How Trade and Globalization Can Help the Poor in Both Developed and Developing Countries - Case Study Example

EFFECTS OF TRADE AND GLOBALIZATION TO THE POOR By Student’s name Code+ course name Professor’s name University name City, State Date Introduction Poverty is a major concern in the world as the population continues to increase significantly since the industrial age. Human beings will continue to increase due to improved health care and access to basic amenities. The UN project that the population will reach almost ten billion by the year 2050. Significant population increase will be concentrated in both developed and developing countries. According to the World Bank, majority of people in the world are poor and lives below one dollar per day. Poverty conditions limit an individual from accessing basic needs. Extreme cases of poverty may result to death in adults and increase in mortality rates among the children. In 2000, the UN initiated the Millennium Development Goals (MDG’s) during the Millennium Summit. The UN developed a set of eight goals addressing specific issues. The first goal addressed poverty and hunger in the world. This goal aims at reducing poverty levels by half, by the year 2015. Trade liberalization and globalization are some of the strategies being advocated by the UN to achieve its objective. Trade Liberalization Trade liberalization is reduction or elimination of trade barriers between countries. It is commonly known as free trade. Trade barriers could be in the form of tariffs, quotas and other non-tariff barriers. Tariffs are measures taken by a government aimed at raising the prices of goods entering a country. While quotas are set rules and conditions for controlling the physical quantity of goods entering the county. The non-tariff barriers are policies that make it difficult to sell goods in another country. These trade strategies are aimed at protecting the local businesses from competition from foreign companies. A reduction in tariff alters consumption patterns in the tariff-reducing country so that more imports are bought (Whalley 1985). Protectionism is adopted to close doors to the external competitors. This protectionism, however, is seen as a contributor to poverty and under development. Globalization Globalization integrations world economies through elimination of barriers on trade, while strengthening communication and interaction between states. Movement of goods and labor in globalized economies is easier compared to the protectionist economy. Globalization brings nations closer together and hence the world appears like a global village. Improved methods of information dissemination such as the use of the internet contribute positively in globalization to speed. Culture and ideas are exchanged without many limitations experienced earlier before globalization. That results to cohesion and understanding among nations. An integrated economy offer many opportunities for economic growth. Effects of Trade and Globalization to the Poor Liberalization of trade and globalization has both positive and negative impacts to those countries that adopt them. Globalization may affect growth of a country in different ways depending on government policies. Better policies are developed to address poverty in general due to globalization. The member states, therefore, do not operate in isolation but cooperate with other countries. Employment opportunities Studies indicate that economic globalization stimulates economic growth reduces poverty and generates employment opportunities. Globalization has changed the role of the state in economic development and the creation of employment (Cohn 2012). Trade Liberalization and globalization play a significant role in poverty eradication through job creation. Lack of a source of income is a major contributor to poverty. Lack of employment opportunities occurs when a country’s economy cannot absorb existing human labor. Due to lack of enough businesses in the country, extra workforce can no longer be accommodated. Protectionist economies cannot expand their businesses due to financial limitations. However, open policies may encourage foreign investors into the countries and create more businesses. This will eventually create employment to the local people. Income from those job opportunities improves the living standard of the poor. However, there is a serious disagreement as to the effects of trade liberalization on the degree of wage inequality (Auer 2006). Reduction in rural to urban migration Rural-urban migration is common in both developed and developing countries. This form of migration is attributed by the fact that many businesses are concentrated in the urban centers. An important factor in internal migration is the inequality of rural- urban development (Laruelle 2013). The poor who reside in the rural areas migrate to towns in search of work opportunities. They end up without jobs and reside in poorly planned settlements in urban centers. Development of the slums results to negative effects to the environment. Pollution becomes prevalent and crime rates increase. The slum dwellers live in deplorable conditions that make them prone to ill health and therefore unproductive. Globalization makes it possible for international businesses to establish a base in rural areas. Such multinational companies provide jobs to the rural poor. The poor are able to meet their basic needs from income earned from employment. There is also skill transfer to the poor who work in the industries. They learn basic trade skills at work and that eventually empowers them in the long run. Improved health care The poor are commonly affected by diseases that are preventable and curable. These diseases reduce life expectancy for the poor. Globalization enhances health care since industrialization brings along with its social amenities (Helpman 2011). The global health is attracting considerable attention (Lee 2005). When companies are set up, amenities like clinics and hospitals are also built to address the health concern of the workers. Some of these organizations are philanthropic and exercise social responsibility to the society in general. The poor have limited resources to attend hospitals or seek medical care. When medical facilities are made available by the international corporations, the poor are bound to get help on health issues. Mortality rate of the children is also improved through access to medical care. Some countries have best hospital facilities and offer services at subsidized costs. The poor can access such hospitals even in foreign countries at very low rates. If the UN goals are achieved, they will create better living conditions of the poorest people who are most affected by hazardous living conditions (Kawachi 2007). Reduction of hunger Prior to the nineteenth century, nations were faced with recurring food shortages due to highly protectionist food policies by governments (Vaidya 2006). Hunger and malnutrition are major killers to both adults and children. The poor are the most affected by lack of food since they do not have financial capability to buy food. Lack of food is caused by either natural or manmade factors. Poor agricultural techniques and practices can result to poor yields. Globalization brings about innovations and agricultural techniques which improve food sustainability. The countries that have higher food production capacity can export the extra produce freely to hunger stricken countries without restrictions. In most cases, such exports are usually subsided by the government. That makes food prices affordable to the poor since subsidies cushion taxes by the government. Some countries have favorable weather thought the year that makes them ideal agricultural countries. Others have hostile climatic conditions and agricultural activities cannot be carried out. Countries under such climatic condition experience low food production capacity which results to unaffordable food prices by the poor. Other countries use highly mechanized techniques in farming. Such technologies can be exported to countries with inferior techniques. Technology transfer can only happen when there are trade agreements in place. Improved communication network and infrastructure Globalization improves the means of communication and transportation. The world’s poor are usually concentrated in the most remote regions of the country. For instance, the poor people who live in Sub Saharan Africa travel long distances on foot. Communication is a great challenge since there is no proper infrastructure in place. People require moving from one place to the other in order to carry out various undertakings. Infrastructure such as roads and rail are important for distribution of goods. Without the movement of people and goods, economic prosperity is difficult to be achieved. Globalization normally attracts investors to other countries for financial ventures which include infrastructural investments. The poor can, therefore, engage in small trades due to mobility. Goods and services can also reach the poor unlike when such infrastructure is nonexistent. Globalization results to ease of movement from one place to the other or from one country to another. With better information systems, people are able to transact their businesses faster and efficiently. The outcome of that is a significant improvement on the country GDP and creations of more jobs. Conclusion The poor communities can improve their status through liberalization of markets and globalization. Some of the challenges countries are facing could be isolated and also play a role in poverty. Factors such as war and political turmoil are to blame for the proliferation of the poor. When countries open up and welcome new ideas from other countries, such challenges can be overcome. Some nations may overlook the essence of free markets. They may have a perception that globalization and free markets cause unhealthy competition (Speth 2003). Developing countries are still asking for a fairer agreement, one that gives them relatively more compared to developed economies (Ekins 2009). Resistance to globalization could be a misguided opinion since closed markets experience many growth and expansion challenges. Openness to trade contributes to growth (Berg 2003). Trade liberalization and globalization are the strategies to adopt if UN poverty reduction initiative is to be fulfilled. The UN’s goal is, however, wrought with many challenges since some nations perceive globalization as the new form of colonialism. Other countries fear that foreigners may drive local businesses out of the market. All these misconceptions should be addressed through proper policies in order to attract participation from all countries in the world. Globalization is the new wave of post- industrial future (Drucker 1993). References Auer, P 2006, Off shoring and the Internationalization of Employment: A Challenge for a fair globalization? ILO, Geneva. Berg, A. & Krueger, A 2003, Trade, Growth and Poverty: A Selective Survey. IMF Working Paper, 03/30. Cohn, S 2012, Employment and Development under Globalization: State and Economy in Brazil, Palgrave Macmillan, UK Drucker, P (1993), Post-Capitalist Society, Heinemann, London. Ekins, P & Voituriez, T 2009, Trade, Globalization and Sustainability Impact Assessment: A Critical Look at Methods and Outcomes, Earthscan, London. Helpman, E 2011, Understanding Global Trade, Presidents and Fellows, USA Kawachi, I 2007, Globalization and Health, Oxford University Press, New York. Laruelle, M 2013, Migration and Social Upheaval as the Face of Globalization in Central Asia, Koninklijke BRILL NV, Leiden, The Netherlands. Lee, K. & Collin, J 2005, Global Change and Health, Open University Press, New York Speth, J.G 2003, Worlds Apart: Globalization and the Environment, Island Press, Washington. Vaidya, K 2006, Globalization: Encyclopedia of Trade, Labor, and Politics, Volume1, ABC-CLIO, California. Whalley, J 1985, Trade Liberalization among Major World Trading Areas, Halliday, USA Read More