Has globalisation increased poverty?

Globalisation refers to the construction of an interlocking global economy as well as the declining capacity of states to function as independent economic entities. Globalisation is argued to have led to the increasing interconnectedness of the world, in an economic, cultural and political sense. The impact of globalisation on poverty is heavily debated with some claiming it has led to huge benefits to those who were struggling whilst others argue that globalisation has led to greater poverty.

Liberal thinkers like Thomas Friedman argue that globalisation has led to benefits for all and led to the ability of developing countries to begin to match the economics of the ‘highly developed’ countries. Friedman in 2006 argued that the world is becoming ‘flatter’ as globalisation is levelling the economic playing field. The liberal argument is that globalisation stimulates all economies especially the economies of developing countries. This is because developing countries, according to the liberal argument, can gain a huge deal from globalisation. With more competitive markets, there is a growth of entrepreneurialism, as well as inward investment. The ability of developing economies to access larger, more global markets is a huge asset to developing countries as it improves technological innovation and foreign direct investment. China for example, have recognised the potential in the Latin American markets and invested $250bn from 2015 with a promised $500bn worth of trade to Latin American and Caribbean markets. Such deals are benefits for both the developed and developing states. The growth of the ‘Tiger’ states in East Asia; Hong Kong, Singapore, South Korea and Taiwan, has come as a result of using globalisation to their advantage. These states have embraced globalisation whilst protecting their domestic industries. Showing that globalisation has served to benefit developing states. The greater wealth of a state, the greater the reduction of poverty as the rise of China has shown.

However, many argue that globalisation has led to an increase in global poverty because of the structural inequalities that exist within the system. The trend within globalisation seems to be that the ‘Core’ developed states exploit the ‘periphery’ developing states to benefit themselves alone. These ‘periphery’ states are used as production factories for the developed world. The so-called ‘Factory Asia’, referring to the nature of East Asia as the production line for the West, now makes almost 50% of the world’s goods. In 2015, 77% of the clothing imported by the EU came from Asia, double the figures from the start of the decade. There is strong support of the argument that globalisation only pushes more in poverty and widens inequality between the global ‘North’ and global ‘South’. Marxists argue that the system is used to help the rich get richer whilst making the poor poorer. The fact that in 1999 the value of the assets of the richest 3 individuals in the world exceeded the combined GDP of all the countries designated as the ‘world’s least developed’, with a combined population of 600 million. That poverty and inequality is getting worse seems to be quite clear. For instance, in 1800, the income per capita of the US was three times as large as the income per capita of Africa, by the 2000s, the US was over 20 times larger. The rise of TNCs through globalisation has not helped to improve poverty but worsened it. TNCs seek to exploit areas of poor worker’s rights and cheap labour to generate huge profits for Western corporations.

Both hyperglobalists and pro-globalists cite the huge numbers brought out of poverty by China as evidence showing that globalisation has helped to reduce and not increase global poverty. In China, based of Chinese calculations of absolute poverty; having enough food to sustain a human, people living in absolute poverty went from 250 million in 1978 to 28 million in 2001. Additionally, China have reduced the number of people living on less than $1.25 per day by 663 million between 1981 and 2008. Such a reduction in poverty has not been seen by any country in the world. Hyperglobalists argue that this could only have been brought about by the enormous wealth that China have generated off the back of globalisation. China’s economic rise and 7-10% yearly growth has been made possible by the high-speed transport of goods that globalisation has introduced. India has also followed similarly to China with 140 million lifted out of absolute poverty between 2008 and 2011 according to the World Bank report on the Millennium Development Goals. The reason behind this huge reduction in poverty is argued to be India’s economic growth rate since 1991, in 2015, India had a growth rate of 7.6% meaning it is one of the fastest growing economies in the world. Furthermore, with a predicted 1.5% rise in share of world GDP by 2020, more will be lifted out of poverty in the future.

There has been opposition to the argument that globalisation is responsible for this reduction in poverty in both China and India for different reasons. Many challenge the idea that globalisation has caused this massive reduction in absolute poverty in China on the basis that the reduction is down to China’s own poverty reduction strategies. China have focussed on major expansion in manufacturing production which has helped to maintain jobs in the markets. For instance, China dominates the steel industry, accounting for over 50% of world steel production in 2013. China produces far more steel than it can use, so have now resorted to dumping steel on the market rather than downsize the steel industry. This then keeps all the jobs open rather than leaving people without jobs and vulnerable to slipping into poverty. They have also conducted numerous massive infrastructural projects like the building of super cities and bridges, like the creation of the largest sea-bridge in the world connecting Hong Kong and China. Such huge projects mean jobs in manual labour are always open which helps to reduce poverty. Policies like the one-child policy help to manage population and prevent a growing number of people being born into poverty. Showing that the reduction of poverty in China is down to Chinese poverty reduction policies rather than globalisation. It is argued that in India, globalisation has led to greater poverty. In India, there has been an increase in workers working on other’s land, landless labourers, from 36.9% in 2001 to 44.4% in 2011. Thus showing that more and more people have been pushed into jobs in which the pay is very low and there is almost no job security.

Many have used the example of sub-Saharan Africa as proof that globalisation has led to a decrease in global poverty. Generally regarded as the poorest and least developed area in the world, it has led to some referring to sub-Saharan Africa as the ‘fourth world’. Yet perhaps this trend of decline is coming to an end. According to World Bank figures, the percentage of those living below the poverty line of $1.25 in 2008 fell to 47%, the first time that it had ever fallen below 50%. An 11% decrease on the 58% peak in 1999. Additionally, in the period of 2000 to 2011, the economies of sub-Saharan Africa grew by 4.7% despite the 2008 economic crisis. Showing that there is an increase in the wealth of these sub-Saharan African countries. Such decreases in poverty, whilst not as dramatic as China or India, support the argument that globalisation has led to a reduction in global poverty.

Nevertheless, sub-Saharan Africa is still far and aware the least developed region in the world. Where in sub-Saharan Africa, the life expectancy is 54.17 years, the global average is 69.6 years. Such a large gap between the region and the rest of the world does indicate that sub-Saharan Africa has become a fourth world and is far behind even the less developed countries in the rest of the world. Such poverty is exacerbated by prominence of diseases in sub-Saharan Africa, like HIV and AIDS. In 2007, the region accounted for 68% of cases worldwide and 76% of all AIDS deaths. The fact the percentage is so high serves to demonstrate that globalisation has not helped to reduce global poverty. In fact, globalisation has made poverty worse in sub-Saharan Africa due to the mass migration it has inspired. The promise of better pay, living conditions and an increased life expectancy has led to a ‘brain-drain’ occurring. African migrants have doubled between 1980 and 2010 reaching 30.6 million migrants. Furthermore, a 2013 UN report showed that 1 in 9 Africans with a tertiary education, 2.9 million people, were living in developed countries in Europe and North America. Which is a 50% increase in the past 10 years. ‘Brain-drain’ reduces the number of skilled workers and means that the ratio of skilled workers, say doctors to people, drops. According to WTO data, in Uganda, there are less than 5000 doctors and 30’000 nurses for a population of over 35 million. This has large implications as healthcare becomes less accessible, and therefore more expensive, meaning that huge swathes of people are unable to access proper healthcare, weakening that country’s place on the Human Development Index. More people are pushed into poverty as healthcare becomes unaffordable. Therefore, it is evident that globalisation has not helped reduce global poverty given the worsening of the situation in sub-Saharan Africa.

Whilst globalisation may be responsible for the increasing the wealth of states all around the world, that does not necessarily have a direct correlation with a reduction of poverty. Yes, China and the ‘tiger’ economies have used globalisation to reduce poverty, the reduction has not come about simply by letting globalisation run its course. It has been modified to suit those economies. Furthermore, whilst sub-Saharan states may have greater wealth, the corruption epidemic has meant that this wealth often does not find its way to the people rather the pockets of the politicians at the top. It remains clear that global poverty as well as inequality has been increased rather than decreased by globalisation.

Alex Badcott

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