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Globalization And Poverty

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Published in: Geography
1,705 Views

How does globalization impact poverty?

Parul G / Delhi

8 years of teaching experience

Qualification: M.A (Johns Hopkins University (USA) - 2015), B.A (Lady Shri Ram College for Women (LSR), Delhi - 2009)

Teaches: BA Tuition, Economics, Mathematics, Statistics

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  1. Global Economy and the poor
  2. What is globalization? ' UNESCO: "Globalization describes a world environment in which there is relatively free and frequent movement of goods, capital, people, information and ideas internationally." (emphasis added) ' We will be looking at the linkages between globalization and poverty, especially in developing countries, and the role of policy in this context
  3. Globalization and poverty ' Opposition to globalization ' Cultural attack/homogenization ' Short-term capital flight—destabilization ' Loss of jobs/income security with consequences for poverty/inequality ' Author focuses on third issue Specific questions ' How does globalization affect the conditions for the poor? ' How do global constraints restrict the effectiveness of policies attempting to improve the conditions of the poor? Short answer: no causal prediction ' Both hardships and opportunities due to globalization ' Domestic political-socio-economic institutions determine the response
  4. Scope of discussion ' What do we mean by poverty? ' Absolute poverty ' Which are the affected groups we are concerned with? ' Poor workers (self-employed or waged) ' Recipients of public services/users of common property resources ' Not considering change in welfare of consumers
  5. workers ' Who are they? ' Small farmers, artisans, petty retailers ' What constraints do they face (in general)? ' Credit, storage, marketing, insurance, access to technology, infrastructure, government regulation (or lack of it) ' How will they be engaged with globalization? ' Selling farm produce, handicrafts, other manufactured goods
  6. Impact of globalization on self-employed workers Advantages Can relieve infrastructural/technological bottlenecks Can support marketing attempts of exporters from poor countries and help them gain credibility Disadvantages Competition from large agri-business companies (for farmers)/other established brands with large scale production Face restrictions from developed countries on grounds of environmental/safety issues, child labor laws Multinational marketing chains can act as monopolies and charge huge margins in return for their services Average income increases but spread also increases due to fluctuations in prices and income» vulnerability increases in the absence of safety nets Role of Policy (to reduce disadvantages) Technological/financial support Provide assistance for quality certification Regulate international marketing chains to prevent monopolization (WTO can play a role here) Strengthen access to credit, insurance to smooth consumption
  7. Wage-earners ' Labour surplus nations can export labour-intensive goods and workers will benefit through higher wages ' However, developing countries (say country X) can decide to import from even poorer countries (say country Y): then wages in country X will fall further
  8. JOB FOR ALL UhEMPLOYMENT ALLOWANC MANIPtJR smv cnil
  9. Impact of globalization on wage earners Advantages Job opportunities, possibly higher wages Disadvantages Poor working conditions ("sweatshops") Workers of declining/importing sector suffer MNCs can use labour-saving (displacing) technology, resulting in unemployment or low wages Unions can lose bargaining power: the threat of foreign competition leads to lower profit margins and employers can threaten workers with factor-substitution Political sovereignty of a nation can be weakened, potentially affecting welfare of the disadvantaged Role of Policy Stringent regulations regarding working conditions Retraining/unemployment allowance to help transition Developing countries need to strengthen bargaining position—WTO can help settle disputes Committed domestic policy (income support/insurance): BUT how to raise money for this? ' Limited scope to tax capital due to potential flight ' Focus should be on progressive tax (VAT/GST)
  10. Users of Public services ' No access to social security, but basic needs are provided by government ' Education, health, transport, rural infra ' Need for macroeconomic stabilization increases with global integration fiscal deficit needs to be contained ' Public spending curtailed ' Issues of accountability/enforcement (lack of) further compound the problem and the gains don't reach the intended beneficiaries
  11. Users of common property resources ' Poor depend on natural envt for livelihoods/basic needs ' Trade liberalization may lead to over-exploitation of resources in resource-rich developing countries further increasing vulnerability of the poor ' Property rights and price distortions determine to what extent the resources will be exploited ' Coordinated global envt policy is needed so that one country doesn't gain at the expense of another by adopting environmental malpractices
  12. Summary/ConcIusions ' Opposition to globalization ' Claim: More restricted trade will be better for the poor ' Those in favour of globalization ' Claim: conditions for the poor will be worse without trade ' Evidence: both/none are true ' Globalization won't solve all problems: supplement with sound policies/insti reforms Strong leadership ' Participation of citizens ' Building admin capacity Well-directed public spending ' International cooperation ' Tech/knowledge transfer, collaborative R&D ' Antitrust action ' Reduction of trade barriers (two-way) Instead of blaming trade and resisting it, focus should be on building a conducive domestic envt ' Support for quality certification, international negotiations
  13. Refe re n c e ' Abhijit Banerjee, Roland Benabou and Dilip Mookerjee, Understanding Poverty, Oxford University Press, 2006, Chapter 6
  14. Global Economy and the poor
  15. What is globalization? ' UNESCO: "Globalization describes a world environment in which there is relatively free and frequent movement of goods, capital, people, information and ideas internationally." (emphasis added) ' We will be looking at the linkages between globalization and poverty, especially in developing countries, and the role of policy in this context
  16. Global Economy and the poor
  17. Globalization and poverty ' Opposition to globalization Cultural attack/homogenization ' Short-term capital flight—destabilization ' Loss of jobs/income security with consequences for poverty/inequality ' Author focuses on third issue Specific questions • How does globalization affect the conditions for the poor? • How do global constraints restrict the effectiveness of policies attempting to improve the conditions of the poor? Short answer: no causal prediction • Both hardships and opportunities due to globalization • Domestic political-socio-economic institutions determine the response
  18. What is globalization? ' UNESCO: "Globalization describes a world environment in which there is relatively free and frequent movement of goods, capital, people, information and ideas internationally." (emphasis added) ' We will be looking at the linkages between globalization and poverty, especially in developing countries, and the role of policy in this context
  19. Scope of discussion ' What do we mean by poverty? ' Absolute poverty ' Which are the affected groups we are concerned with? Poor workers (self-employed or waged) ' Recipients of public services/users of common property resources ' Not considering change in welfare of consumers
  20. Globalization and poverty ' Opposition to globalization Cultural attack/homogenization ' Short-term capital flight—destabilization ' Loss of jobs/income security with consequences for poverty/inequality ' Author focuses on third issue Specific questions • How does globalization affect the conditions for the poor? • How do global constraints restrict the effectiveness of policies attempting to improve the conditions of the poor? Short answer: no causal prediction • Both hardships and opportunities due to globalization • Domestic political-socio-economic institutions determine the response
  21. workers ' Who are they? ' Small farmers, artisans, petty retailers ' What constraints do they face (in general)? Credit, storage, marketing, insurance, access to technology, infrastructure, government regulation (or lack of it) ' How will they be engaged with globalization? ' Selling farm produce, handicrafts, other manufactured goods
  22. Scope of discussion ' What do we mean by poverty? ' Absolute poverty ' Which are the affected groups we are concerned with? Poor workers (self-employed or waged) ' Recipients of public services/users of common property resources ' Not considering change in welfare of consumers
  23. workers ' Who are they? ' Small farmers, artisans, petty retailers ' What constraints do they face (in general)? Credit, storage, marketing, insurance, access to technology, infrastructure, government regulation (or lack of it) ' How will they be engaged with globalization? ' Selling farm produce, handicrafts, other manufactured goods
  24. Impact of globalization on self-employed workers Advantages Can relieve infrastructural/technological bottlenecks Can support marketing attempts of exporters from poor countries and help them gain credibility Disadvantages Competition from large agri-business companies (for farmers)/other established brands with large scale production Face restrictions from developed countries on grounds of environmental/safety issues, child labor laws Multinational marketing chains can act as monopolies and charge huge margins in return for their services Average income increases but spread also increases due to fluctuations in prices and income» vulnerability increases in the absence of safety nets Role of Policy (to reduce disadvantages) Technological/financial support Provide assistance for quality certification Regulate international marketing chains to prevent monopolization (WTO can play a role here) Strengthen access to credit, insurance to smooth consumption
  25. Impact of globalization on self-employed workers Advantages Can relieve infrastructural/technological bottlenecks Can support marketing attempts of exporters from poor countries and help them gain credibility Disadvantages Competition from large agri-business companies (for farmers)/other established brands with large scale production Face restrictions from developed countries on grounds of environmental/safety issues, child labor laws Multinational marketing chains can act as monopolies and charge huge margins in return for their services Average income increases but spread also increases due to fluctuations in prices and income» vulnerability increases in the absence of safety nets Role of Policy (to reduce disadvantages) Technological/financial support Provide assistance for quality certification Regulate international marketing chains to prevent monopolization (WTO can play a role here) Strengthen access to credit, insurance to smooth consumption
  26. Wage-earners ' Labour surplus nations can export labour-intensive goods and workers will benefit through higher wages ' However, developing countries (say country X) can decide to import from even poorer countries (say country Y): then wages in country X will fall further
  27. JOB F0K ALL UhEMPLOYMENT ALLOWnxn MANIPLJR coli
  28. Impact of globalization on wage earners Advantages Job opportunities, possibly higher wages Disadvantages Poor working conditions ("sweatshops") Workers of declining/importing sector suffer MNCs can use labour-saving (displacing) technology, resulting in unemployment or low wages Unions can lose bargaining power: the threat of foreign competition leads to lower profit margins and employers can threaten workers with factor-substitution Political sovereignty of a nation can be weakened, potentially affecting welfare of the disadvantaged Role of Policy Stringent regulations regarding working conditions Retraining/unemployment allowance to help transition Developing countries need to strengthen bargaining position—WTO can help settle disputes Committed domestic policy (income support/insurance): BUT how to raise money for this? • Limited scope to tax capital due to potential flight • Focus should be on progressive tax (VAT/GST)
  29. Users of Public services ' No access to social security, but basic needs are provided by government Education, health, transport, rural infra ' Need for macroeconomic stabilization increases with global integration fiscal deficit needs to be contained Public spending curtailed Issues of accountability/enforcement (lack of) further compound the problem and the gains don't reach the intended beneficiaries
  30. Users of common property resources ' Poor depend on natural envt for livelihoods/basic needs ' Trade liberalization may lead to over-exploitation of resources in resource-rich developing countries further increasing vulnerability of the poor ' Property rights and price distortions determine to what extent the resources will be exploited Coordinated global envt policy is needed so that one country doesn't gain at the expense of another by adopting environmental malpractices
  31. Summary/ConcIusions ' Opposition to globalization Claim: More restricted trade will be better for the poor ' Those in favour of globalization ' Claim: conditions for the poor will be worse without trade ' Evidence: both/none are true ' Globalization won't solve all problems: supplement with sound policies/insti reforms Strong leadership ' Participation of citizens ' Building admin capacity Well-directed public spending ' International cooperation ' Tech/knowledge transfer, collaborative R&D ' Antitrust action ' Reduction of trade barriers (two-way) Instead of blaming trade and resisting it, focus should be on building a conducive domestic envt ' Support for quality certification, international negotiations
  32. Refe re n c e ' Abhijit Banerjee, Roland Benabou and Dilip Mookerjee, Understanding Poverty, Oxford University Press, 2006, Chapter 6
  33. Global Economy and the poor
  34. What is globalization? ' UNESCO: "Globalization describes a world environment in which there is relatively free and frequent movement of goods, capital, people, information and ideas internationally." (emphasis added) ' We will be looking at the linkages between globalization and poverty, especially in developing countries, and the role of policy in this context
  35. Globalization and poverty ' Opposition to globalization Cultural attack/homogenization ' Short-term capital flight—destabilization ' Loss of jobs/income security with consequences for poverty/inequality ' Author focuses on third issue Specific questions • How does globalization affect the conditions for the poor? • How do global constraints restrict the effectiveness of policies attempting to improve the conditions of the poor? Short answer: no causal prediction • Both hardships and opportunities due to globalization • Domestic political-socio-economic institutions determine the response
  36. Scope of discussion ' What do we mean by poverty? ' Absolute poverty ' Which are the affected groups we are concerned with? Poor workers (self-employed or waged) ' Recipients of public services/users of common property resources ' Not considering change in welfare of consumers
  37. Wage-earners ' Labour surplus nations can export labour-intensive goods and workers will benefit through higher wages ' However, developing countries (say country X) can decide to import from even poorer countries (say country Y): then wages in country X will fall further
  38. workers ' Who are they? ' Small farmers, artisans, petty retailers ' What constraints do they face (in general)? Credit, storage, marketing, insurance, access to technology, infrastructure, government regulation (or lack of it) ' How will they be engaged with globalization? ' Selling farm produce, handicrafts, other manufactured goods
  39. JOB F0K ALL UhEMPLOYMENT ALLOWnxn MANIPLJR coli
  40. Impact of globalization on self-employed workers Advantages Can relieve infrastructural/technological bottlenecks Can support marketing attempts of exporters from poor countries and help them gain credibility Disadvantages Competition from large agri-business companies (for farmers)/other established brands with large scale production Face restrictions from developed countries on grounds of environmental/safety issues, child labor laws Multinational marketing chains can act as monopolies and charge huge margins in return for their services Average income increases but spread also increases due to fluctuations in prices and income» vulnerability increases in the absence of safety nets Role of Policy (to reduce disadvantages) Technological/financial support Provide assistance for quality certification Regulate international marketing chains to prevent monopolization (WTO can play a role here) Strengthen access to credit, insurance to smooth consumption
  41. Impact of globalization on wage earners Advantages Job opportunities, possibly higher wages Disadvantages Poor working conditions ("sweatshops") Workers of declining/importing sector suffer MNCs can use labour-saving (displacing) technology, resulting in unemployment or low wages Unions can lose bargaining power: the threat of foreign competition leads to lower profit margins and employers can threaten workers with factor-substitution Political sovereignty of a nation can be weakened, potentially affecting welfare of the disadvantaged Role of Policy Stringent regulations regarding working conditions Retraining/unemployment allowance to help transition Developing countries need to strengthen bargaining position—WTO can help settle disputes Committed domestic policy (income support/insurance): BUT how to raise money for this? • Limited scope to tax capital due to potential flight • Focus should be on progressive tax (VAT/GST)
  42. Wage-earners ' Labour surplus nations can export labour-intensive goods and workers will benefit through higher wages ' However, developing countries (say country X) can decide to import from even poorer countries (say country Y): then wages in country X will fall further
  43. Users of Public services ' No access to social security, but basic needs are provided by government Education, health, transport, rural infra ' Need for macroeconomic stabilization increases with global integration fiscal deficit needs to be contained Public spending curtailed Issues of accountability/enforcement (lack of) further compound the problem and the gains don't reach the intended beneficiaries
  44. JOB F0K ALL UhEMPLOYMENT ALLOWnxn MANIPLJR coli
  45. Users of common property resources ' Poor depend on natural envt for livelihoods/basic needs ' Trade liberalization may lead to over-exploitation of resources in resource-rich developing countries further increasing vulnerability of the poor ' Property rights and price distortions determine to what extent the resources will be exploited Coordinated global envt policy is needed so that one country doesn't gain at the expense of another by adopting environmental malpractices
  46. Impact of globalization on wage earners Advantages Job opportunities, possibly higher wages Disadvantages Poor working conditions ("sweatshops") Workers of declining/importing sector suffer MNCs can use labour-saving (displacing) technology, resulting in unemployment or low wages Unions can lose bargaining power: the threat of foreign competition leads to lower profit margins and employers can threaten workers with factor-substitution Political sovereignty of a nation can be weakened, potentially affecting welfare of the disadvantaged Role of Policy Stringent regulations regarding working conditions Retraining/unemployment allowance to help transition Developing countries need to strengthen bargaining position—WTO can help settle disputes Committed domestic policy (income support/insurance): BUT how to raise money for this? • Limited scope to tax capital due to potential flight • Focus should be on progressive tax (VAT/GST)
  47. Summary/ConcIusions ' Opposition to globalization Claim: More restricted trade will be better for the poor ' Those in favour of globalization ' Claim: conditions for the poor will be worse without trade ' Evidence: both/none are true ' Globalization won't solve all problems: supplement with sound policies/insti reforms Strong leadership ' Participation of citizens ' Building admin capacity Well-directed public spending ' International cooperation ' Tech/knowledge transfer, collaborative R&D ' Antitrust action ' Reduction of trade barriers (two-way) Instead of blaming trade and resisting it, focus should be on building a conducive domestic envt ' Support for quality certification, international negotiations
  48. Refe re n c e ' Abhijit Banerjee, Roland Benabou and Dilip Mookerjee, Understanding Poverty, Oxford University Press, 2006, Chapter 6
  49. Users of Public services ' No access to social security, but basic needs are provided by government Education, health, transport, rural infra ' Need for macroeconomic stabilization increases with global integration fiscal deficit needs to be contained Public spending curtailed Issues of accountability/enforcement (lack of) further compound the problem and the gains don't reach the intended beneficiaries
  50. Users of common property resources ' Poor depend on natural envt for livelihoods/basic needs ' Trade liberalization may lead to over-exploitation of resources in resource-rich developing countries further increasing vulnerability of the poor ' Property rights and price distortions determine to what extent the resources will be exploited Coordinated global envt policy is needed so that one country doesn't gain at the expense of another by adopting environmental malpractices
  51. Summary/ConcIusions ' Opposition to globalization Claim: More restricted trade will be better for the poor ' Those in favour of globalization ' Claim: conditions for the poor will be worse without trade ' Evidence: both/none are true ' Globalization won't solve all problems: supplement with sound policies/insti reforms Strong leadership ' Participation of citizens ' Building admin capacity Well-directed public spending ' International cooperation ' Tech/knowledge transfer, collaborative R&D ' Antitrust action ' Reduction of trade barriers (two-way) Instead of blaming trade and resisting it, focus should be on building a conducive domestic envt ' Support for quality certification, international negotiations
  52. Refe re n c e ' Abhijit Banerjee, Roland Benabou and Dilip Mookerjee, Understanding Poverty, Oxford University Press, 2006, Chapter 6

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