Is Poverty Really a Side Effect of Globalization?

Throughout history businesses have tried to find new an innovative ways to expand business and profits. With the ever increasing effects of globalization on our economy as well as the economies of the other countries that provide the workers, labor, or resources, people are trying to find reasons as to why the businesses are prospering while the laborers or struggling. The wealthy countries that own the businesses are blamed in exploiting labor from workers in underdeveloped countries. In this paper I will explore the options to help decide whether companies are unfairly taking advantage of a situation for profit or if globalization really is not the root cause of exploitation in these countries.

In 1983, Theodore Levitt published an article called "The Globalization of Markets" (Tedlow & Abdelal, 11). This was the first use of the term globalization in a business sense. This revolutionized the way that managers and companies could create new opportunities in other countries to benefit their businesses. This called for companies not to think just multinational, but globally (12). If they could find ways to create business practices that create the highest quality, low cost products that can be mass produced and distributed throughout the entire world, then they will be the best and most profitable corporations (13).

The term globalization was not defined until 1992, when Roland Robertson referred to it as, "both to the compression of the world and the intensification of consciousness of the world as a whole" (Kumar, 96). He believed that markets and businesses should all try towards "unity" and that would create the best business opportunities (97). By making the world one big market, everyone would be able to benefit from the same profits, goods, and services.

The main problem that many people have found with the increasing amounts of global trade, increasing telecommunications, international financial systems, outsourcing, and Westernization is they believe that all of these practices are only benefiting the rich Western nations (Ravallion, 1). Globalization has been criticized for growing the economies of the Western nations, but what is it doing for the poor nations? From 1981 to 2001, the percentage of people living in poverty dropped from 40 to 21 percent (5). This shows a dramatic increase of families that are making over the $1 a day poverty level income during the main starting days since globalization became larger scale practice.

The critics of globalization actually agree these statistics saying that poverty has actually risen since the early 1980's (Ravallion, 8). It has nothing to do with their personal income towards that $1 a day, but the fact that the businesses are making larger profits from the products and manufacturing than the workers. Since their pay increases are not as dramatic, they are still in poverty. In Africa, the poverty level actually rose from 42 to 46 percent showing that not all areas of the world have benefited from new market practices (Bardhan, 272).

Many globalization supporters argue that poverty is actually greatly reduced by countries with businesses that use these methods. In China alone since 1981, the poverty level has dropped from 64 percent all the way down to 17 percent (Bardhan, 272). Since the early 1980's their communist government has tried to find ways to improve their country and give their businesses a step up in the modern economies to keep their type of government running. Many communist governments failed because they were not able to keep their products flowing in a free trade market. By globalizing and opening up new economic activity for their country, China has been able to reduce a great amount of poverty (273). Farmers have moved to the city to get higher paying jobs and the citizens are receiving better social programs to keep healthy and to learn new skills to help build their economy for the future. They farmer make a great deal more income working in the factories for the larger companies than they did farming their family land (274).

The main problem that is facing smaller and poorer countries is that their workers are mainly self employed and do not have the resources to keep their products competitive with mass produced and distributed goods (Bardhan, 273). They end up losing money trying to keep their prices competitive. They do not have access to or the money to afford new machinery to help them produce things quicker, roads to carry their goods to market, irrigation, telecommunications, and in many places even electricity. A farmer can not sell his meat or vegetables in some foreign competitive markets if they are not able to satisfy the safety standards of the markets (274). These upgrades and special precautions can be costly and push these workers out of the global economy.

No foreign investors or outside help will want to come to these areas and help these people if they do not their money and time is worth the trip. Outside money has to flow to these areas to help build it up from within. If an area does not have outside communications or a stable political situation then the people are not going to receive the aid they need to help eliminate their poverty (Bardhan, 274).

Many pro-globalizers blame the governments of these poor areas for sucking out profits and spending them on extravagant purchases for the rich or for over spending on their military, instead of creating a solid infrastructure and social programs. These governments find it easier to cut programs and budgets for those that are not able to fight back rather than cut the spending of their friends and family that will complain and fight back (Bardhan, 279). It seems to be largely a problem that is caused and can be solved by lack of accountability in the governments of these countries with high poverty levels. One main problem with creating accountability within these governments is they have to be willing to change their ways and adopt new domestic policies on everything from education, health care, trade, labor laws, fair budgeting, and capable administration (Bardhan, 282). The workers of their country can not prosper if they are kept as untrained, menial laborers which are what the richer countries are trying to exploit. At least even if they are not being paid much, they are being paid more than what their government would help them to earn.

New laws and regulations need to be created by these countries to prevent their citizens from any harm that could be caused by foreign interests. One example of how a company creates ways to get around government regulations and using cheap out of country labor would be that of Nike (Hu-Dehart, 246). The Oregon based company was able with the new telecommunications breakthroughs of the 1970's and 1980's to find cheap Asian labor to produce their products at a fraction of the cost to use American workers (247). They found rich men in the Asian countries to subcontract their work out to so it didn't look like Nike was directly controlling production and it also got around any laws that prohibited these actions of using these women for cheap labor.

There are always people in any area that are willing to take advantage of someone else if they are able to, but it seems like the main responsibility in governing the welfare of its citizens should be on the government of that country. Until the governments of these third world countries that are seen as being preyed upon and being impoverished by the Western world get stable governments with solid infrastructure, the poverty will continue. Globalization is not a main cause of poverty. Globalization will cause the loss of some jobs for the unskilled and those than can not compete, but will leave openings for those willing to try new things in new areas. In many cases the foreign money that is invested or paid to citizens can relieve some of the strain of poverty, but it will remain a subject of debate as long as anyone perceives any inequality in the system.

References

Bardhan, P (2004). The impact of globalization on the poor. Brookings Trade Forum, 271-296. Retrieved November 26, 2006, from Project Muse Database, http://muse.jhu.edu.ezproxy.umuc.edu/journals/brookings_trade_forum/v2004/2004.1bardhan.html

Hu-Dehart, E (2003). Globalization and its discontents: exploring the underside. Frontiers: A Journal of Women Studies, 24, 244-260. Retrieved November 25, 2006, from Project Muse Database, http://muse.jhu.edu.ezproxy.umuc.edu/journals/frontiers/v024/24.2hu-dehart.html

Kumar, V (2003). A critical methodology of globalization: politics of the 21st century?

Indiana Journal of Global Legal Studies , 10, 81-111. Retrieved November 25, 2006, from Project Muse Database, http://muse.jhu.edu.ezproxy.umuc.edu/journals/indiana_journal_of_global_legal_studies/v010/10.2kumar.html

Ravallion, M (2004). Competing concepts of inequality in the globalization debate. Brookings Trade Forum, 1-38. Retrieved November 26, 2006, from http://muse.jhu.edu.ezproxy.umuc.edu/journals/brookings_trade_forum/v2004/2004.1ravallion.html Tedlow, R. &, Abdelal, R. (2005). Theodore Levitt's "The Globalization of Markets": An evaluation after two decades. Retrieved November 30, 2006, Web site: http://media.wiley.com/product_data/excerpt/79/07879685/0787968579.pdf