Globalization: Does It Help Or Hinder Poverty?

Introduction

Globalization is one of the most widely debated topics in the world today. There are many different schools of thought on the effects of globalization on world poverty. Certain people believe that globalization increases global poverty and that the poor of the world are cheated because of it. However, others believe that globalization decreases poverty and helps aid the poor. Further to this, another group of people believe that poverty and globalization are not linked.

However, before moving into a debate on globalization and poverty, we must first look to define these terms. Globalization can be described as the “process fuelled by, and resulting in, increasing cross-border flows of goods, services, money, people, information and culture.” Thus, this means that there is more travel and tourism, immigration, investment, trade and on the whole a creation of a universal set of values. Different people have different perceptions of globalization. Some see it as a beneficial process вЂ" something that leads to economic development in the world and is inevitable. On the other hand, certain people believe that it increases inequality within nations, causes unemployment, deteriorates living standards, and prevents social progress.

In this essay, I will outline the positive and negative effects of globalization on world poverty. In addition to this, I will then attempt to present a case to reinforce my belief that globalization, at large, has in fact helped reduce poverty. Also, I will give examples of two specific developing nations which have adopted an integration policy and look at the reasons for whether this has been a success or not.

How does Globalization increase global poverty?

Multinationals competing with Domestic Businesses

Globalization can have a negative effect on society and contribute towards increased poverty in the world. For example, according to Robert Reich, a political economist, “national economies” are disappearing . By this he means that large, foreign multinational companies are setting up their businesses in developing countries and taking away business from the domestic competitors. Thus, since “multinationals locate most of their assets, owners, top managers, and research and development activities in their home countries” local companies are going out of business and people are becoming poorer.

Welfare Spending

Globalization “puts downward pressure on government spending for redistribution and welfare.” Since governments then do not have much money and control is in the hands of localities and independent organizations, not much money is spent on welfare. Also, globalization promotes a neo-liberal ideology where organizations such as the International Monetary Fund and the World Bank pressure developing nations into policies focused on limited government spending, selective social services and private control. Thus, there is limited spending on welfare and poverty is aggravated.

Rising Wage Inequalities in Developed and Developing Nations

There has been a rise in wage inequalities in developed nations. This is due to the rising demand for higher skilled labour in society compared to the lesser demand for lower skilled labour. Thus, more of the workers with a lower level of education are unemployed. Another factor which may have influenced wage inequalities is increased trade with developing countries. This has resulted in a rise in immigration of lower skilled labour into developed countries and therefore, a widening wage gap.

Furthermore there have also been rising wage inequalities in some developing nations. This is partly due to “industry wage premiums resulting from changes in trade policy that favour workers in specific industries.” In addition to this, the growing size of the informal economy means that more people are being paid lower wages and are working in poor conditions. Finally, there is a shortage of high skilled labour in developing nations due to a lack of a good education. This again means that the wage gap broadens.

The Negative Effects of Globalization in Africa

Globalization has been the cause for increased poverty in Sub-Saharan Africa. This is due to large debts to “unfavorable trade and all the bad conditions imposed by the International Monetary Fund (IMF) and the World Bank” The Nigerian President, Olusegun Obasanjo feels that “Our societies are overwhelmed by the strident consequences of globalization and the phenomenon of trade liberalization.” The Developed countries were criticized by African Leaders in the World Economic Forum in Durban for not keeping promises that they would cancel some of Africa’s debt to allow them to deal with the problem of AIDS, other diseases and extreme poverty.

One of the main problems with Africa is that the price of their exports is continually falling while the price of their imports is constantly rising since they import manufactured goods and export raw materials. Also, not as many people in the developed world want to buy as many African products and the market for African goods is becoming smaller since globalization has caused the introduction of many trade barriers such as tariffs and quotas. Developed nations are using their power to use trade organizations for their own benefit.

Thus, since the market for African products is shrinking and the price of their exports is very low, they have to borrow from developed nations in order to pay for their imports. Thus, their debt increases even more. Therefore, the countries have very little money that they can spend on development and poverty increases.

How does Globalization help reduce poverty?

On the other hand, in certain countries, globalization has also had positive effects and poverty has been reduced.

Integrated National Economies

Globalization results in increased integration and interconnectedness between different countries. Therefore, now, due to globalization, many developed and developing countries are trading and sharing with one another. This has had a number of positive effects on world poverty.

Trade

World trade has increased as a result of globalization. From 1989 to 1999, developing countries have increased