This paper explores current and potential effects caused by economic globalization. Aiming to explore this tendency, it reveals scrutiny of great scholars regarding benefits, which the globalization has. Similarly, it identifies warnings that are provided by the 20th century history, as well as indicates poverty measurements and core concepts of imperialism, capitalism, and neo-liberalism. Moreover, the given paper addresses questions, such as whether or not a world-wide globalization is an inevitable process, what its tools and mechanisms are, and how it corresponds with other political and cultural globalization. Besides, it discusses pros and cons of free trading, assessing it as a powerful means of economic globalization.
Globalization and Poverty
As it is known, the trend of economic globalization is being vastly discussed and disputed. On the one hand, adherents of this process emphasize its benefits, referring to the idea that economic globalization is the result of a world-wide improvement of financial terms. On the other hand, critics of this tendency suggest that it leads to increased poverty, monopoly, imperialism, and the lack of control.
This paper will explore extended arguments provided by followers and opponents of economic globalization. To ensure an in-depth analysis of this social phenomenon, this research refers to statistics discussing main indicators of poverty. In addition, it will apply relevant views of famous scholars and their teachings. Besides, the survey aims to link all observed aspects of globalization, attempting to display their positive or negative relationship.
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Estimating the process of economic globalization, it is important to view it as a part of the global process. For example, other components of globalization, as well as its political and cultural aspects sharpen today’s economic tendencies to a great extent. A positive sample of economic globalization is the “fast growing industrializing economies of Asia are well connected to global markets for goods and capital” (Taylor, 2006). Acknowledging this peculiarity, one should also understand that economic globalization can hardly be possible without political and cultural globalizations.
These tendencies are complimentary and interdependent. Consequently, exploring the role of economic globalization and its potential outcomes, it is appropriate to perceive these processes in unity. For example, obviously world-wide penetration of the Asian market would not have been possible without relevant international government policy. Besides, penetration of the Oriental culture is a modern phenomenon that tends to expand. Economic globalization is considered to be beneficial since it involves different distant countries into global interaction. As a result, states that maintain friendly attitude towards globalization can enjoy advantages of world-wide support and cooperation.
The history of economic globalization suggests that contemporary world endures at least the second, if not the third wave of globalization. This insight presumes two important ideas. Firstly, the process of interpenetration that today’s society has to face is not as new as it seems to be at the first sight. This thought is supposed to lessen the contemporaries’ burden of being pioneers of globalization. Secondly, it presumes that the humanity lives in accordance with certain laws that affect the life of every individual as well as life of entire nations, encouraging them to interact. In economic terms, this interaction implies the world trade.
A researcher Alan M. Taylor surveyed this process and concluded that the economic process followed somewhat arbitrary patterns. In particular, “circa 1870, the ratio of world trade to GDP stood at 10 percent, rising to 21 percent by 1914, falling to 9 percent by 1938” (Taylor, 2006). Thereafter, it grew up to 27 percent as the indicators of the 1992 display. This U-shaped pattern characterizes the first wave of economic globalization. Undoubtedly, it is important to detect the reason that triggered such rapid growth of the word trade in the second part of the 20th century.
To comprehend consistent patterns of globalization, Taylor advises referring to two economic models, in particular the Heckscher-Ohlin model and the gravity model. The first one suggests that a state’s course to develop international trade is defined through domestic positive changes that lead to deposition of a greater amount of national endowments. Simply put, country’s achievements in industrial, cultural, and other fields provide new possibilities for international interaction, including trade. Similarly, the gravity model reveals that states “export differentiated products in proportion to their own country size and subject to distance-related transport costs” (Taylor, 2006).
Employing these theoretical models to assess the global economical process of the last century, one can deduce that the state’s assets (all types of tangible and intangible property) define the country’s actual capacity to participate in the world trade. Consequently, it means that every country affects globalization either by fastening or inhibiting a world-wide economic interaction. At the same time, state’s capacity to conduct international trades greatly depends on foreign political and cultural impacts. These rationales can be proved using the following examples. The Heckscher-Ohlin model presumes that the ratio of world trade decreased because of the Second World War, which destroyed a great amount of natural, industrial, intellectual, and other assets of the most powerful countries of that time. Therefore, temporarily they were not interested and could not afford to participate in the world trade.
As for the gravity model, it also reflects the picture of the decreased world trade during WW II and the post-war times because many countries were ruined and the amount of the available workforce was significantly lowered. That is why, economical volume and meaning of most post-war states were decreased; it inhibited the world trade. Consequently, the process of economic globalization was delayed.
The above-described interdependence between the growth of global trade, as well as between country’s assets and its role in the economic globalization is a critically important idea of this research. Specifically, it implies that the process of globalization is based on the ever-increasing financial prosperity of its participants. This insight suggests that economic globalization is positively related with poverty elimination, but, what is even more important; it means that economic globalization precedes eradication of poverty.
In these terms, one can deduce that economic globalization is an inevitable process as long as there are states that orient their domestic and international policy on the incensement of their own power and value. Naturally, this process is often addressed with certain objections. The most important one implies that globalization tends to limit the state’s ability to make decisions independently. As a result, one may assure that while making important strategic decisions countries are pressed from the outside. It suggests development and strengthening of global supervision or, in other words, imperialism. More likely, such threat exists, but it does not necessarily lead to increased poverty. Besides, taking into account rapid technological growth, as well as unevenly situated deposits of mineral resources, it is appropriate to conclude that there always would be leading states with the biggest amount of assets.
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In addition, acknowledging the fact that economic globalization is closely related with political and cultural globalization, it is hardly possible for a government of a particular state to avoid being involved into this process. Nevertheless, the state may decide to elaborate steps that are aimed at inhibiting the process of globalization; however, today’s tools and mechanisms of global interaction are sophisticated enough to nullify such efforts. Moreover, under these circumstances it is more appropriate to work on enhancement of own power, developing and depositing the assets and constructing friendly interaction with international states. In a word, given inevitability of globalization, it is recommended to develop characteristics, which would assure an easy and more natural transition into the reality of the globalized humanity.
Impact of globalization for today’s society
To comprehend the today’s level of globalization and its impact, one should refer to main methodologies. The first method presumes the use of the Gini coefficient, which “calculates the extent to which the distribution of income deviates from a perfectly equal distribution” (The Conference Board of Canada, 2014). The Gini coefficient is noticed to consistently decrease starting from 1962. It means that general inequity has been reducing ever since. Nonetheless, researchers emphasize that such statistics is obtained because of the rapid economic growth in the two biggest Asian countries, India and China. Given that together these states comprise more than a third part of all population, the decline of the Gini index is greatly predetermined by their prosperity. Estimating development of other states, it is possible to observe quite the opposite results.
Specifically, “if China and India are removed from the calculation, the population-weighted Gini index trends upward after 1982” (The Conference Board of Canada, 2014). Simply put, the Gini coefficient displays that meanwhile such Asian countries as China and India tend to reduce the gap of inequity, other countries continue to experience polarization of incomes. Scrutinizing this information, one may deduce that the overall picture of unequally distributed earnings seems to improve. In these terms, it is possible to presume that globalization implies imperialism, whereas certain countries are more prosperous than others. What is more, starting from 2000 the income gap between highly developed and developing countries has been following a tendency to lessen (The Conference Board of Canada, 2014). This particularity can be viewed as an outcome of economic globalization. It is generally positive since it points to the fact that a great number of individuals can enjoy more equal opportunities for personal and professional growth and development.
Gross Domestic Product (GDP) is implemented to measure value of production. In particular, 2009 gross national income was more than $12,000 for rich countries, about $4,000 for upper-middle income countries; from $1,000 to $3,000 for lower-middle income states, and $1,000 or less for poor states (The Conference Board of Canada, 2014). This statistics displays positive domestic growth for all states; however, the difference in GDP remains significant. The gap is especially noticeable while comparing gross domestic product of rich countries with the one of upper-middle income states. This sample accentuates the ongoing growth of financial polarization.
Purchasing Power Parity
What is more, Purchasing Power Parity (PPP) is another means to measure the level of globalization. It “estimates produced an apparently lower level of inequality since the market or administered exchange rates of poor countries tend to be far below the exchange rates which would equalize purchasing power” (Sutcliffe, 2004, p. 3). Therefore, in contrast to the exchange rate, Purchasing Power Parity reveals a general decline of inequality starting from 1980.
Interesting findings are depicted by a scientist Bob Sutcliffe who suggests that the enhancing financial gap is not directly linked with economic globalization. Thus, “a continuous increase in inequality from 1820 to 1980, seemingly not affected by fluctuations in the degree of globalization” (Sutcliffe, 2004, p. 20). This supposition has a critical meaning because it contradicts the claim that economic globalization is defined by positive qualitative changes in different states. Simultaneously, it conflicts with the premise that globalization is a means of imperialism since fluctuations relating to its intensification, which have been discussed above, do not affect a constantly growing level of global inequity.
Economic globalization tends to unite people from different states even if those are the distant ones. Nevertheless, the issue of social inequality and poverty remains highly topical in the contemporary world. In particular, apart from low incomes, the sociologist links poverty with the notion of “social exclusion”. Referring to the term “social exclusion” while estimating the level of globalization is rather significant. These processes occur simultaneously even though at the first sight it is illogical to presume that exclusion and globalization cab be related.
Moreover, poverty may be classified into absolute and relative poverty. For instance, absolute poverty presumes observation of all states with the purpose to define the amount of citizens in each county who are doomed to live “less than $X per day” (Palmer, n.d.). This ‘X’ reveals the minimum amount of money required for satisfying mere vital needs. Nevertheless, there are countries, for example, the United Kingdom, where nobody lives on this minimum. Under such conditions, it becomes impossible to measure a concrete level of absolute poverty; therefore, researchers use the term ‘the relative poverty’ (Palmer, n.d.). This term is used to identify minimal income inside a particular community or state. For example, if global absolute poverty can be marked with $1 per person per day, while the poorest British citizens are known to spend $3, they are relatively poor in their domestic state, but are not absolutely poor in the global meaning.
As it can be seen, the notion of poverty is rather relative, as well as the notion of ‘social exclusion’. It goes without saying that this relativism complicates estimation of economic globalization since it constantly implies ambiguity. Nevertheless, it is clear that positive outcomes of economic globalization presume the necessity to consistently enhance the threshold of relative poverty.
Endeavoring to emphasize the multifaceted nature of globalization, it is appropriate to define all aspects of this phenomenon. First and foremost, speaking about inequality, one should define its categories (Sutcliffe, 2005). For example, people may currently have different incomes or differ in terms of their general wealth, life conditions, health conditions, and expected longevity. As a rule, the above-stated matters are closely related and, thus, are often attributed to the same group, being marked as ‘prosperity’. Nevertheless, the difference between them is clearly visible.
Besides, it is relevant to question whether or not all of these characteristics should be included into a demographic survey. Finally, equity and value of these aspects are also debatable. What makes things even harder is the dilemma as to between whom the ratio of inequity should be measured. Hence, there is inequality among “the countries of the world, men and women, capitalists and workers, different ethnic groups, rural and urban dwellers, the healthy and the sick, the old and the young” (Sutcliffe, 2005).
In addition, there are numerous technical issues that must be addressed before starting to examine the level and disposal of poverty. These are the need to compare earnings in different currencies, as well as a necessity to obtain relevant data and choose the most appropriate measures. Naturally, the above-stated samples display that notions of poverty, financial polarization, and economic globalization consist of numerous variables. What is more, they are multifaceted and, thus, often tend to generate ambiguous outcomes.
Studying processes of economic globalization, it is necessary to explore the work of such financial organizations as the IMF, World Bank, and the WHO. The International Monetary Fund (IMF) is an international organization that assembles 188 states working together to assure “the stability of the international monetary and financial system” (The International Monetary Fund, 2014). The IMF was established in 1945. Nowadays, this organization functions to facilitate world trade, guard exchange stability, and help states to solve payments issues.
Meanwhile, the World Trade Organization (WHO) is the international financial organization, which was founded in 1995; it includes 159 countries and comprises all main trading economies. Specifically, it helps to organize and maintain a smooth flow of the international trade. Moreover, the WHO “provides countries with a constructive and fair outlet for dealing with disputes over trade issues” (The International Monetary Fund, 2014). Both organizations are known to be complementary since, basically, they share similar goals. Cooperation between the IMF and the WHO is a vivid sample of economic globalization because they are launched to maintain the global financial order.
A similar example is the World Bank, which is known to be launched by the “Group of 7”, in particular, the United States, the United Kingdom, Japan, Germany, Italy, France, and Canada. The World Bank imposes “economic austerity policies in the countries of the so-called “Third World” or “global South” (Global Exchange, n.d.). States that collect immense international debts spoil their reputation and ‘credit history’. Therefore, these countries cannot get credits anywhere aside such financial organizations. Consequently, the Word Bank may force borrowers to meet any terms. In fact, as a rule countries fail to get out of debts, applying to resorting loans proposed by international financial institutes. Duties of the above-mentioned financial organizations display their function to organize and maintain a world-wide control. Assessing performance of the WHO, the IMF, and the World Bank, it is possible to deduce that they help to fasten economic globalization. Therefore, they can be considered as the most important players responsible for the level of poverty and disposition of inequity.
Another approach of the economic globalization is the idea to establish free international trade. Naturally, this suggestion is being greatly argued since it may cause both positive and negative outcomes (“History and Debate of Free Trade,” n.d.). Free trade is a type of trade when laws and conditions imposed by the government are absent. Without doubt, this strategy is greatly beneficial for traders as well as for their clients since limitation of state’s requirements results in providing more affordable commodities and services. Besides, free trade makes a particular market more open and friendly towards foreign traders. Undoubtedly, this policy attracts more companies that desire to conquer the market, which enhances the level of completion. Adherents of the free trade approach state that competition is highly advantageous for the community. In particular, rivalry motivates businesses to enhance quality of their products; it presumes ever-lasting education and improvement of professional and personal skills of the workforce. Therefore, free trade is generally beneficial for all participants.
At the same time, opponents of free trade emphasize that “many outsourced jobs are a result of fair trade practices; regulating trade could keep companies from finding cheaper labor overseas” (“History and Debate of Free Trade,” n.d.). Critics of free trade point to a current situation in the United States where the level of unemployment continues to grow as a result of immense competition and outsources jobs. What is more, opponents of free trade assume that given unbeneficial situation enhances the level of social distress, making the American society even tougher to live in. Finally, these negative outcomes may prevent people from investing into the U.S. economy. Considering the above-stated pros and cons of the free trade approach, it is appropriate to conclude that relevance of its implementation has a negative side; however, pro arguments seem to be stronger. Besides, free trade is a powerful mechanism that facilitates the process of economic globalization.
Linking the contemporary situation to economic theories, one should refer to the notion of capitalism, which was thoroughly discussed by Marx and Engels. Specifically, in their literature work Communist Manifesto, Marx and Engels surveyed that “Who must sell themselves piecemeal, are a commodity, like every other article of commerce, and are consequently exposed to all the vicissitudes of competition, to all the fluctuations of the market” (Lorimer, 2000). The given description strongly resonates with the notion of globalization and its mechanisms and manifestations. The described example resembles the current unemployment issue in the United States. Moreover, it underlies that the necessity to compete was strengthened as a result of setting free trade.
Moreover, according to Marx, people are driven to obtain and acquire as much capital as possible. Thus, this itch is the engine of economic globalization since the urge to collect material goods forces individuals to expand their habitats. Consequently, people will continue to attempt to erase political, cultural, and national borders in order to gain more capital. This Marx’s claim is relevant and topical in the contemporary society. Simply put, it is appropriate to state that economic globalization is a result of the people’s endeavor to satisfy their material needs. According to Marx, this approach is quite unbeneficial and even dangerous because it can strengthen global financial inequity.
Moreover, evaluating contemporary economic globalization from the perspective of imperialism, one should refer to views of a great politic and scholar Lenin. In particular, at the beginning of the 20th century, he argued:
At the end of the 19th and the beginning of the 20th centuries, commodity exchange had created such an internationalisation of economic relations, and such an internationalisation of capital, accompanied by such a vast increase in large-scale production, that free competition began to be replaced by monopoly. (Lorimer, 2000)
Comparing Lenin’s claim with ways how globalization manifests itself today, it is possible to conclude that his supposition was correct to a great extent. Both schools of thought, capitalism and imperialism, resonate with processes of financial polarization, poverty, and political, cultural, and economic penetration. This idea is another proof of the dubious nature of economic globalization.
Today’s society is characterized by ‘neo-liberalism’, while capitalism is being shaped with the fear of socialism (Lorimer, 2000). Scholars argue that economical interpenetration has been inevitable. It is believed that the current second wave of globalization was provoked “during the 1980s by a combination of the IT “revolution” and “globalization” of production and marketing of goods and services by transnational companies (Lorimer, 2000). What is more, transnational companies are considered to be integrated into “borderless (at least for capital) world-wide market in which all nation-states have lost their ability to regulate their economies” (Lorimer, 2000). These examples of the neo-liberalism epoch reveal concerns and anxiety, which are begot by the impossibility to assert unequivocally whether the phenomenon of economic globalization is advantageous or unbeneficial.
Summing up the above-mentioned, it is important to acknowledge that the notion of globalization is an important part of the today’s reality. Types of globalization (political, economic, and cultural) are interdependent. These components of global processes are employed by numerous multinational corporations as an endeavor to obtain capital. Referring to the concepts of capitalism, imperialism, and neo-liberalism, one can acknowledge their meaning and significance in the modern globalized world. Furthermore, economic globalization is known to be positively linked with the notion of poverty. Scholars distinguish two types of poverty: absolute and relative. Considering that relative poverty actually affects lives of poor people, it is relative poverty that has to be addressed on a state level of every country with the purpose of increasing the poverty threshold. To a great extent, the level of poverty is being controlled by financial institutes such as the WHO, the IMF, and the World Bank. In addition, implementation of the free trade strategy is reported to be the source of further financial polarization of the humanity. The level of poverty is typically measured using the Gino’s index or by means of exploring the PPP values and the domestic exchange rate. The above-stated measurements demonstrate different results: whereas the GDP displays the ever-increasing level of poverty, the Purchasing Power Parity depicts an overall decline of this social issue. The process of globalization is multifaceted and ambiguous. Therefore, it is hardly possible to predict and anticipate plausible outcomes of economic globalization.