Some experts see it as a driving force for economic development. One thing is for sure: Globalization and Money Businesses worldwide are no longer confined to national borders.
While the potential for povertyreduction is great, the extent of it will depend on many factors including, in particular, the pattern of growth followed by the developed and developing countries and the overall global policy framework.
A question that is often raised is whether the actual distribution of gains is fair and whether the poor benefit less than proportionately from globalization—and could under some circumstances actually be hurt by it. The downside of globalization is most vividly epitomized at times of periodical global financial and economic crises.
The costs of the repeated crises associated with economic and financial globalization appear to have been borne overwhelmingly by the developing world, and often disproportionately so by the poor who are the most vulnerable.
On the other hand, benefits from globalization in booming times are not necessarily shared widely and equally in the global community.
The fear that the poor have in some instances been by-passed or actually hurt by globalization was highlighted by recent studies which point towards limited—if not a lack of—convergence among participating national economies and across regions as globalization has proceeded.
In particular, inequality may affect growth and thereby poverty alleviation in the future. However, this progress on poverty reduction was mainly achieved by the substantial reduction of the poor in China million fewer people were poor in China incompared to the estimate in In particular, poverty has increased significantly in Africa in terms of poverty incidence as well as depth of poverty.
These concerns have generated a passionate debate worldwide as well as a powerful anti-globalization movement.
The globalization-poverty relationship is complex and heterogeneous, involving multifaceted channels. It is highly probable that globalization-poverty relationships may be non-linear in many aspects, involving several threshold effects.
It may be futile to attempt to establish theoretically, on an a priori basis, the effects of globalization on poverty as universally observable conditions. Indeed, each sub-set of links embedded in the globalization openness -growth-income distribution-poverty nexus can be contentious and controversial.
These channels include changes in relative factor and good prices, factor movements, the nature of technological change and diffusion, the impact of globalization on volatility and vulnerability, the world-wide flow of information, and global disinflation.
However, the direction of causality between openness and growth is still debated and the positive openness-growth link is neither spontaneously achieved nor universally observable.
The conventional view is to emphasise the growth-enhancing effect of inequality through higher aggregate savings and capital accumulation as well as on the basis of existence of investment indivisibilities and incentive effects.
The contrasting new political economy literature links greater inequality to reduced growth operating through a number of sub-channels, such as: The proponents of this new political economy approach argue that growth patterns yielding more inequality in the income distribution would, in turn, engender lower future growth paths.
This would then also affect the potential for poverty alleviation. Thus, according to this school of thought successful poverty alleviation depends not only on favourable changes in average GDP per capita growth but also on favourable changes in income inequality.
Inequality is an impediment to poverty-reducing growth, as the elasticity of poverty with respect to growth is found to decline with the extent of inequality. Indeed, in a world of interdependent evolution, openness is a necessary but not a sufficient condition for successful development.
All countries have to undergo a structural transformation throughout the process of development. At the outset of the development process a country is predominantly agrarian and the economy is relatively closed. The experience of East Asia has demonstrated that after reaching the take-off point, a careful structural transformation generates a growth process that is pro-poor, whilst taking advantage of the potential benefits of openness.
Other Channels through which Globalization Affects Inequality and Poverty The income distribution effects induced by a shift in relative product prices in the process of opening up of trade are well known as postulated in the SamuelsonStolper theorem of international trade theory.
The losers especially, the poor residing in either urban or rural area may be vulnerable to these induced effects in addition to changes in absolute and relative prices of wage goods. This could be explained by many factors, including: The highly differentiated degree of cross-border factor labour and capital mobility observed today may be identified as another channel of producing winners and losers as a result of globalization.
In particular, the extent of cross-border mobility differs significantly between skilled and unskilled labour. More generally, there are some distinctive features of factor movements: While the mobility of unskilled labour is severely restricted and regulated, de facto labour mobility has taken place through the increasingly free cross-border capital mobility and the ability of Multi-National Corporations MNCs to re-locate production sites in response to changes in relative labour costs.
In fear of driving away MNCs, governments of developing countries are less likely to enact regulations to protect and enhance labour rights. Thus, the differential factor mobility as observed over the recent decades may profoundly affect the functional income distribution between labour and capital.
The process of globalization provides a golden opportunity for mankind to contribute to a major reduction of poverty world-wide.
Hence, technical change tends to be labour-saving, capital-intensive and skill-biased, and would tend to increase inequalities in both developed and developing countries by creating a wider wage-gap.But globalization as such, shall have impact on cultural, political, legal and technological environment hence, globalization shall be defined as a process of integration of societies of all countries in fact, it is a process towards a new economic order, a monotonous world.
Additionally, the long-term effects of globalization provide the poor with better standards of living as they gain more access to improved market goods. When a country opens itself up to the world market, globalization can become a positive mechanism for increasing economic opportunity and unleashing flourishing for the least of these.
With globalization, a company in one country can now sell its products in another country halfway around the world. Furthermore, it can build stores and factories there, invest in .
Globalization despite having benefits to the world, it also has a negative effects of it. INTRODUCTION. Globalization in short, points to the whole effort towards making the world global community as a .
Jun 30, · The debate continues to rage over whether or not global expansion of corporations and the opening of economic markets in developing countries is good for the poorest of the world's nations. 4 positive impacts of globalization on world economy. News; 4 positive impacts of globalization on world economy.
By Andy Rao - May 7, Share on Facebook. Tweet on Twitter. It’s a small world, after all. This saying has never been more true, and if trends continue to develop the way they are, the world may continue to shrink.