Economic Globalisation: Solution To Poverty? Flashcards
arguments to suggest that economic globalisation is the solution to poverty and inequality
SAPs are effective
economic growth is the best way to tackle poverty
economic globalisation and trade
arguments to suggest that economic globalisation is NOT the solution to poverty and inequality
SAPs are ineffective
economic growth is not the best way to tackle poverty
economic globalisation and trade
SAPs are effective
SAPs
there is tension between orthodox and alternative approaches to poverty and development due to their attitudes towards SAPs. The orthodox approach, inspired by thinkers such as Adam Smith and David Ricardo, in turn inspired and is underpinned by the conditionality attached to SAPs. It provides much of the thinking behind SAPs, believing that the best way to promote development in underdeveloped states is to introduce economic liberalism. This may involve countries freeing up their markets, privatising state owned industries and focusing on producing products in which they have a comparative advantage. The SAPs offered by the IMF and World Bank are therefore beneficial and are the best way to encourage growth.
SAP requirements for Greece – Reduce public spending on government wages and welfare benefits the Greek system of state pensions was costing 17.5% of Greece’s GDP
The Greek government was required to make €1 billion of savings through pension reforms alone
The Greek parliament voted in 2016 to approve reforms to income tax and general state pension schemes
Greases governing anti-austerity party, Syriza, Proposed the reforms in the face of public protests pensions have been cut many times and are now estimated to be worth 25 to 55% less but at the beginning of the debt crisis
demonstrates the effectiveness of SAPs
SAPs are ineffective
SAPs
economic globalisation encourages poverty and inequality rather than resolving it
For example, the 1988 annual meetings of the IMF and World Bank were met with huge protests in West Berlin that attracted international support
These movements point to the Structural Adjustment Programmes (SAPs) given out by the IMF and the World Bank, which are loans with conditions attached. Such loans require developing countries to undertake policy objectives such as privatisation, deregulation and opening up their markets to the world.
However, rather than encouraging economic growth, anti-globalisation movements argue that these loans create a poverty cycle by encouraging developing economies to open up their markets to exploitation by much larger economies and TNCs, leading local businesses and infant industries to be at best side-lined and at worst completely destroyed. They also encourage developing countries to produce cash-crops such as coffee and cocoa, which leaves them vulnerable to exploitation by TNCs who control the production, manufacturing and distribution of such products.
leading local businesses and infant industries to be at best side-lined and at worst completely destroyed. This can be seen in the way in which Ghanaian rice farmers, the Jamaican peasantry and the Senegal groundnut industry have all been ruined by cheap foreign imports.
Cash crop production also reduces the amount of land under cultivation to meet domestic food needs, which can lead to a continuing cycle of famine and poverty. In this respect, the IMF and World Bank seem to relegate countries to peripheral status so that they never achieve a proto-industrial stage of development, which reinforces the North-South divide.
Many also suggest that the World Bank hurts the poor rather than helps them. According to a 2015 investigative report, nearly 3.5 million people have been displaced over the last decade to make room for World Bank funded projects. In the event of such projects, the World Bank has rules to ensure that families are not forced from their homes without warning and that they are safely resettled elsewhere. However, on many occasions, the World Bank has reportedly failed to live up to the standards. For instance, in 2007, the World Bank loaned nearly $17 million to Kenya’s Mational Forest Service for a conservation project, but Kenyan authorities reportedly used the money to forcefully evict thousands of indigenous people who had been living in the project area. Between 2007 and 2014 up to 1000 indigenous homes had been ransacked or burned. Furthermore, the Bank encourages unsustainable development. Marshland has been drained, hillsides terraced and trees felled to grow crops for export, lowering biodiversity and increasing the risk of landslides and flooding which can be especially hard for developing countries to deal with. The World Bank acknowledges these problems but has yet to make any changes so continues to face severe criticism.
the alternative approach tends to have a more pessimistic attitude towards SAPs. This roots from its beliefs in development needing to be a bottom-up process, centred around local people, rather than being imposed from above by international organisations. Strands of alternative approaches would also suggest that SAPs may actually do more to exacerbate poverty by keeping developing states in dependency relationship with developed states and encouraging them to open up their markets to much more powerful businesses and enterprises, which will only damage local businesses who will not be able to cope with such huge powers dominating the market.
economic growth is the best way to tackle povety
ECONOMIC GROWTH, DRIVEN BY ECONOMIC GLOBALISATION, IS THE BEST WAY TO TACKLE POVERTY
the orthodox approach to poverty believes that poverty should be defined as a lack of income or material resources, meaning that poverty can be measured through economic growth and GDP
the orthodox approach believes that since poverty concerns the ability to meet material needs, the best way to reduce poverty is to encourage economic growth and according to this approach, unlimited economic growth is possible under the free market
this approach believes that the spread of liberal economic policy is beneficial and will lead to necessary development because increased wealth will benefit everyone by trickling down through society, allowing underdeveloped countries to become more developed
moreover, the process of development and economic growth should be a top-down process, relying on the technology and expertise of forces outside the state itself, particularly Western countries, organisations like the IMF as well as TNCs
essentially, free trade without government intervention in competitive markets will drive growth – free trade and privatisation will open up developing economies to international trade, which will inevitably trigger growth and help to reduce poverty
economic growth is not the best way to tackle poverty
ECONOMIC GROWTH IS NOT THE BEST WAY TO TACKLE POVERTY
the alternative approach to poverty and development suggests that there are 2 main issues with measuring poverty in terms of economic growth
one of which is that this approach only measures income and does not take into account other factors contributing to poverty
in order to consider whether peoples’ basic needs are being met, a much wider measurement of poverty is required, specifically one that acknowledges human development such as access to education, gender equality, quality of healthcare and life expectancy
the alternative approach therefore suggests that poverty should be measured and defined as the inability to meet both material and non-material needs through your own effort
the theory therefore rejects the notion that poverty reduction and development is best achieved through economic growth
the alternative approach is instead much more centred around human well-being and believes that development means becoming self-reliant
rather than being a top-down process, poverty reduction and development should be bottom-up, locally controlled and involve local people directly, especially marginalised groups such as indigenous people. It should also be sustainable and rely on local knowledge rather than that outside the state.
economic globalisation and trade
ECONOMIC GLOBALISATION AND TRADE
the greatest contributor to reduction in poverty is globalisation and trade
the world’s economies and cultures have become more interconnected and free trade has driven the growth of many developing economies
world trade has been growing since the end of WW2 — free trade agreements and technological advances in transportation and communication have allowed goods and services to move around the world more easily than ever
advancements in technology like the mobile phone have reduced poverty — the economist Jeffrey Sachs says that mobile phones are the “single most transformative technology” when it comes to the developing world
they give people access to banking and payment schemes as well as better access to education and information
in some places, phones help farmers get information and get the best price for the stuff they’re producing
mobile phone towers are also a lot cheaper to install than running thousands of kilometres of telephone lines — this is called leapfrogging, countries can skip straight to more efficient and cost-effective technologies that weren’t available in the past
developing countries attract investment by engaging in free trade, so allowing them to break out of the cycle of subsistence agriculture, especially since they also have an incentive to provide a better trained and educated workforce in order to attract this investment
nation-states are able to use their comparative advantage within a global market, so creating limitless opportunities for expansion
TNCs outsource employment to countries with the lowest labour costs, creating diversification in developing countries that export raw materials and/or manufacture products
there has been a dramatic decrease in levels of global poverty and a greater convergence between the GDP of the Global North and Global South since developing countries have engaged in globalisation
the MDGs have been largely successful due to the effect of economic globalisation
international trade has also created new opportunities for people to sell their products and labour in a global market place, which has helped millions to get out of extreme poverty
reduces the global cost of imports, enabling the world’s poorest to purchase subsistence and consumer goods more cheaply
free trade liberalism has done more than anything else to challenge the North-South divide by creating new jobs in manufacturing across the world
as a result, gross world production has increased from $41 trillion in 2000 to $77 trillion in 2014
and the number of people living in extreme poverty has dramatically decreased as people across the world gain higher paying jobs — the number of people living in extreme poverty in 1980 was 1.9 billion, but in 2015 it was only 702 million
developing countries have been able to break into global markets and use their comparative advantage in cheap labour to lift millions of their citizens out of extreme poverty
the employment opportunities created by economic globalisation provide people in the developing world with the chance to break out of the poverty cycle
jobs in factories may seem unacceptable to the developed world but the wages are above average in developing countries
economic globalisation and trade
ECONOMIC GLOBALISATION AND TRADE
globalisation is a winners and losers process
companies produce labour-intensive products like shoes in countries with the lowest wages and the weakest regulations
the winners of this process include corporations and their stockholders, who earn more profit, but also the consumers who get products at a cheaper price
the losers are the high wage work workers who used to make those products, but their jobs moved overseas, as well as the low-wage workers who are often thrown into hazardous working conditions
globalisation leads to exploitation and oppression, it is essentially a form of economic colonialism that puts profit before people
wealth generated through economic globalisation is concentrated in the hands of the elite, which dramatically increases the gap between the rich and the poor
in 2016, it was estimated that the poorest 25% of China owned just 1% of the country’s wealth, while the richest 1% owned around 33% of the country’s wealth
as the income gap between the rich and poor increases, both within and between countries, this creates resentment and dissatisfaction which undermine social cohesion
globalisation marginalises the poor instead of lifting them out of poverty — as Hans Rosling said: “the 1 to 2 billion poorest in the world, who don’t have food for the day, suffer from the worst disease: globalisation deficiency… the way globalisation is occurring could be much better, but the worst thing is not being part of it”
