Economic Liberalisation And Global Poverty And Inequality

Discussions on globalisation, particularly its economic aspect and the latter's impact on inequality and poverty are abundant and ignited. The meaning and implications of this association are complex, let alone contested. I argue that the current form of economic globalisation viz. neo-liberal in nature has deepened poverty and inequality worldwide, both within as well as between nations. For the purpose of this answer I will first extrapolate upon and analyze the conceptual components of 'globalisation' and 'poverty' & 'inequality', separate from one another. Then I will address the debates concerning the impact of globalisation on patterns of global poverty and inequality, debunking the neo-liberal argument of a positive link between them, and make my case for a negative link between globalisation and patterns of poverty & inequality. Finally I will advance some possible (but arguably politically difficult to realize in the current framework) solutions to address the issue of increasing poverty and inequality. Discourses on globalisation itself are heavily contested among scholars.

According to David Held et al "in its simplest sense globalisation refers to the widening, deepening and speeding up of global interconnectedness." On economic globalisation, Friedman elaborates how the combination of free trade agreements, the Internet, and the integration of financial markets have been diminishing national borders, and resulting in the creation of a united, lucrative but a tremendously brutal marketplace. It is significant to keep in mind that even the economic aspect of globalisation almost definitely has political consequences - affecting the position of nations as well as the lives and livelihood (whether positively or negatively) of people residing in them.

Poverty is most commonly defined as a per capita income of less than $1 or $2 a day. However, for the purpose of my argument it is significant to take into account the non-monetary dimensions of poverty (which includes inequality) in order to be truly comprehensive in assessing the impact of liberal globalisation on patterns of inequality and poverty in the world.According to Paul Spicker, poverty can be defined as the lack of basic needs and security, exclusion, inequality, dependency, serious deprivation and the lack of entitlement, possibilities, and dignity. Nandy and Arie interestingly point out how countries of Africa, Asia and Latin America were always poor but not poor in the sense of lacking entitlement, as is the case now with the acceleration of globalisation and the assault of 'development' on traditional communities. Overall poverty can be defined as a lack of basic human capabilities for the purpose of this essay. However, as Sen and Spicker point out the two concepts (of poverty and inequality) are not identical. For instance, the rich countries continue to grow with a resultant inequality with poor ones, but at the same time the poor countries might still have increased absolute wealth. Hence, there can occur less poverty (if defined on narrow terms) but more inequality simultaneously as a result of globalisation.

Neo-liberal assessments indicate a positive link between economic globalisation and poverty and inequality i.e. the reduction (or constancy) of inequality and poverty in the developing countries and between nations, since liberal globalisation (1990's). Economic globalisation is looked upon at 'mutually beneficial' for both the South and North. This approach argues that world income inequality and extreme poverty have actually fallen for the first time since 1975. According to Dollar and Kraay, higher growth rates have contributed to higher earnings of the poor, even with rising inequality.(Vietnam has seen an increase in per capita income and no change in inequality) Thus international financial institutions and the WTO have been stressing deeper integration as the only solution to accelerate growth and reduce poverty in developing countries.

My argument is absolutely contrary to and in vehement opposition to this - globalisation and the current manifestation of its economic dimension in reality has deepened inequality (both within nations as well as between nations) and poverty. While world GDP has grown 2% faster than population growth (over 20 years) when measuring poverty according to the World Bank's International Poverty Line, it is evident how small a share of the world income goes to those living on less than $1 per day.

According to Bank's World Development Indicators 2001, of the world's 6 billion people 1.2 billion live on less than $1 a day, the same number in 1987 and 1998,indicating that globalisation has not increased global poverty. However, Wade provides evidence in his work that the World Bank's figures contain a large margin of error because poverty headcount is sensitive to the precise level of international poverty lines and to the reliability of household surveys of income and expenditure. Moreover, China and India, the two most important countries for the overall trend, have PPP-adjusted income figures that are not completely reliable. The PPP exchange rate for China is based on guestimates from small, ad hoc price surveys in a few cities and the Indian one are extrapolations from 1985 qualified by later ad hoc price surveys. This obviously compromises the results. Also, the often-cited comparison between 1980 and 1998 of extreme poverty reducing from 1.4 billion in 1980 to 1.2 billion in 1998 is incorrect because the World Bank introduced a new methodology in the late 1990s which according to Wade make the figures non-comparable. The Bank's estimates result in a 'downward bias' greatly underestimating the number of people living in extreme poverty. Moreover, it is not enough to just measure poverty on such a narrow basis of extreme poverty, and thus a comprehensive dimension of the same as the 'lack of basic human capabilities' suggest that the link between economic globalisation and poverty is indeed a negative one indicating a decline in proportion of people living in poverty but an increase in absolute poverty. There is no single best measure of world income inequality. However, with liberal globalisation world income distribution has become rapidly more unequal, when incomes are measured at market exchange rates and expressed in US dollars. Several serious studies find that world PPP-income inequality has increased within the last two to three decades, both between and within nations The top 10% is comprised almost entirely of people living in the core countries of North America, Western Europe, and Japan, where incomes have grown over the past 20-30 years, while a large chunk of the bottom 10% is comprised of African countries where incomes have stagnated or fallen. Wade advocates that income inequality within countries was stable or declining from the early 1960s to 1980-1982 and then with the acceleration of globalisation sharply and continuously increased and has been increasing till present.

There are also reasoned speculations about China's growth rates and income level being overstated along with increasing inequality within both China and India offsetting the reduction in world income inequality that comes from their relatively fast growth of average income. There has been increasing inequality in the United States as well income distribution in it being the most unequal compared to other European countries.

Another point to counter the neo liberal argument would be the instance of transnational corporations in developing countries and their impact on local communities. Additional wealth does flow into these communities, however not without inequalities. Labour conditions, rights and wages are abominable, especially in Special Economic Zones. Klein points to a 1998 survey of Special Economic Zones in China which revealed wages of workers in manufacturing for Ralph Lauren, Adidas and Nike being as little as 13 cents per hour. To take the instance of India, the adoption of these very policies (through structural adjustment programs since 1990's) have in fact worsened inequality and poverty. Pastoral lands have been diverted for industry to grow bio-fuel depriving millions of land and consequent livelihood and monopolization of agriculture by a few agribusinesses has increased farmer suicides. These issues are not related to national policies alone, but directly related to adoption of liberal globalisation and influence of TNCs over national trade policies. In short, globalisation worsens global poverty, as developing countries compete against each other in a "race to the bottom", lowering wages and basic human needs. This process also benefits elites and traders in developing countries who collaborate with TNCS resulting in growing income disparities within the particular developing country. ?Even migration of cheap labour to developed nations results in greater inequality due to low wages.

However, my argument is not so much a case against 'globalisation' as it is against its particular current version. Globalisation in itself has tremendous potential to be harnessed for good. According to Amartya Sen the real question is how to make right use of the benefits of economic globalisation with regards to the interests of the deprived. There have been initiatives taken by the IMF and World Bank like Highly-Indebted Poor Countries (HIPC) initiative and the Poverty Reduction and Growth Facility. However, these continue to work within the neo-liberal framework without addressing core issues of inequity and redistribution. Genuine land reforms as well as structural changes to eliminate inequitable power relations within and between countries as poverty reduction strategies through global and national cooperation must be brought to the forefront. Moreover, the poor must also be a part of this deliberative process of formulation of strategies. It is thus exigent to deliberate upon ways to restructure the global capitalist economy so as to serve that purpose fruitfully and with value in order to establish a truly positive link between economic globalisation and poverty and inequality.