The paper “ Causes of Poverty, Dangers of Free Trade to Poor Countries, and Ways of Reducing Poverty” is a thrilling variant of the literature review on macro & microeconomics. The problem of poverty and its reduction and/or elimination has been amply researched and written on and remains one of the global issues in the contemporary world. The data collected by World Bank shows that as of 2005 about 1.4 billion people (one of four) – lived below the poverty line of $1.25 a day (Chen & Ravallion, 2008). In the same survey, we see that the number of people living below the poverty line has decreased from 1.9 billion (one of two) in 1981.
Taking into account the intensification of world economic integration of the last 20 years, it would be logical to connect it to a decrease in poverty. For example, Bhagwati (2003) tends to support the claim that trade enhances growth and growth reduces poverty. On the other hand, integration of the world economy is also perceived as malicious, as poor countries would not profit from free trade unless complementary policies are launched (in Harrison, 2007).
This question, therefore, remains a highly disputable one. The purpose of this paper is to explore this question and attempt to present a discussion of the problem presented. Research conducted within this project indicates that genuine free trade is an opportunity to be used. Such an opportunity can present a number of significant benefits as well as a number of substantial threats to poor countries. The overall effect of free trade and globalization on poor counties will vary depending on the government’ s policy. Free tradeThe concept of free trade was first voiced by Adam Smith in his “ Wealth of Nations” , where he maintained that countries could benefit from trading with other countries (Bhagwati, 2003).
In essence, the theory is based on comparative advantage theory. Free trade is understood as free movement of commodities, which is not encouraged, nor restricted with direct government intervention (World Bank, 2004). The concept of free trade fits into a bigger concept of globalization – a cluster of economic changes (including free trade) that are increasing the interconnectedness of the world (Croucher, 2004).
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