Globalisation does not help poor countries

The world is getting smaller. Yes, you heard it right. The world is getting smaller. Impossible? The world is becoming a “global village” through a process known as globalization. Globalisation is, in the words of Milton Friedman, “an overarching international system” that integrates the world socially, politically, economically, culturally and financially. Globalization impacts everyone, and I will be exploring the effects of globalization on developing countries. I believe that developing countries are not deriving the full benefits of globalization. This is mainly due to three factors, namely, the exploitation of workers, the unequal distribution of income and the unfairness of trade rules that especially disadvantage impoverished countries.

One major reason why poor countries are not benefiting as much as they should from globalization is because their workers are being exploited by Multi-National Corporations (MNCs). The availability of cheap labour attracts MNCs to the impoverished countries , where they hope to reduce their costs of production. A considerable number of workers are stripped of their fundamental human rights in the factories where they work. The factories, in attempt to meet the demands set out by the corporations, which almost border on the unreasonable, force the workers to work for long hours in inhuman conditions. For example, international sports manufacturer Nike admitted that 25% of the workers in its factories were paid below the minimum legal requirement. It also said that, after conducting an undercover investigation, it found evidence of verbal and physical abuse and intolerable conditions. Between 25% and 50% of its workers were punished because they refused to work overtime with little or no pay.

It would be unjust to say that globalization does not provide any benefits for developing countries. Developing countries have been able to significantly reduce the poverty rates because of direct foreign investment. When MNCs enter foreign labour markets, they provide members of the local communities with job opportunities. The income that the workers earn through working for these corporations lifts them and their families out of abject poverty, stopping the vicious circle of illiteracy and unemployment. For example, the poverty rates in China have fallen drastically from 64% in the late 1970s when China first embarked on its economic reform, to just under 10% today. India, although not as significant, has also experienced a drop in poverty rates. In 1981, when it was about to adopt an outward oriented economic approach, 60% of its people were living under the poverty line. This figure dropped to 42% in 2005.

Globalisation widens the chasm between the rich and the poor. Although poor countries have seen a reduction of poverty, as mentioned above, when compared to the other countries, they have not made much progress. In absolute terms developing countries have seen growth and advancement, but in relative terms, their growth has been sluggish. The rich countries have been accumulating wealth at an unprecedented rate, while the poor countries are still languishing in their wake. According to the UNDP 1999 Development Report, the ratio of income between the rich countries and the poor countries has increased from 30 to 1 in 1960 to 82 to 1 in 1995. Also, 20% of the world’s richest people account for about 82% of the total GDP, while the poorest 20% account for a measly 1%. Although there has been a phenomenal increase in the total amount of wealth accumulated, it is not evenly distributed, with the rich countries earning disproportionately more than their poorer counterparts.

Another barrier to the economic development of the poor nations is the unfairness that they face in the international trade arena. Rich nations such as the United States, United Kingdom and Japan impose extremely high tariffs on the exports of developing countries, making them substantially more expensive, which turns off most customers. These protectionist practices make it virtually impossible for the developing countries to earn income on their exports, making economic advancement seem like a distant, unattainable dream. For example, American taxes on goods imported from Bangladesh, Cambodia and Mongolia stood at 14%, 15.8% and 16.1% respectively, while taxes on goods imported from Norway and France stood at 0.5% and 1.1% respectively. Secondly, rich countries manage to discourage most of their citizens from buying the agricultural products exported by the developing nations by giving subsidies to their own farmers. The farmers of the rich countries are then able to sell their goods at a lower price than their counterparts from the poor countries who are not fortunate enough to receive subsidies. International organizations such as the International Monetary Fund, the World Bank and especially the World Trade Organization turn a blind eye towards such discriminatory and protectionist practices because they are dominated by the very countries that implement such policies.

Poor countries are unable to derive all the possible benefits because of the exploitation, discrimination and inequality that they face. Just like fire, globalization is neither good nor bad in itself. If we are able to harness it and take advantage of it while mitigating the negative aspects of it, it might just be the best thing that has ever happened to humanity.