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Globalisation and Poverty

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Contents

  1. Introductioln
  2. Definition
  3. Globalisation and Poverty
  4. Conflicting Perspectives on Globalisation
  5. Poverty
  6. Factors which led to Poverty due to Globalisation
  7. Positive and Negative Effects of Globalising Process on Developing Countries 
  8. Summary

Introduction

In the nineteenth century, particularly in the theories of Karl Marx, a multifaceted process known as "globalization" first emerged. The last three or four decades, however, have seen a significant increase in how widely perceived globalization is. Although some associate it with modernization that leans more towards westernization, globalization is frequently related to economic terms. People move around more as a result, and there are also cultural shifts, new business practices, and political and economic ties between different nations. Globalization is viewed as a threat to governments worldwide in both international relations and the global economy. It is a process in which the barriers to cross-border movement are being reduced, not only for economic flows but also for the global extension of knowledge, information, belief systems, ideas, and values. It is a result of technological development that is fueled by readily accessible, affordable, and sophisticated communication systems.

Globalization is not a single idea that can be encapsulated in a predetermined amount of time, nor is it a process that can be precisely defined with a start and finish. It includes cultural stability, knowledge transmission, cross-border policy exchange, and economic integration. The term "revolution" has been studied and defined numerous times over the years, with some connotations referring to advancement, development, and stability, as well as integration and cooperation, and others referring to regressive behavior, colonialism, and destabilization. Globalization still poses many problems despite these obstacles.

There are various perspectives on globalization that highlight both its advantages and disadvantages. Although many people view globalization positively because they believe it will enrich societies through trade and culture, it also helps people all over the world gain knowledge and information. Others think it threatens traditional cultures and aids in the exploitation of the poor by the wealthy.

Definition

The emergence of a global economy forces national governments to reappraise their assumptions of economic governance and, in doing so, to adopt a more systematic approach to the implementation of socio-economic policies, according to Frank Vorhies, the head of the Economics Unit at the IUCN-The World Conservation Organization. Rudd Lubbers is a well-known expert on globalization and a former prime minister of the Netherlands. The GATT, WTO, IMF, OECD, NATO, WEU, and UN are examples of international institutions whose roles as creators and upholders of the rules governing numerous international transactions in the areas of security, human rights, and sustainable development must also be reexamined in light of the new global economy (1999).

According to Lubbers (2000), "globalization" is a process that increases the scope and nature of cross-border trade in goods, services, and assets as well as the degree of economic interdependence between and among the entities that make up the global economy. These entities can be private, public, or governmental organizations. Technological and economic advancements, such as those in information and communications technology and political developments, are what are driving this process. True economic globalization involves a qualitative shift toward a system based on a consolidated global market place for production, distribution, and consumption rather than on autonomous national economies. This distinguishes it from other forms of intensified interdependence between national economies. More than just economics or interdependence among economies are involved in globalization. For people and communities looking to change regional customs, simultaneity, pluralism, and alternative means of obtaining goods and services, there are a variety of opportunities and risks.

According to Steger (2003), "globalization" is a multifaceted system of social processes that builds, multiplies, stretches, and intensifies social interactions and exchanges on a global scale while also energizing people by raising their awareness of a variety of interconnected issues between the local and the remote. Globalization, according to economist Joseph Stiglitz, is the removal of barriers to free trade and a closer integration of national economies. According to Giddens (1990), globalization is the strengthening of international social ties that bind even remote locales in such a way that local events are influenced by those occurring thousands of miles away. He continues by saying that it is not only one of the most used terms, but also one of the most erroneous and unclear ones.

Globalisation and Poverty

Understanding globalization and how it affects one's self and identity is essential and crucial. Global demographic, economic, ecological, and political interconnections are just a few of the aspects of globalization that have an impact on people's daily lives everywhere in the world. Discussions and debates among and between all different political and ideological groups are sparked by the process of globalization. Concerning industrialized nations, there is a worry about a financial crisis and that the dual forces of technological advancement and global shifts in the location of economic activities are negatively affecting employment prospects.

Poverty and globalization rank high on the agendas of all countries. According to Xavier Sala-i-Martin (2002a), the fact that poverty and inequality have risen over the past 20 years is one of the few things on which politicians tend to side with the average person. Since the last few decades are referred to as the "globalization years," it is almost assumed that globalization is bad because it increases poverty and inequality among people. The nature of the relationship between income distribution and globalization has only recently been the subject of systematic economic research, despite the fact that politicians, political and social movements, international organizations, and the media have been debating these issues for years.

Conflicting Perspectives on Globalisation

The Neo-liberals or pro-globalizers and the Hyper Globalisers are two perspectives that make the topic of globalization very contentious and debatable. For those in the first group, globalization is a worthwhile ideological endeavor. They think that both trade and finance should adopt the ideology of the effective free and market, regardless of national boundaries. Although the neo-liberal proponents of globalization acknowledge that such an ideal state has not yet been attained, they believe that the main problem is that there is not enough globalization, not that there is too much. For them, the world's economic issues and inequalities can be solved by embracing globalization.

Those who are referred to as hyper-globalizers as well as anti-globalizers think that globalization is the issue, not the solution. They see the main issue as the introduction of the free market regardless of national boundaries, which would be advantageous to the other group. They believe they to be the destructive and evil forces. Inequality brought about by free markets inevitably results in poverty. Inequalities will grow in size and scope as a result of the expansion of free markets brought about by globalization. Market regularization is necessary for the greater good. Thus, unregulated markets result in both severe environmental problems and a decline in wellbeing for everyone in the world save a tiny minority. Some anti-globalists believe that the only way to solve the problem is to stop the process of globalization.

Poverty, in its simplest form, is the state in which a person's basic requirements for shelter, clothing, and food are not being met. It refers to a general lack of things, a dearth, or the condition of someone who lacks a certain quantity of both. It is a situation or state in which a person or community lacks the financial means and essentials to maintain a level of living and well-being that is considered adequate by society. People who fall below a certain threshold set by the government are classified as being in poverty. Having social, economic, and political components, poverty is a complex concept. The majority of the time, poverty is closely linked to inequality and appears to be either permanent or transient. Poverty is a dynamic concept that evolves in response to alterations in consumption habits, social dynamics, and technological advancements.

In order to survive in a society, a person must be able to support themselves with the bare necessities. This is what is meant by being in a state of poverty. According to the United Nations, poverty is defined as the lack of opportunities and choices, which is a violation of human dignity. It denotes a basic incapacity to contribute meaningfully to society. It entails not having enough food and clothing to support a family, access to credit, a place to attend a clinic or school, a plot of land to raise one's own food, or a job to support oneself. It entails insecurity, helplessness, and exclusion of people, households, and communities. It denotes a propensity for violence and frequently denotes a life spent in impoverished or unstable surroundings without access to sanitary facilities or clean water. " (UN, 1998).

Poverty is a multifaceted issue that arises from a combination of economic, political, and environmental factors, claims Seebohm Rowntree (2000). When a large portion of the population does not have access to income levels that are sufficient to meet their basic needs, this is referred to as generalized poverty. There are two different types of poverty. The first is absolute poverty, which refers to the absolute standard of living as demonstrated by meeting the absolute necessities for survival. The difference in income between the rich and the poor, or relative poverty, is the second.

Generally speaking, there are two types of poverty: absolute poverty, also known as destitution, is when a person lacks the resources (measured in terms of calories or nutrition) necessary to maintain a minimal level of physical health. The definition of absolute poverty is essentially the same everywhere, and as some nations have shown, it is also eradicable. When people do not have the same minimum standard of living that the government has set and that the majority of the population possesses, this is referred to as relative poverty. These requirements may differ from one nation to another and even from one nation to another. Everywhere there is relative poverty, it is said to be getting worse, and it might never go away.

Extreme poverty, also known as absolute poverty, was first described by the United Nations in 1995 as a state characterized by an acute lack of basic human needs, such as food, clean water to drink, sanitary facilities, health, shelter, education, and information. It concerns both access to services and income. Currently, the term "extreme poverty" is used to describe a person's income being below the World Bank's established international poverty line of $1.25 per day (in 2005 prices). This amount is equivalent to making $1.00 per day in 1996 US dollars. 96% of those who live in extreme poverty do so in South Asia, Sub-Saharan Africa, the West Indies, East Asia, and the Pacific; just about half of them do so in India and China. The World Bank adopted $1 USD per day as the benchmark, which is roughly equivalent to the average of national poverty lines across 10 countries. This definition is merely indicative. Out of the 6 billion people living in the world at the time, as many as 1 and a half billion were below that threshold. This figure dropped to 986 million in 2004. According to reports, poverty rates in China and India decreased from 28% to 9% and 51% to 26% respectively during the final two decades of the 20th century thanks to their respective growth rates of 10% and 6%. It is hoped that the Millennium Development Goals will help achieve the targets, at least in terms of reducing poverty. Although the percentage of the world's population living in poverty has decreased, the absolute numbers have increased. Huge population growth is partially to blame for this.

A measure of income inequality, relative poverty sees destitution as socially defined. The percentage of the population with income below a predetermined percentage of the median income is typically used to measure relative poverty. There are several additional metrics for income inequality. In wealthy developed countries, relative poverty is the most practical indicator of poverty levels. The United Nations Development Program (UNDP), the United Nations Children's Fund (UNICEF), the Organization for Economic Co-operation and Development (OECD), and Canadian poverty researchers all use the relative poverty measure. The most well-known and frequently cited indicator of social inclusion in the European Union is the relative poverty measure.

The crux of the poverty problem, from the perspectives of both the poor person and the societies in which they live, is not so much the effects of poverty in any absolute form as it is the effects of the contrast, daily perceived, between the lives of the poor and those around them. Practically speaking, the issue of relative poverty that exists today in industrialized countries is a problem. UN Development reports claim that the opportunities and benefits of economic globalization and growth may not be distributed fairly, favoring some while marginalizing others. In 2004, there were 2 point 6 billion more people who were considered to be poor. Sub-Saharan Africa is one area with a particularly high prevalence of poverty. Although the number of the poor increased from 240 million to 298 million between 1990 and 2004, the poverty rate decreased from 46.7% to 41.1%. It can be argued that excessive income equality is bad for the economy because it tends to reduce incentives to invest in both human and physical capital. However, excessive income equality creates social tensions and political instability. This point of view was first put forth by Arthur Okun in 1975, who demonstrated the existence of a trade-off between efficiency and equity and demonstrated that greater inequality is required to promote economic growth and raise living standards. Although they are frequently discussed together, poverty and income inequality are two entirely distinct concepts with entirely separate policy implications. While it is generally accepted that either an increase in the percentage of the world's population or the number of people living in extreme poverty is undesirable, it is less certain that income inequality poses a threat to economic growth and that it is unwelcome in society. Sala-i-Martin (2002a) brought up the possibility that rising inequality could be caused by either the poor's situation getting worse or the rich's situation getting better. In this way, the rate of return on investment is equated with income inequality.

Factors which led to Poverty due to Globalisation

The wealth gap is being widened by a number of factors, both directly and indirectly. 
  • 1) Differing rates of population growth between the rich and poor, whether between countries or within a country: At the start of the twenty-first century, there were a total of 6.1 billion people on the planet. It was less than 2 billion a century earlier. According to the UN's largest medium projection, there will be about 9 points 2 billion people on the planet in 2050. The most notable aspect of population growth around the world is how it is primarily occurring in developing nations. In 2005, 815 people lived in the world, i. e. 60.5 billion in the developing world. The population of developing countries is projected to increase from 762 million to 1.67 billion by 2050, despite having high rates of mortality from various diseases. 
  • 2) Different capacities (education, access to technology, etc.) and the downward movement of commodity prices that affects poor countries more than rich countries. that allows some people to benefit more than others from opportunities. 
  • 3) Income inequality has a variety of effects. Political unrest, both within and between nations, and migration from underdeveloped to developed regions are consequences. Uneven income distribution frequently reflects unequal access to societally available economic opportunities. The distribution of income across the globe is also a cause for concern. The bottom 60% of the population only receives 6% of the global income, according to economist Robert Wade, indicating a very high level of income concentration. The richest 20% of the population earn about 85% of the global income. Different metrics can be used to determine equality. This pattern reveals that over the past 20 years, inequality has been steadily rising. It is shocking to see the trend toward unequal distribution in developing nations. The income gap has widened in wealthy nations like Japan and the United States as well. 
  • 4) By 2030, the world's urban population is anticipated to grow by 4 point 98 billion people. On the other hand, an increase of 2.29 in the size of the rural population is predicted for 2030. Developing nations, where there are more big cities, are currently experiencing the fastest rates of urban growth. The dynamism of the economy drives and sustains urban growth in the cities of the developing industrializing economies. Poverty and inequality are caused by the high fertility rate among the poor. This is the process of "over urbanization," where the fundamental physical, social, and economic infrastructure is out of step with the size and rate of growth. The physical manifestation of this explosive growth can be seen in the overpopulated towns in developing nations. 
  • 5) One factor in the unequal economic status of many people is migration. Only about 3% of the entire world's population are migrants from other countries. Transnational migrant communities, especially in developed countries, are one of the most significant results of international migration. Most frequently, host countries discriminate against migrant workers. Many times, immigrants work in very low-paying jobs with few, if any, rights, and little to no job security. They might occasionally also suffer from mistreatment and abuse.

Positive and Negative Effects of Globalising Process on Developing Countries

Positive effects

  • 1) Investment in productive capacity is encouraged by higher export-generated income, and depending on inter-firm relationships, the ability to maintain competitiveness, and other factors, this investment may have a favorable impact on local development. 
  • 2) Employment growth affects both overall employment and employment in lower-paying sectors, depending on how labor-intensive it is. Any of these results has the tendency to raise wages. 
  • 3) Exposure to new technology improves skills and labor productivity, which enables industry to upgrade into more value-added output while either allowing for further wage growth or relieving downward pressure. 
  • 4) If social structure, political institutions, and social policies play a significant role—which they do—then the significant increase in employment and consequent increase in wages results in less social inequality.

Negative Effects

In comparison to older industrialized nations, developing nations face a far worse employment situation. The higher rate of labor force growth in many developing nations continues to put tremendous pressure on both the rural and urban labor markets. The growth of the manufacturing industry alone is unlikely to put such pressure on the environment. Manufacturing industries have grown significantly in developing nations. However, the majority of developing countries' issues with unemployment and underemployment have not been significantly improved by manufacturing industries. The manufacturing sector only employs a significant number of people in a select few small nations, like Hong Kong and Singapore. While Hong Kong businesses were forced to move the majority of their manufacturing production to southern China due to a lack of labor, Singapore had to turn to controlled immigration. The issue is different in some other situations. Although many people have been hired, the rate of hiring cannot keep up with the expansion of the labor force. Many times, globalization processes were advantageous to some developing countries, but for the majority of them, it was a double-edged sword. As a result, Stiglitz (2002) lists the following as some of the negative effects of globalization processes:
  • 1) Developed countries are favored by the rules governing globalization, while developing nations fall even further behind. 
  • 2) The environment is one of the factors involved in globalization, but it only focuses on the monetary value of goods. 
  • 3). Globalization is in control of developing nations and has a negative impact on their democracies. Developing nations borrow a sizable sum of money from other nations and the World Bank, but because of the conditions attached to loan repayment, they essentially have to give up the advantages of their democracy. 
  • 4) The idea that it falls short of the goals it was set out to achieve. Although the economic benefits of globalization were touted, neither developed nor developing nations have seen an improvement as a result. 
  • 5) A new economic system has essentially been imposed on developing nations by the new globalization system. The "Americanization" of their policies and cultures is viewed as having occurred with this new economic system. Both resentment and financial harm have been greatly exacerbated by this.

Summary

Processes of globalization do not occur naturally. They rely on various "structures" to enable the processes. The true effects of globalization and whether it is actually a good thing are hotly contested topics. The process of increased interconnectedness between nations, particularly in the fields of economy, politics, and culture, is known as globalization. In determining the fate of every nation, it is crucial. It results in easier access to items like music, movies, food, clothes, and more from other cultures. Overall, there are more options available. A country benefits from its social and economic development. Governments are able to collaborate more effectively to achieve shared objectives as a result of globalization, and there is no denying the benefits of cooperation, improved communication and coordination skills, and a global awareness. But even though globalization creates more job opportunities, it also inevitably eliminates jobs from one country and gives them to another, leaving many people without employment options. Additionally, as different cultures from all over the world interact, they start to blend together and lose their distinct features. According to the consensus of many economists and world leaders, globalization is intended to raise living standards, facilitate greater access to foreign markets, encourage more foreign investment, and open borders. But as Nobel Prize winner and former World Bank Chief Economist Joseph Stiglitz argues, globalization is utterly failing the 40% of the world's population that lives in poverty and the 80% of people who live in developing nations.

Most people find the idea appealing, but when it comes to their jobs, communities, and countries, they run into issues. Numerous issues that people and countries encounter are of a global nature, offering both opportunities and challenges for global solutions.

Does globalization produce and spread wealth and prosperity, or does it have a negative impact on the poor? This question is still open. Economist Ann Harrison (2007) thinks that if the right institutions and policies are in place, globalization will benefit the underprivileged. She claims that there is conflicting evidence regarding the relationship between globalization and poverty. It is true that over the past few decades, as developing nations have integrated more deeply into the global trading system, the rate of poverty has decreased globally. Nevertheless, a number of studies on globalization and poverty contend that the poor are not always among those who benefit from it and that rising inequality is a side effect of globalization. The same could be said for new export and import regulations; they may benefit some workers while hurting others. According to her, the relationship between globalization and poverty is influenced by how it interacts with the rest of the economic environment, including investments in infrastructure and human capital, the promotion of credit and technical assistance for farmers, trustworthy institutions and governance, and macroeconomic stability. As evidence suggests that relying solely on trade or foreign investment is insufficient to combat poverty, she holds that the needs of the poor in various countries who are likely to be harmed by globalization must be carefully studied.

To benefit from trade reforms, the poor also need access to credit, better infrastructure, education, and the ability to relocate from contracting to expanding sectors. Only economic growth and demands for redistribution will cause inequality to decline. As things stand, globalization is still unable to bring about equality in the world's poorest nations, despite recent evidence suggesting that the growth in inequality in developing countries may have slowed.

References

  1. Bhagwati, J. (2004) In Defense of Globalisation. New York: Oxford University Press. 
  2. Coe, N. M. (2003a) “Globalisation, regionalisation and scales of integration: US IT industry investment in South-East Asia”, In M, Miozzo and I. Miles (eds.) Internationalisation, Technology and Services. Cheltenham: Elgar. pp. 117-36. 
  3. Cohen, B. (2004) “Urban growth in developing Countries: a review of current trends and a caution regarding existing forecasts”, World Development, 32:23-51. 
  4. Conference Board of Canada (2013) Child Poverty, Ottawa, Ontario. Dicken, P. (2011) Global Shift. London: Sage.
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