Introduction
The modern world has seen the growth and development of different regions in the world over. The difference comes in the rate of the growth. Much as there is a collective responsibility in the regional growth, several individuals seem to be the ones calling the shots and affecting the growth altogether.
The World Bank’s recently released a report that shows that a fourth of the world population lives below the poverty line, with respect to the capability of spending more than $1 a day. The effect of poverty is largely felt in developing countries, as opposed to developed countries. This shows that, despite years of economic and social growth, increased economies, widespread globalisation, increased foreign aid, and increased projects funded by donors, intense poverty has not reduced (Pugel, 2004).
The question that we might easily reflect on is whether globalisation has been of benefit in reducing the economic gap between the rich countries and the (so considered) poor countries.
Economic development is very country-specific, and is dependent on where countries started off and on the nature of trade reform. Oftentimes, when we try to look at the contribution of globalisation to the poor masses, we focus on workers in developing countries: what types of factories they work in, and what wages they earn (Rodrik, 1997). We often find that wages are lower than similar workers would be making in a developed country. But another way of looking at the consequences of globalisation for poor countries is to actually consider how workers in these countries were doing before globalisation and compare that to how they are doing now (Conversi, 2009).
Global technology
Several changes in international changes reflect technology advances. Increased transaction frequency means that countries and companies now must fast adapt to be at par with technology. The investment nature is also affected by technological change. While production was previously limited to rich countries with higher wages, today transfer of technology developing countries is easier and sophisticated production effectively combined with lower wages. Today technology is more easily transferred to developing countries, where sophisticated production can be combined with relatively low wages.
The increasing simplicity with which technology can accompany capital across all borders intimidates to break the links between increased productivity, better technology and high wages.
A study by the World Institute for Development Economics Research at United Nations University reports that the richest 1% of adults alone owned 40% of global assets in the year 2000, and that the richest 10% of adults accounted for 85% of the world total. The bottom half of the world adult population owned barely 1% of global wealth (Pugel, 2004).
Factors that seemingly enhance the divide
Unfavourable terms
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In the graph, the increase in taxa especially in the Tundra lakes at around 10000 BP and at the same time showed that there was decline in cold-water taxa. The trend continued to around 6000 yr BP when Chironomid increased in cold water.
Stringent rules
Poor countries often find it difficult in international trade due to the fact that the rules are biased against them. While three quarters of the world population are from the developing countries, they only get a quarter to a third of the income generated while the rest goes to the quarter in the developed countries. This is barely an equitable distribution but still most of this goes to powerful exporters in Asia and South America.
Policies for the protection for industry and agriculture in industrial countries are intact, while issues of fundamental concern to poor countries- particularly the debt problem and the management of primary commodity markets have been ignored.
Unfavourable tariffs
Goods from the industrial countries enjoy highly reduced tariffs in the Uruguay Round than those from developing countries-45% compared with 20-25%. Altogether, developing countries face tariffs that are 10% higher than the global average, while the poorest countries face tariffs which are 30% higher (Eskeland, Harrison, 2003). This is due to the fact that tariffs still remain high on the all important goods of trade for the developing countries such as leather, textiles and agricultural goods. Increased tariff in the practice of imposition of greater tariffs on processed goods rather than raw goods is another problem faced by developing countries. Therefore, developing countries face volatile commodity markets, with dwindling real prices thus hindering their obvious way of adding value from their exports. For some commodities of particular significance to developing countries tariffs will always to be superior on the final product than on the raw materials.
Non-tariff barrier
Although past agreements have led to reduced tariff barriers, industrial countries have increasingly switched to non-tariff barriers- antidumping measures, "voluntary" export restraints and quotas. That said, the scope for evading the spirit, if not the letter, of the Uruguay Round agreements remains considerable. Antidumping policies restrain exporters from selling below cost to drive competitors in the importing country out of business and then take advantage of their large market shares by imposing higher prices.
Antidumping actions, and their subsequent penalties, are some of the most common forms of protection (Conversi, 2009). Their imposition doubled in between 1988 and 1995, thereby massively affecting exports to industrial countries. Most of the antidumping cases brought up by the European Union which involved the united States and the European Union have applied antidumping measures against a wide range of developing country exports.
Agriculture
With the current special status that the agricultural commodities have in the world trade, the prices of these commodities have been greatly reduced. United States and the European Union dominate these market and thus greatly affect the agriculture markets as they give heavy subsidies to their farmers and this remains a great hindrance to the exporters who find unfair competition (Bello, 1999). This subsidisation in rich countries hits developing countries hard. It also eliminates them from expanding to food markets in the rich countries.
It also exposes producers of domestic food to dumping in the form of cheap food imports, which reduces incentives for food production and in the process undermining self dependence and thus their sources of revenue. Cheap food imports have positive short-term income benefits for food-deficit poor countries. They also help poor households, which spend much of their income on food (Pugel, 2004).
But most of the countries categorised as low-income food-deficit countries cannot sustain food imports. And purchasing food imports may not be the most productive use of one of their scarcest resources which is their foreign exchange as these countries spend half of their foreign exchange on food imports.
Some estimates suggest that if the industrial countries cut their agricultural subsidies and protections to a significant level, the developing countries could make extra income of up to 30billion a year.
Intellectual property rights
Previous policies extended the life of patents and their enforcements and other intellectual property rights-thus adding to cost of technology shift to developing countries. In the early 20th century, the United States adapted and developed European technologies without consideration for patent rights. And after the Second World War, Japan also did the same with United States innovations. These two countries are now imposing stringent policies that will impose stiff charges on developing countries for using their technology. It is well known that in this kind of economy, access to modern technology determines the amount of benefit one gains from globalisation. Truth be said, we are experiencing globalisation but it seems that its outcome seems to be benefiting the more powerful and dynamic countries of the north and in thee process putting at a loss the developing countries (Conversi, 2009).
Economists are now sceptical about the need for adoption of free trade and open markets, and are thus suggesting the gradual phase in the reformation of free markets. This school of knowledge significantly underscores the need to carefully examine the relationship of economic globalisation and adoption of free markets to democratisation and governmental efficiency.
Careful look at globalisation
In the phase of globalisation, more opportunities can be realized for the developing countries. We can find ways in which the economic cake can equally be shared. The mantle perhaps lies with national governments, who perhaps have the powers to steer world markets, and minimise the damage and maximize the benefits and opportunities (Berri, 2004).
Policies for reducing poverty and empowering the poor can become part of a strategy for empowering nations in a globalising world. Following are some potentially effective policy options for such a stratagem.
Careful management of trade and capital flows
National government can be more considerate when adopting policies of liberalisation. A more careful approach to the global market would be to consider the example of most East Asian economies-with some limited, performance-related analysis and for prospectively viable industries. This in turn encourages invention and innovation and ensures that the rights of innovators are safeguarded.
Education and sensitisation of uninformed masses.
Globalisation addresses extra urgency to this. There is little diffusion of new technology which in turn increases the payoff to higher levels of human capital and to more advanced set of skills. Those without the necessary and all important education will be left behind.
Encourage the growth of small and medium enterprises.
Encouragement and support of micro-enterprise, small and medium sized companies is a sure way of ensuring there is growth in a country’s economy, as these companies are more labour-intensive than large firms and will provide the bulk of new jobs for the poor masses for some time. These enterprises are also subcontractors to larger enterprises and connection between the informal and formal sectors, and also not withstanding the fact that these firms increase competitiveness by reducing fixed costs and providing flexibility (Rupert, 2000).
With such modalities having been successfully forged in Japan and its neighbours, its increased adoption in Africa and Latin America could have a similar impact that could contribute to increased economic growth, where these links are much less common. So as to ensure more labour intensive industries do the exportation, small enterprises that can export should be supported in making this leap by awarding them with incentives (Talbot, 1917).
Management of new technology.
Some technologies may be inappropriate in developing countries especially labour saving technologies which require advanced skills that are developed elsewhere. Technological change is always vital thou its effect on poverty eradication is always complicated and poorly understood (Talbot, 1917). Formidable policies for human capital creation and fostering of small enterprises need to be created so as to reap the benefits of maximization of investment in technology.
Increase modalities for poverty reduction and enhancement of equality
It is quite possible that inequality can arise from globalisation as a result of its redistribution of benefits and opportunities. Reduction in poverty levels implies increased earnings and thus increased cash flow which in turn leads to greater economic development. Policies to reduce poverty and moderate income inequality can counter the disruption from globalisation (Pugel, 2004). Therefore, avenues need to be created to capture opportunities for the poor and help them move in new direction.
Marxism favours an ultimate society where allocation is based on an individual's needs rather than capability to produce, inheritance, or other such factors. In such a system inequality would be minimal (Rodrik, 1997).
Marxists believe economic equality is necessary for political freedom—saying that when there is economic inequality then political inequality is assured—in such a society currency would be done away with, the means of production owned in common and non-labour income eliminated. Marxists believe that once the production avenues are owned in common and worked for necessity rather than profit, that all workers be given a voice in a democratic workplace and the money motivation removed, economic equality will be realised (Birdsall, 2002).
Improve governance
Globalisation usually weakens the state's influence-but in several ways it ensures that a state is stronger, to help people reap its benefits and mitigate its costs. Better governance Is very important to any country, not just to ensure the rule or law and protect against international organized crime, but also to maintain and expand social and economic infrastructure. It is easier to seal international deals organized by government that will help a large number of citizen, as opposed to an individual company international contract. It is also evident of the benefits that a government can reap from international trade especially if they seal the deal by themselves, (partly) due to the fact that they control taxation (Rupert, 2000).
Conclusion
Economic freedom and private-property rights are necessary for the promotion of the productive entrepreneurship that leads to increase in the growth of economy. In countries where this institutional environment is lacking, sustained economic development remains indefinable. When countries make market based reforms which enhance their economic environment, growth will inevitably improve.
But greater inequality doesn’t automatically imply greater poverty. The effect of trade on uneducated labourers in these developing countries is dependant in part on where they are employed and how mobile they are across specific sectors (Rodrik, 1997). All workers, both educated and uneducated, in export-oriented sectors tend to benefit. However, workers employed sectors shielded by higher tariffs experienced a drop in relative wages as tariffs were eliminated. These are short-term costs of globalisation, and over time you would hope that these workers would be able to move toward the exporting sectors and share in the benefits of globalisation. The concept of globalisation seems to be accepted the world over and just as the two sides of a coin its setbacks cannot be overplayed as being to be economically disastrous (Rodrik, 1997).
But that is not occurring as fast as we would like because worker mobility in many of these countries is quite constrained. Therefore we should hope that continued encouragement of globalisation the world over would lead to narrowing of divide between the rich and poor countries.
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