Globalization about Poverty - Essay Example

Introduction In every part of the world, globalization presents two divergent views since others argue that its beneficial while others see it as a necessary evil. Others also argue that globalization is promoted by the rich to benefit them economically while the poor having less benefits in this current world setting. In my view, I believe that globalization is less beneficial since the world poverty is slowly declining and the global inequality is still evident in most parts of the world. I believe that globalization is increasing more opportunities for investment, economic growth and opening new markets that are beneficial to a few individuals while the rest are left languishing in poverty. Globalization is a system that began in 1980 that is characterized by the increasing integration of the economic system and societies through financial services, the flow of ideas and information (Elmawazini, Khalid & Nwankwo 23). Increasing integration is mainly driven by improving technology leading to reduction of costs and removal of barriers that used to slow the movement of goods and services from one place to another. One of the motives of globalization was to open markets and seek raw materials for goods and services in all four corners of the globe. It began with the elimination of tariffs and non-tariff barriers to trade and this was quickly followed by monetary and fiscal reforms, privatization, and deregulation meant to streamline economics and commerce on the global scene (Gindling & Terell 910). Globalization in relation to Poverty In order to fully analyze the impact of globalization on poverty, we need to fully determine he income accrual to individuals globally and access the basic living standards of all the societies in the world. Is as much as this indication may be real, it is also good to notice that the cost of living also varies from one point to another depending on the economic stability and prosperity of a country. The poor people are thus those whose material, cultural and social resources are below par when compared to the standard resources in other places perceived to be rich (Asongu 27). According to United Nations, about 20% of the global population live below one dollar per day to mean that they are considered poor people. This percentage of the global population stands at over one billion people who are struggling to survive in this new dispensation of globalization. Globalization has always been cited to reduce poverty, but, despite the world practicing globalization over the past three decades, it is still evident that a good proportion of the world population remains poor (Angus) The world poverty has become synonymous with developing countries since poor living standards have become endemic over the years. The World Bank and international monetary fund are some of the global intuitions that have struggled to reduce poverty in developing counties in this era of globalization with minimal improvements recorded. Between the 1980s and 1990s, these two institutions formulated a structural adjustment program to improve economic growth of poor countries, but this also achieved minimal results despite ever increasing rate of globalization. In fact, this program turned counterproductive in sub Saharan Africa especially in Nigeria. This program aimed at forging economic growth through liberalization ad integration of economies, which are important components of globalization. International financial institutions like the World Bank and the international monetary fund urged the developing countries to focus on cultivation and exportation of export commodities and importation of processed products to facilitate free trade and development (Nissanke & Thorbecke 11). However, this type of business is what constituted to increased dependency ration and finally increase in poverty levels and inequality in developing countries. A condition whereby developing countries are exporting their agricultural produce to developed countries resulted to unequal exchange since they have less control on the prices of their commodities. It is also true that a country that exports raw materials to other countries and later import the finished products always loose economically since processed foods are more costly, despite them selling raw materials cheaply. The country that imports such raw materials also get the added advantage, contributed to its laborers and taxes to the state (Gingling & Terell, 912). In most cases, it is evident that the country that exports such raw materials have to borrow money from international financial institutions such as IMF in order to finance their infrastructure to produce and swiftly exports such products to developed countries. They also need to borrow money from the same institutions in order to finance the importation of finished products leading to more debts than they had before such aspect of globalization. Later the country would use more of its available resources to service their ever-growing debt at the expense of providing quality education and health care to its citizens leading to poverty (Vera-Sanso 331). It is established that about half a million children lost their lives due to imposed restructuring of their countries economies to ensure properly servicing of foreign debts that resulted due to globalization. Developed countries have also not been spared from the negative effects of globalization with respect to poverty. America is considered one of the most developed countries on the planet, but it has over 40 million people considered poor. Educated people in developed countries are loosing jobs to less educated people from other parts of the world since they can be easily sourced. The machines developed from various parts of the world are quickly replacing human power leading to job losses and increased poverty. Globalization in relation to inequality Inequality in the context of globalization refers to unequal distribution of goods and services to people from one region to another across various aspects of the economy (Jaumotte, Lall & Papageorgious 284). This is always represented as a percentage of the population controlling the wealth of that region in comparison to others. For example, it can be said that 5% of the world population control 95% of the global wealth, a condition that contributes to inequality in wealth distribution. It is pretty difficult to find a region with the same living conditions despite globalization being practiced to enhance the free flow of good, ideas and information. According to recent data on growth and income, inequalities have been on the rise in the last two decades due to various factors contributed by globalization. Globalization has an optimistic relationship between inequality in incomes and production outsourcing procedures leading to inequality between very experienced employees and the slightest competent for the latter entices less earnings related to what the former earns. Inequality is also seen in this aspect whereby countries with abundant supply of physical and human capital, trade openness and liberalization is significantly improving their real and nominal income each and every time. This is particularly common in developed countries, thus reducing inequality levels in them, a condition that is contrary to developing countries. Globalization also has an impact on foreign direct investments that are channeled in some parts while leaving other places (Celik & Basdas 361). The increase in flow in foreign direct investments that has fundamental distributive costs among several economies resulting in income and other economic inequalities. There is a rise in capital quantity in developing nations, leading to increased marginal physical product of labor increases since such cash flows from developing nations to developing nations. In order to promote businesses and other global interests, the dependency that exists between developed and developing countries is a major source inequality at the height of global economics. This dependency of nations on others is developing economic disparities that also come with social implications in the long-term basis. Increase in foreign direct investment in developing countries hampers economic prosperity by creating dualism in productive structures of those countries. Multinational companies that bring foreign direct investment in developing countries creates highly intensive export sector that uses most of the available resources and bringing in a different economic function in the country. In addition, these companies interfere with existing capital and credit, hence repatriating most of the profits and wealth earned in those countries, a condition that promotes inequality. Foreign direct investment is also promoting inequalities in the sense that they promote and maintain local elites who ensure that their interests are served and not the interest of the remaining persons. In another argument, foreign direct investments lead to transfer of capital from wealth to poor nations, a condition that results to outsourcing of activities that are low skilled but labor intensive. This creates a big demand for skilled labor that in turn pushes the wages that should be earned by the skilled workforce thus promoting inequality with respect to earnings (Nissanke & Thorbecke 13). It is true that people living below one dollar per day have decreased, this less helpful on the poverty index since it is also true that inflations has also adjusted leading to a more widened the income gap. The living standards can rise with minimal free trade between countries. This is evident in Cuba, whereby the healthcare and education standards are high despite limited trading opportunities with the United States and other neighboring countries. Conclusion There are different parameters that can be used to measure improvement in living standards as opposed to methods brought by globalization. In as much as there are reduced numbers of people who survive with less than one dollar per day, it is also true that the levels of inflation have also changed drastically in this globalization era. Therefore, this implies the living standards may not have improved. Most of the countries that are considered developed have had years of stable government leading to ability to acquire wealth that can sustain their populations properly. Some poor countries have benefited with aid from developed countries only to be squandered by the few political elites. Globalization has also resulted in exploitation between countries due to difficulty in balancing the imports and exports in liberalized markets. This has promoted poverty due to over reliance between countries as a result of liberalized markets. International financial institutions that lend money to promote globalized trade have made developing countries poorer since most of them are constantly servicing their huge debts at the expense of promoting development of their citizens. Therefore, I disagree with the liberal argument that globalization incrases growth and reduces poverty and inequality. Work Cited Angus, Deaton. Is World Poverty Falling? IMF. 2002. Web. 26 Feb. 2014 Asongu, Simplice. Inequality, poverty and quality of institutions: which freedom channels of globalization matter for Africa? European Economics Letters. 2013, Vol. 2 Issue 1, p24-31 Celik, Sadullah & Basdas, Ulkem. How Does Globalization Affect Income Inequality? A Panel Data Analysis. International Advances in Economic Research. 2010, Vol. 16 Issue 4, p358-370 Elmawazini, Khalid & Nwankwo, Sonny. Globalisation and Income Gap between Rich and Poor Nations. Economic Issues. 2013, Vol. 18 Issue 2, p19-40. Gindling, T.H & Terell, Katherine. Minimum Wages, Globalization, and Poverty in Honduras. World Development. 2010, Vol. 38 Issue 6, p908-918 Jaumotte, Florence., Lall, Subir & Papageorgious, Cris. Rising Income Inequality: Technology, or Trade and Financial Globalization? IMF Economic Review. Vol. 61 Issue 2, p271-309 Nissanke, Machiko & Thorbecke, Erick. Introduction: Globalization–Poverty Channels and Case Studies from Sub-Saharan Africa. African Development Review. 2008, Vol. 20 Issue 1, p1-19. Vera-Sanso, Penny. Gender, Poverty and Old-Age Livelihoods in Urban South India in an Era of Globalisation. Oxford Development Studies. 2012, Vol. 40 Issue 3, p324-340. Read More