To what Extent can Growing Poverty be blamed on the Advance of Globalization?

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To what Extent can Growing Poverty be blamed on the Advance of Globalization?

Introduction

Globalization refers to the closer interaction between countries of the world due to the increase in the rate and level of international trade and technological advancement among countries. National boundaries have become of less significance allowing for movement and trade among countries with few restrictions. In addition, globalization also results in countries becoming more interdependent thereby benefiting from each other. International organizations such as the United Nations (UN), International Monetary Fund (IMF) as well as World Trade Organization (WTO) among others have also contributed significantly to the globalization of the world. For example, the UN deal with issues of global concern and formulates laws that protect countries and participating countries have to amend their domestic laws to reflect the issues agreed upon. Poverty refers to the inability of an individual to meet their basic needs to low income or lack of it. Poverty levels are set in various country contexts using different ‘baskets’ of goods and services, taking into account changes over time and varying cultural and societal norms (Lodge & Wilson 2006). According to the World Bank, people living on less than $ 1 per day in developing countries and $ 2 per day in countries of medium economies are considered to be poor. It is, however, not prudent to use similar estimates of poverty levels as it is dependent on a country’s economy.

The US Census Bureau characterizes poverty for a sole, elderly individual (over age 65) as take home less than $25 per day (US Census, 2005). In developed countries such as the United States and the United Kingdom, which have cost of living that is quite high, the poverty level is higher than that of developing countries. World concern about poverty is increasing, not because of a sudden upsurge of morality, but because the trend towards increasing globalization has increased beyond a shadow of doubt that poor people are a nuisance and danger to the prosperous (Lodge & Wilson 2006). This concern has led to the international organization formulating measures to deal with global poverty. As globalization advances, the poverty levels, especially in countries with low Gross Domestic Product (GDP) seem to be getting poorer compared to the more developed ones. This is due to the disparities in incomes among countries and different conditions relating to labor and wage rates among others. They provide loopholes, which have been exploited thereby leading to increased poverty in some countries. Less developed and developing countries are especially at a disadvantage and more likely to suffer the negative effects of globalization.

Extent that Growing Poverty can be blamed on the Advance of Globalization

From a liberal perspective, there seems to be a positive and direct association between poverty and globalization: the rate of poverty will decrease as the rate of globalization increases (Reuveny & Thompson 2008). However, Critics see it differently and have argued that the current form of globalization, motivated by economic supremacy, clearly encourages the domination of Western culture and conglomerates; puts jobs and societies at risk in the rich nations and take advantage of cheap labor form the poorer nations; increases hazards to the environment, and undercut the fundamentals of democracy and social steadiness by subjecting national political institutions to elements of economic change that are beyond their control (Lerche 1998). The economic gains from globalization are felt to a greater extent by the developed countries while the poor countries continue to languish in poverty and have to depend on the developed countries. These are some of the ways in which globalization impacts negatively on the developing countries and leads to a higher poverty rate.

One of the ways in which growing poverty can be blamed on the advancement of globalization is due to the differences in labor laws such as wage rates and workers’ conditions. An example of this is seen is in most companies and manufacturers, in the United States who have, transferred their factories to China due to poor labor laws in order to reduce their labor expense and increase their profits. China has poor labor laws and workers work under unacceptable conditions. They are overworked and receive low wages hence companies are in a position to make worker handle more work lower cost. This is cheaper compared to the United States where workers have to be paid a certain minimum wage and work under humane conditions (Kapstein1996). The company, therefore, spends more to produce their products and maintain good working conditions hence lower profits. In moving the factories to China, the US companies are encouraging the situation and making the workers poorer as they have to work under this poor working conditions and wages. Globalization can be blamed for this due to the fewer restrictions to enhance trade between countries. This is also similar to the effects felt in developing countries where multinationals and influx of cheap products produced in other countries lead to collapse of local industries. This occurs when the local industries are unable to compete favorably against the multinationals. In most cases the multinational have strong financial power, enjoy economies of scale and thus product good at a lower cost as well as sell them cheaply. Most local industries cannot afford to sell their products cheaply, since their cost of production is high; hence they slowly die of.

Another way in which globalization has enhanced poverty is through the exploitation of resources in less developed countries by the developed ones. These countries have more resources and funds to exploit resources compared to the less developed ones, and they may use the fewer restrictions on trade and movement to exploit resources in those countries (Birdsall, Rodrik & Subramanian 2005). The developed countries are able to exploit the natural resources by bring experts and funds from their own country. Despite the benefits accrued by the developing countries when from the use of these resources such as job opportunities, the companies from the developed countries benefit more. The funds are ploughed back to their own countries through salaries and allowances paid to the experts. Furthermore, they are well position to acquire raw materials at lower prices as the developing countries are not able to fully process them. Once these raw materials reach their countries, they are used to manufacture products which are sold at a much higher price to the same countries. In this case, the developing countries get fewer benefits compared to companies from developed countries. They are, therefore, not able to come out of the poverty cycle as most of the money is paid back to the investors doing the work.

Globalization also widens the gap between the First world/ developed countries and, their counterparts, the underdeveloped/poor countries. From1960 to 1994, the difference between the per capita income between the 20% richest individuals in the world (mostly in from developed countries) and 20% of the world’s poorest (from third world countries) doubled to 78:1 to 30:1. According to the UNDP 1997 by the mid-1990s this trend was becoming more marked: by 1995, the ratio was 82:1 (UNDP 1997). Developed countries are in a better position to maximally exploit globalization due to their vast resources, as well as better developed industries. They have more exports compared to these countries. When fewer restrictions are imposed on international trade, they are able to market their commodities in the international market with fewer barriers. This enables them sell more and hence get more revenue from it. On the other hand, less developed countries rely more on imports and hence will not benefit much from this arrangement. Their industries are not well developed and hence their products do not compete favorably in the international markets compared to the developed countries. This means that the developed countries are able to get more revenue from the trade. Huge differences between the affluent and deprived in developing countries are also seen as enormous hindrances to macroeconomic growth since theses nations do not have a crucial middle class (Biggs 2008).

Advancement in globalization has also led to increased movement across countries for jobs and business opportunities. In developing nations, there is high migration to developed nations like the USA, UK and Australia among others for higher education opportunities as well as jobs. Developed nations worsen this trend, hiring talented individuals (such as engineers doctors, nurses e.t.c.) with attractive employment offers and work visas while rejecting entry application to aspiring migrants who posses lesser skills (Biggs 2008). This leads to brain drain in the less developed countries thereby affecting their advancement. Consequently, the developing countries have fewer educated people to lead and develop the countries and hence are not able to grow even economically.

Although most countries invest in eliminating poverty within their territories, thus such are brain drain, which reduce skilled manpower affect these countries economies severely. This increases the poverty rate in these countries since the manpower left do not have the capacity to contribute to their countries GDP. Due to the increased poverty and involvement of the international organizations due to globalization, there has been more awareness on the issue leading to measures being taken to improve the situation (Bishop 2009). The issue is being addressed at international levels to ensure countries, which are less developed are protected from exploitation by the more developed ones. An example is where people shun goods from companies where production is done under poor labor conditions. This includes goods produced in countries like China where workers are exploited. This makes companies, especially from the developed countries to be more cautious in setting up their factories in other countries to ensure the labor conditions are good and human rights are not violated during the production process (Alcock 2008). This measure is thought to poses a number of effects on the employment conditions and wages of workers and may in turn lead to them getting better wages and working conditions. However, due to need for employment and high population in such areas, the measure is difficult to implement and more has to be done to ensure such workers are protected. Another reason given for the smaller effect of globalization on less developed countries is poor leadership and economic policies. Less Developed Countries did not manage to integrate into the global economy and share the benefits of the growing global prosperity, their own self-serving and often corrupt leadership, political instability and erratic economic policies are seen as the main reasons for their stagnation (Bigman 2007).

Conclusion

Globalization has contributed to growing poverty especially in the less developed countries due to disparities in resources, laws and industries development. The developed countries are able to exploit countries with cheap labor in order to increase their revenue. They have set up factories in the less developed countries in order to avoid the high wages they are expected to pay in their own countries. In addition, they have the ability to employ their resources to exploit natural resources in the less developed countries due to the less restrictive laws on trade. They then buy the raw materials at lower prices and sell back processed goods to the same countries at higher prices thereby benefiting highly from the arrangement. Measures need to be put in place to ensure that less developed countries are not taken advantage of by the developed countries.

References

Alcock, Frank, 2008, Sustainable Trade Begins at Home, World Policy Journal.

Biggs, C, 2008, Global Poverty: Why, Global Poverty and International Development, Vol. 5, 1-6.

Bigman, D., 2007, Globalization and the Last Developed Countries: Potentials and Pitfalls, CABI, Cambridge, M.A.

Birdsall, N., Rodrik, D. and Subramanian, A., 2005, How to Help Poor Countries. Foreign Affairs.

Bishop, Matthew, 2009, Fighting Global Poverty: Who Will Be Relevant in 2020? Brainard and Chollet, 42-52.

Kapstein, E. B, 1996. Workers and the World Economy, Foreign Affairs, Vol. 75, No. 3.

Lerche, C.O., 1998, The Conflicts of Globalization, The International Journal of Peace Studies, Vol. 3, No. 1, pp. 1-5.

Lodge, G.C. & Wilson, C., 2006, A Global Solution to Global Poverty: How Multinationals can Help the Power and Invigorate their own Legitimacy, Princeton University Press, Princeton, N.J.

Reuveny, R. & Thompson, W.R., 2008, North and South in the World Political Economy, Blackwell Publishing, Malden, M.A.

UNDP, 1997, Human Development Report 1997, Oxford University Press, Oxford, U.K.