Gloablization and poverty

Review of Literature

Globalization and Poverty

James Lavinshon in his article “Globalization and Poverty” Discussed Some impact of globalization;
1. Globalization leaves an economy potentially much more sensitive to international shock such as exchange rate crises.
2. Globalization means the prices of internationally traded goods, even at constant exchange rates are defenseless to changes beyond the control of forces in the domestic economy. A small economy will have no control over the world prices of it’s imports and exports.
3. Globalization conveys access to a new set of goods. These may be goods that are either new varieties of products that already exist in the absence of trade or they may be new good entirely (i.e. personal computers.)
4. Globalization imparts an expanded set of opportunities for what is sometime called outsourcing or fragmentation of the production process. From the prospective of poorer countries, this typically means that firms headquartered in other countries may elect to do part of their manufacturing processes in poorer country.


One of the sample impact of global massive of capital in exchange rates crises which has happened in some of Asian countries and Latin America is collapse of exchange rate value or decrease in purchasing power of domestic people the price of import will be more expensive. Another impact which is studied by James Levinsohn the very poor were in fact the most vulnerable. But being vulnerable to globalization is not always a bad thing and in some instances, this vulnerability conveyed significant economic benefit to the very poor. In other cases, the poor were, in absolute as well as relative terms, the most harmed. Which I have experience from the financial crises in my country Indonesia the value of currency (Rupiah) deteriorated up to 80 % against Dollar, than the purchasing power of Rupiah really goes down every thing become expensive. And he said one of the lessons from Indonesian experience is that the impact of the crises on the poor are dynamic and it may be some time before some of the damaging effects of the crises are really felt. This is because there is evidence that the crises led to disadvantageous health among infants and children in poorer households. The long term impact of these outcomes is likely to be played out over the course of many years. And he said even if the exchange rate is stable, a small open economy will still take world price as given. For most commodities, poorer countries will find themselves in this position. Important to know just who consumes and produce s the importable and exportable. In many agricultural cases, the poor will comprise both groups. Again, one would expect the impact of globalization to differ across the urban and the rural poor.

Keith Porter in his article “Prosperity or Poverty” (2006) mentions there are advocates of globalization, opponents of globalization, and a wide middle which sees globalization as nearly inevitable, largely positive, and in need of sensible management. The single issue which seems different apparently is the role of globalization plays in causing or curing global poverty.

The advocates say globalization brings the first real chances of prosperity to the impoverished corners of the world. Opponents say globalization is the cause of growing poverty and inequality in the planet. And those in the middle see how unbridle globalization could wreak havoc on some while simultaneously opening the doors of opportunity to others.
And he quotes many statements of economist and social figure regarding Poverty and Globalization some are as follow:


Razeen Sally (London School of Economics) “Globalization, then, is growth-promoting. Growth, in turn, reduce poverty ……the liberalization of international transaction is good for freedom and prosperity. The anti liberal critique is wrong: marginalization is in large part caused by not enough rather than too much globalization.”

Jonah Goldberg, (Editor, National Review Online) “Agreement like NAFTA and the WTO for nations to respect contracts, which encourage responsible investment and, hence, economic growth. And, you see, economic growth creates a middle class, and a middle class, eventually, demands democracy. That is the story of the 20th century and God willing it will be the story of the 21st.”

Kofi Annan “Personally, I do not believe that those (poor) people are victims of globalization. Their problem is not that they are included in the global market but, in most cases, that they are excluded from it.”

The World Bank “Globalization has helped reduce poverty in a large number of developing countries but it must be harnessed better to help the world’s poorest, most marginalized countries improve the lives of their citizens, according to the report Globalization, Growth and Poverty: Building an Inclusive World Economy”.
James C. Bennett "I believe that the ultimate logic of globalization will eventually win out; and most and perhaps even all nations will eventually cross the threshold of democracy and transparent market economies. However, I also believe this will be the work of generations, and that there may be substantial backsliding in the process." - James C. Bennett
Clare Short, UK Secretary of State for International Development "Globalization is generating great wealth. This could be used to massively reduce poverty worldwide and to reduce global inequality. The world’s richest 225 people have a combined wealth equal to the annual income of the poorest 47 per cent of the world’s people. We must try to manage this new era, in a way which reduces these glaring inequalities and that helps to lift millions of people out of poverty." -
Ray Killey in his article “Globalization and poverty, and the poverty of Globalization Theory (current sociology, 2005) discussed the ongoing “globalization debate” by focusing on two apparently separate debate: on the links between trade liberalization, growth and poverty reduction and he gave too much explanatory weight to the concept of globalization. The article critically reviews the evidence for and against recent claim that global poverty has declined over the last 20 years.

Frank Lechner (2001) writes, why people oppose globalization? One of the reasons is that it stands for a real process, it perpetuates the inequity and exploitation inherent in capitalism, and globalization polarizes the globe and therefore creates an even more unjust world.
Globalization has thus become a tool in the symbolic politics of oppositional movements, a rallying cry in their assault on diverse global ills. And the paper argues that rather than creating rapid, universal human development, globalization has widened the gap between rich and poor, and he said that to close it, new institution will be needed.

In another paper written by J. Bradford DeLong (1999) titled Globalization and Neoliberalism
In first of his writing. He open the discussion by stated that almost all Condemn Globalization and the forces driving the world economy toward increased economic integration are sinister and disturbing. And he believes that globaphobia and critics of increasing international economic integration are suffering irrational fear. International economic integration—driven by rapidly falling transport and communications cost is both inevitable and beneficial. The main point in his paper is the statement that ‘The only question is how quickly government is going to learn how to benefit from it. The benefits of this “globalization” according to the neoliberal argument, are threefold:
1. Both the nations comprising the world economy’s industrial core and those in the developing periphery benefit massively when the capital-rich core (where interest rates are low) loans to the capital poor periphery ( where interest rate are high).
2. Consumer benefit when lower transport costs and reduced tariffs make goods far away more affordable.
3. The more internationalized the world economy, the more use producers in each country can make of commodities and production processes invented elsewhere. Faster diffusion of knowledge raises the level of productivity and technology worldwide.
his point is that the globalization leads to a richer world, and to a more vibrant and tolerant world as well. Government should not fight globalization, neoliberals contend. instead they should embrace it.

Robert I. Lerman (2002) in his writing “globalization and the fight against poverty” Today, stated his goal in introduction, shed light in three directions: first, by presenting the best analyses of the levels and trends in world poverty and inequality; second, by reviewing briefly the evidence on how the economic pillars of globalization—international trade, investment, and immigration—have influenced and continue to influence poverty and inequality; and third, by considering why some people oppose globalization
He found there is dramatic decrease in absolute poverty by using comprehensive analysis done by Colombia University professor Xavier Sala-I-Martin (2002), Role of globalization: In principle, allowing trade, investment and migration should reduce global poverty. Less clearly, it should also shrink the gap between rich and poor. Migration toward high wage areas makes labor scarcer in sending areas—thereby pushing wages up—and makes labor more abundant in receiving areas and lowering wages there. Incomes of the poorest workers rise and wage differences shrink between areas. Overall, globalization helped the poor countries that adopted sound policies and contributed to income convergence among the countries participating in the global system. However, since stagnation continued in many countries isolated from globalization, world inequality still rose. One critical point is there is no free mobility of worker and labor across countries. And in last he said with the open market economy, the world economy become more competitive and productive, and giving good, positive impact for the economic as a whole.


Anup Shah (2006) in his writing “Causes of Poverty” discussed that “Behind the interconnectedness promised by globalization, are global decisions, policies, and practices. These are typically influenced, driven, or formulated by the rich and powerful. These can be leader of the rich countries or other global actors such as Multinational Corporation, institutions, and Influential people. In the face of such enormous external influence, the government of poor nations and their people are often powerless. As a result, in the global context, a few get wealthy while the majority struggle.


Conclusion: according to some researchers that the impact of globalization are sufficiently varied and the life situations of the very poor so very heterogeneous, that there is no clear answer
One of the reason people opposes globalization because it perpetuates the inequity and exploitation innate in capitalism; globalization polarizes the globe and therefore creates a smooth more unfair world.