves remarkable risks and indirect socio-economic costs. Liberalised capital markets in the world, according to Machiko and Erik (2006, pp1338-1360), have triggered immense volatility in local financial sector, especially in poor economies that lacked effective financial structures. Substantial reversals in immediate capital flows usually touched off by contagion factors or fluctuations of commodity costs in the global market have impacted harsh financial slumps and sharp rises in joblessness and poverty. Some of these cases have had lasting effects, with the economically weak segments of the community being forced to bear the brunt of such challenges. In light of this, trade openness has impacted a major reduction in demand for casual labour and meagre pay as in the immediate context (Asiedu, Gyimah-Brempong 2008, pp49-66). The aggravation of the situation by a low level of inter-sectoral movement of the workforce, redundancies and low incomes has often resulted in higher poverty levels in society. Impact of technology According to Šliburytė and Masteikienė (2011, pp404-410), new technologies and the development of conventional innovations happen across the world each passing day. Nonetheless, it is costly to swiftly innovate and implement these developments for use by the entire world. This high cost of production results in the rise of the inflation of technology products, beyond the reach of the common man. Today, many of the world’s poor economies that purchase install and maintain the latest technology, continue to lag behind economically, even as more advanced innovations of technology grow. The liberalization of technology works to the advantage of mainly the richer economies. In light of this, wealthier companies also stand to gain from the innovations. Technological advancements enable nations and their firms across the world to reach consumers across the world, thus more revenue. These increases of revenue are brought about by the ability of the investors to cash in on the Internet tool, telephony projects, and in facsimile machines. Currency traders across the world have also found it easier to update changes in the stock market and inform the common man of the developments more swiftly. This has impacted more need to finalize agreements, because firms are confident that they will not lose in business deals (Machiko, & Erik 2006, pp1338-1360). The global market is largely driven by the highly influential companies and individuals. The advantaged “winning” firms, with immense financial muscle and countries of similar strength are able to trade their commodities across the world, while the weaker countries and firms are restricted to their domestic markets (Dionisios, George, & Ioannis 2011, pp636-648). Big global markets also trigger immense incentives for companies and countries to send their commodities to customers across the world. The National Basketball Association (NBA) is an example of an influential business that has benefitted immensely from technology growth and globalisation. This is manifest in the massive sales of over than five hundred million dollars achieved through licensed merchandise across the world. The organization owes this massive source of revenue to technology development and its proper use. Conversely, basketball organizations operated in nations that lack the resources needed for the global reach, are left with no option other than to trade off licensed merchandise to the local consumers. This substantially results in the lowering of potential gains (Aimee, & Nishith 2011, pp265-277). Since the mid-twentieth century, capitalism in the world has resulted in the creation of more wealth for the poorer populations faster than ever before. Nonetheless, by increasing the population of the rich, the system has also touched off the sharp increase in the number of the poor. It has also aggravated the economic conditions of the poor within the society making it increasingly doubtful that the lower-end will ever achieve any reprieve. Economic tensions According to Meidani and Zabihi (2012, pp120-126), globalization creates anxieties, more so within countries and business organizations, between the better equipped in terms of skills and capital; and those who lack such assets to vie for opportunities in the world. Notably, the introduction of the Internet tool to the global use, for instance, led the more developed and advantaged countries in the globe to use it in wealth creation before it would be available for use by the poorer economies. The wealthier economies had already set up a substantial progress in the Internet-related technologies by the time the weaker countries saw the need to invest in the new technology tool and reap from its advantages. Although, hundreds of millions of computers are connected today by the Internet, the greater percentage of these machines are bought and linked on the Internet by individuals and organizations in developed countries. The developed economies control major businesses and the online medium. They also manage the entry of new domains on the Internet, prompting the poor economies to grapple with the high costs of maintaining Internet services such as the creation of e-companies and outsourcing services. Through the Internet, retailers and suppliers remain in touch. Through technology, voices, sounds, images, and files can be changed into simpler modes conveyable online. In light of this there is a close link between more productivity to immense investments in technology and related innovations. Despite these benefits, Santiago, José, and Francisco (2011, pp106-115) indicates that by the time the weaker economies and individuals are in a position to gain from the incorporation of the Internet, the better placed wealthy parties will be enhancing their riches. Technological developments in the transportation sectors have also contributed toward the more gains registered by wealthy parties more than weaker ones. As the development of modern means of transport such as airplanes and vehicles became prominent globally, the poorer nations were prompted to use animals, primitive water vessels such as canoes because the cost of the more efficient means of transport was too costly. This offered the wealthier economies immense advantage because a commodity that previously took more time to transport by water would be ferried in a few days on the aircraft or an automobile (Dionisios, George, & Ioannis 2011, pp636-648). Organizations in the richer economies are also able to deploy their personnel across the globe to hold meetings with their counterparts from other regions and sign beneficial deals, while the managers of organizations based in poorer regions are still spending more time on their boats moving. If a state is reluctant to update her transportation sectors, multinational organizations will be unwilling to establish stores and distribution channels within that state; hence, more poverty to the locals. This way globalisations results in poverty by creating soaring rates of joblessness, and lowering the standards of living. Moore’s law indicates that the influence of computer technologies doubles every one and a half to two years. This implies that only societies that have the capacity to part with millions on an annual basis will be ready to access, use and gain from latest technology (Cassidy 2005, pp72-77). The latest technology that many economies and individuals can purchase and maintain is sometimes out-of-date, triggering off their economies deeper into poverty due to the less effectiveness of such technologies in terms of competing with more affluent societies. For the more developed economies, however, the more the use of cutting-edge technologies in the various operations the faster the sharing of files. It also enhances efficiency because faster technologies, which are able to process and store more data, are the property of business organizations in developed countries. New technologies as a globalisation tool has resulted in decreased costs of data storage in developed countries because more memory is one of the most important components of modern computing. The quantity of data that a square inch of hard disk can hold has expanded at an annual rate of more than half in the past two decades. Memory management by compression technology, results in the reduction of the bulkiness of files. Owing to the ever decreasing extent of the chips, the size and mass of computers and communication gadgets have also been miniaturized. Unfair global competition Many foreign organisations and nations are hiding under the disguise of poverty alleviation to aggravate the condition in poor countries. For instance, most foreign companies pay their employees higher rates than the national earnings of the country, even though this may amount to many times the amount workers take home is considerably worse than the optimum earnings the companies offer their employees based in the home-country (Šliburytė, & Masteikienė, 2011, pp404-410). Companies owned by foreigners are also establishing employment opportunities quicker than local firms, impacting graver levels of poverty in the nation because the gains to the organization are carted away for investment in the home country, instead of helping with the alleviation of poverty in the country of location. A large number of foreign business organizations also allocate immense resources on research and development programs in their investment environment; nonetheless, Chao-Hsi, Kai-Fang, and Pan-Long (2010, pp763-779) indicate that the gains of the latest, better commodities are taken back to the home country. Further, foreign businesses also have a higher amount of exports than local ones, reaping away the commodities, revenue and future business venture in the environment. The economic strength of many developing countries grows and expands at the cost of smaller, weaker economies. Successful states and business organizations are not just the users of the cutting-edge technology. This category incorporates those that are constantly striving to enhance and better their existing technology assets. The poorer economies of the world cannot afford, to better their technologies regularly as required (Yeung 2008, pp635-660). Nonetheless, states and firms must always strive for the betterment of the time taken to process transactions; business ventures, production, and administration. The parties must also strive to organize their existing technologies and network systems to the best before implementation so that the productivity is properly exploited. Decrease in efficiency within a region or an organisation results in poverty. Low efficiency within a country or an organization also triggers it to a position of less competitiveness in the worldwide market. Šliburytė and Masteikienė (2011, pp404-410) indicate that if an organization or a country is unable to summon enough resources to update their commodities and technologies from time to time, then they will most likely lack the strength to make any significant gains in the global marker. Foreign rivals set the pace for excellence and production timetables of commodities. In view of this, in case a firm is not able to update its processes and assets, it will be outdone by the more competitive firms. The liberalization of economy has contributed the thriving of globalization. The wealthy nations, however, are gaining the lion’s share of the profits. Although, there are enough resources available for firms to go about their businesses, the bulk of the gains of the new firms are being channelled ton developed countries. Business ventures in the wealthy states have sharply increased to unprecedented levels. Whereas the financial system of the United States, for instance, has grown into one of the most established in the world, a large number of developing countries in the world are being forced deeper into economic stagnation as a consequence (Meidani, & Zabihi 2012, pp120-126). An aspect that is thought to be triggering the achievement of globalization efforts and practices are the setting up of treaties and trading partnership through economic integration. Despite the mutual intent of the founding members to benefit all partners in such alliances, the economies that stand to make significant gains from these associations, are historically wealthier economies. Liberalized trade, common markets, customs, and economic unions are imperative to the expansion of globalization; nonetheless, they hinder the economic developments of the under-developed nations, who are left out of these arrangements. Globalization, while imperative to the achievement of a common market in the world, has a harrower, less unknown side. Only some under-developed countries, most developed economies, as well as big, popular multinationals, stand to benefit from it. On the receiving end, however, are the economies of several countries and the less competitive firms owned by the weaker, in terms of finances. In an attempt to enhance global competition, globalization has practically complicated the chances of viable local companies making any significant gains in the global market. Additionally, it has impeded investments and economic developed of some third world economies with inadequate wealth. Whereas, globalization limits poverty in a number of countries, it simultaneously enhances the problem in others. Economic gains and losses Many researchers exploring the impact of globalization on poverty indicate that globalization is attributed to the increasing disproportion, and that the financially weak do not normally have the opportunity to enjoy the gains from a liberalized market (Cassidy 2005, pp72-77). For instance, the poor in economies with a large number of the unskilled labour does not normally benefit from global trade reform. Additionally, the lower-end parties are more expected to benefit from globalization when employees are able to move freely, more so from contracting sectors of the economy into developing. Similarly, gains are achieved when poor persons have access to borrowing and lending services as well as technical skills, when poor people have such collective safety nets as support for investment capital, and when relief food is taken to those who need it the most. The proof strongly indicates that increments of exports and inflow of foreign investment often mitigate poverty (Šliburytė, & Masteikienė, 2011, pp404-410; Dionisios, George, & Ioannis 2011, pp636-648). But at the same time slumps in the value of currency can aggravate the economic situation of the “have nots.” In Indonesia, for example, poverty rates soared by more than half after the currency crisis that rocked the country in 1997. The lower-end category of Mexicans had to grapple with the long-lasting effects of the 1995 peso. In view of this, globalization creates both wealth and losses, with the poor getting poorer and the richer getting richer. For example, in Mexico, poorer corn farmers witnessed their revenues reduced by half toward the end of the twentieth century, while wealthier corn growers gained from the global market. In other states, poor employees in the industries dealing with exports or in industries based on foreign investment often achieve significant gains from reforms of trade and investment, whereas scarcity of resources persisted in previously cushioned sectors that were vulnerable to import antagonism. Summary The connection between globalization and scarcity of resources is complex, yet several persuasive inferences may be achieved from the researches, which involve the relationship between the two issues. One can conclude that the connection can be based on financial globalization and the connection of globalization to the remaining economic factors: ventures in human resources and infrastructure, enhancement of credit and practical guidance to producers, worthy organizations and administration, and macroeconomic viability, encompassing friendly exchange rates (Bhaskara, & Krishna 2011, pp795-805). The subsistence of such factors is increasingly turning out to be an imperative aspect of multilateral organizations. It is still unclear as to whether friendly labour laws cushion few employees who essentially fall in the formal sector in under-developed countries, or whether such laws ease short-term costs of economic modification and enable the employees to reap the benefits of globalization. In view of this, selective measures may be effective. While many analysts predicted that the under-developed world with substantial population of unskilled employees would gain from globalization due to increased demand for their casual jobs, this point is yet to be ascertained (Cassidy 2005, pp72-77). Cross-country researchers, however, suggest that increasing socio-economic disparities have been attributed to globalisation (Aimee, & Nishith 2011, pp265-277). This trend is mostly common in developing economies, suggesting an increase in poverty levels among those who have limited resources already. For instance, globalization creates barriers to commodity exports from under-developed countries, thus driving these economies deeper into oblivion. In light of this, keen targeting is important to address the plight of the poor in various societies who are vulnerable to economic stagnation brought about by the disparities of globalisation. The current trend of globalisation, which involves over-dependence on trade and massive investment by foreign companies may not account for effective poverty alleviation. The poor economies need education, better infrastructure, accessible loans and the capacity to move away from contracting industries and join developing ones to gain from trade reforms. Conclusion Although, globalization has created more wealth across the world, thus increasing the standards of living, it has at the same time, however, pushed many deeper into scarcity of resources. Small organizations and the under-developed world are not incapable of making meaningful gains from the latest of technologies as it is the case in larger, more developed counterparts. Losing in the stiff competition presented by successful multinationals and wealthy economies, small organizations and poor countries are prompted to concentrate their business deals in the domestic market, grappling with the challenge of under-capacity. Globalisation leads to more poverty, especially when the quicker and more successful economies and organizations in developed countries are put together to compete with poor economies and firms; for instance, trade reform in under-developed economies may trigger redundancies in the short run and greater poverty, due to the pervasive distortions of the labour industry such as a poor remuneration and inadequate movement of the workforce across sectors. In a nutshell, globalisation will continue to hurt the poor more if proper measures are not established to correct the current status of inequalities in the world economy. References Aimee, C., & Nishith, P. 2011. The redistributive effects of political reservation for minorities: Evidence from India. Journal of Development Economics, 96(2), pp265-277. Chao-Hsi, H., Kai-Fang, T., & Pan-Long, T. 2010. Inward and outward foreign direct investment and poverty: East Asia vs. Latin America. Review of World Economics, 146(4), pp763-779. 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