ECONOMICS

Globalization and Poverty

Globalization and Poverty

Globalization and poverty is highly talked about topic in the literature. This literature raises the question whether globalization reduces poverty or not? Number of studies suggests that globalization increases poverty, on the other hand, various studies prove that poverty increases due to globalization. Bhagwati (2004) argues that globalization is a positive force that can lift countries out of poverty. With globalization, there comes a trend of regional economic integration which helps reducing the poverty through agreements among countries in a geographic region to reduce, and in order to remove, tariff and non-tariff barriers to allow free flow of goods, services and factors of production between these countries. According to Gudgeon (2007, pp. 5-6) when it comes to the international trade side, the evidences show that two groups have been emerged due to globalization. First, those who have gained benefits due to the expansion of investment and world trade such as Western Europe, Latin America, North America. etc and secondly, those who did not gain any benefit or been marginalized or excluded.

According to Bhagwati (2004) inequality, poverty, lack of democracy or pollution can best be cured with the economic growth and integration into the global economy is the road towards economic growth. It has been argued that global economic integration helps poor because poor countries own a comparative edge in producing goods with unskilled labour (Harrison and McMillan, 2006, pp. 123-124). This practice helps transferring the skills as managers and technicians are trained to be employed at such new multi-national organizations. It also creates a tax base and the revenue which allow the government to pay for different social practices (Bhagwati, 2004). On the other hand, critics of globalization such as Weede (2003, qtd. in Kacowicz, 2005, 116) poverty is caused and deepens due to globalization and there are many interrelated reasons behind this. Firstly, economic integration is not beneficial without capital. The less developed countries own little or no capital and that is why they are unable to invest in a joint global market. Secondly, uneven development social and economic gaps are between and within the states are worsening by reinforcing the creative destruction process. And finally, it has also been argued that the reason behind poverty of developing countries is exploitation carried out by the developed countries.

Researchers such as Harrion and McMillan (2007), Gudgeon (2001), Heshmati (2004) and Kacowicz (2005) have reviewed the ...