Historical accounts that support the role of globalization in poverty reduction are observed especially during peace time and pro-globalization among countries. There is at least eighty percent of the world population that lived at an inflation-adjusted $1 per day at the onset of wartime in the early nineteenth century (Srinivasan and Wallack 2003). Half century by half century, this level is consistently lowered with drastic improvement in post-war period.
However, up to this day, debates continued at the gates of international organizations such as WTO, WB, IMF, etc. Most of the protagonists are still in doubt not on how globalization contributed to economic growth but more importantly how it impacted the poor. These debates are inconsistent with historical accounts that proved globalization as solution to poverty. The impact of globalization on poverty is a matter of time to give way for trickle effects, institutional adjustments and change of perception on traditional beliefs.
And so, in the long run, there are fewer questions about the benefits that poor may have from globalization. In this view, protagonists are highly concern on the distance between the deliveries of poverty effects of globalization to the grass root people which are normally the poor with economic growth serving as intermediary. They are primarily concern on how unequal the amount that is delivered and how unfair the delay of those amount. Thus, economic growth is criticized to prioritize the welfare of the well-off sector rather than the welfare of the poor.
The preceding statement is especially true when the risks of well-off people are compared with the risks of the poor. The former have ease in searching for employment, has enough liquidity for the delay in the welfare delivery and thus in the position to be doubly happy. On the other hand, the latter is in reverse situation aggravated by subsistence living and exposure to physical hazards and capitalist exploitation making them in absolute despair by lengthy wait for delivery of minimal welfare. A good example is the inequitable income distribution.
As industries expand business due to increasing inflow of direct and portfolio capital from abroad, well-off people are prioritized to jobs that are created due to formal education. If they are terminated or walk out of the office in their voluntary preference, they are still on-demand from expanding businesses. In contrast, the poor with little knowledge of how the sector works and little options would feel inferior and thus is willing to take whatever salary, conditions of work and other dictates of their employer. Both their mobility and freedom are taken away.
There are several empirical studies that suggest globalization is pro-poor. Besley and Burgess (2003) found that there is a negative relationship between the poverty and income per capita. In monitoring GDP growth and poverty on a twenty-year frame from 1980 to 2000, Deaton (2001) concluded that economic growth is responsible to poverty reduction in India. China, which is referred to as an economic giant awaken by foreign direct investments, is quoted by Park and Wang (2001) to have drastically eradicated rural poverty since 1998.
To evidence that the role of globalization is not only limited to income aspect, poor nations in Africa showed high levels of lowered poverty during the 1990s elevated by consequently addressing issues of mortality, education and AIDS epidemic. According to Besley and Burgess (2003), economic growth is only possible when three resources are present; namely, physical capital, human capital and technological change. This is illustrated in many ways. As the poor gain equal knowledge as the well-off, the former salary will increase and thus get both of them in equal footing in terms of income.
As newer technologies primarily in agriculture increase the yield of the poor, their incomes as well as capitalist tendencies will simultaneously benefit. There is even a surplus harvest to attend their nutritional demands and less risk that a natural calamity will make this positive situation short-lived. As road infrastructure takes over the rural and farm areas, access to larger markets and faster economic activity will further improve the situation of the poor.
These three sources of economic growth can be done minimally by the national and local government due to the vicious cycle of being a poor nation. With globalization, deficient funding will not be a hindrance to provide sources of economic growth due to inflow of capital. Accepting the argument that economic growth is indeed a good middleman to improve the welfare of the poor from globalization, the global community must have an average annual economic growth of 3.
8% by 2015 with lowest demand growth from Eastern Europe and Central Asia and highest demand growth from Sub-Saharan Africa (Besley and Burgess 2003). Eminent in the work of Srinivasan and Wallack (2003) is that globalization must be coupled with redistribution such as price support and public services to the poor. On the other hand, Besley and Burgess (2003) specifically defined their preference on the term redistribution through income distribution. They argued that the volatility of income distribution among developing countries is very minimal.
Thus, the impact of globalization on the poor sector is loomed by increasing the average income of the population. In the study of Dollar and Kraay (2001), it is found that globalizing large economies of the developing world are characterized by large rise in trade and large fall in tariff barriers starting in 1980s. Economic growth compared to 1970s is higher for the following decade through 1990s. However, even with this figures, non-globalizing developing countries that are small did not gain the same success of their large economy counterparts.
On the positive side, the welfare of the poor in respect to level of income is argued to have regression relevance with the level of trade. This study supported the role of globalization to poverty reduction and the effectiveness of economic growth to deliver the necessary benefits to industries, sectors and public at large. Still, the minority of small countries that may not have the sufficient market as well as institutional backbone to exploit large foreign capital inflows are hoping for the miracles of globalization. Conclusion
Would I support Globalization in terms of growth? The answer is relative and as much as we would like to place straightforward answer we cannot. It is hard to generalize the behavior of developed countries towards transition economies. The overlapping issue is that the former is offering the latter with the chance to achieve the former economic status without going through historical hardships which can include war. This is an offer that is hard to give away especially that most governments of transition economies are administered by older people.
In addition, inability to integrate relations to world affairs at least partially would make the transitional country weak against global shocks, external feud and addressing of internal objectives. To this view, globalization is for growth since it encourages transitional economies to join the globalization wave to improve national economy. On the flip side, it is rational for the leaders of transitional economies to make a well-prepared and if not rigid bilateral and multilateral agreements with trading partners. This is true especially when its internal resources are vulnerable to adverse spill-over effects of globalization.
It is a conservative but helpful to view these treaties as anti-growth particularly on quality of life, history and well-being of the nation’s identity. Internal resources do not only include people, places and things but also intangible resources like ideologies and memories. Globalization serves as intervening if not modifying mechanisms to status quo of these components. As a result, to be able to protect the non-economic growth of several national treasures and resources, seeing globalization as anti-growth to internal well-being is valid.
Besley, Timothy J, & Burgess, Robin (2003). Halving global poverty. Journal of economic perspectives, 17(3), 3-22. David Dollar, Aart Kraay (2004) Trade, Growth, and Poverty* The Economic Journal 114 (493), F22–F49 Deaton, Angus. (2001a), “Counting the World’s Poor’s Problems and Possible Solutions,” World Bank Research Observer, 16(2), 125-47. Park, A. and S. Wang (2001), “China’s Poverty Statistics,” China Economic Review, 23, 384-95. Srinivasan, T. N.? Wallack, J. S. ,“Globalization,Growthandthe Poor”,in De Economist, 152 (2), 2004, p. 251
University/College: University of Arkansas System
Type of paper: Thesis/Dissertation Chapter
Date: 21 December 2016
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