Is globalisation leading to greater equality and inclusion or greater poverty, exclusion and inequality? What are the arguments for either side of this debate?

 

 

 

• INTRODUCTION

 

Globalisation is a multidimensional notion that’s why its not include only economic  theory. In the same time its include theories such as ; state theory, international relations theory, peace, democracy, IGOs, NGOs, etc. However,  all globalisation theories are based on economics. Economic globalisation can be definable as ; production, distribution,use of goods and services integration between world economies (Şahin,2012: 125).

 

According to another definition , globalisation is the liberalization efforts of the world trade. Especially in the end of the 1980s and in the early 1990s, globalisation is a widely  used concept in the world. Economically, globalisation have three basic dimension. (Seyidoğlu, 2013: 226):

Trade globalisation  

Trade globalisation’s objective about providing the international trade liberalization. Within the framework of the GATT (General Agreement on Tariffs and Trade), there are some policies for the decrease of tariffs and other trade barries. Technological developments (especially in the communication area), have a huge support for the development of global trade. Also in the end of the 1980s and in the early 1990s, the collapse of Eastern bloc and creation of the unipolar world expedite the globalisation process.

 

Financial globalisation

Financial globalisation is the removing obstacles and restrictions about short and long term capital flows policies with providing the integration between  national and world markets. There has been a huge increase in the capital flow in the world market and the world has turned into single market. Financial globalisation event belongs to post-1980 period. The concept of globalisation has also become widespread, especially with financial globalisation.

 

Globalisation of production

   The globalisation of production means the expansion of cross-border production. Today, an important part of world production performed outside the borders of their own countries by multinational cooperations. In this sense, globalisation is not a new concept. Globalisation of production started after the WWII.

 

• Theoretical Approach to Globalisation

                                 

There are different interpretatitons and  there is no consensus about globalisation, as there is no common definition of globalisation. In this context, there are two opposite thesis about globalisation (Çeken, others, 2008: 81-82)

According to neoliberal approach; Globalisation is a meaning of modernization and development and also it is a process that should not be prevented and avoided. Supporter of this idea believe that, the globalisation process will spread international trade and investments,  and also the globalisation will create a huge opportunities and it will cause world welfare. Therefore, globalisation has benefit in politically, economically and international order for everyone.

 

   Economically: Globalisation is accelerating total world trade and development with using world resources in the most rational and efficient way. In the medium term, globalisation has good effect for everyone even those who are suffering temporary damage because of the radical change.

 

   Politically: Globalisation is accelerating the democratization process. The core values of the West such as democracy and human rights are carried to less developed countries through globalisation. Also developments in the communication sector provide awareness about developments in the world, thereby globalisation will strengthen democracy and  freedom of individual.

 

   In terms of international order:

   International order provide the domination of Western order, which is end of the ideological struggle and the provision of the ‘’New World Order’’.

 

 

   According to Marxist approach; Globalisation is the name of neo-liberalism and imperialism in the early 21st century. For Marxist ideology globalisation has various problems in terms of economic, political and international order.

   Economically: For  the West, globalisation is the concept for maximize market share and expand capitalism in the world. Therefore, income distribution break down, poverty is increasing and various problems such as environmental pollution are emerging in the world.

 

Politically: Globalisation can not bring democracy because Western countries use this concept to intervene in the internal affairs of underdeveloped countries and also weaken these countries for achieving their aims more easily. Developed countries prevent the decisions of underdeveloped countries in the national and international arena with the excuse of globalisation. This is also have negative effect for the independence of underdeveloped countries.

 

 In terms of international order: In fact, main motto of globalisation ‘’New World Order’’ brings disorder together. Increasing conflict in the countries, increasing of terrorism, poverty, hunger, misery and human trafficking are tangible examples of this idea.

 

To put it briefly, globalisation is a fact of today’s world even if we support or against to idea. All countries are facing this reality regardless of their level of development. Globalisation emerges as a process that affects countries in various fields but ‘’Poverty’’ is one of the serious consequence of globalisation.

 

 

Poverty and Global View of Poverty

 

Definition of Poverty

   Poverty is a difficult concept to define because of its multifaceted and complex nature. However, when people have different approach about the poverty fact with different worldviews,  makes it difficult to reach a consensus on the definition of poverty. Marxist ideology see poverty as a consequence of inequality in the distribution of power and wealth because of the structure and functioning of the system. But Liberal ideology see poverty as a pass over opportunities because of the lack of individual quality like education, skills and capacity (Gündoğan, 2008: 43). There are lots of subject about poverty in the literature but only three subjects were discussed in our study.

 

 

Absolute Poverty

   Absolute poverty is inability of  the most basic needs for the households or individuals to maintain the minimum standard of their living.

 

Relative Poverty

This approach defines poverty in terms of the purchasing power to the needs of the individual with comparing to the other individual’s purchasing power in the society. In other words, whether a person is poor or rich, not only depends on how much income he has, but also it depends on the income of other individuals in society.

 

Humanistic Poverty

   For the first time, the concept of humanistic poverty has been put forward by the United Nations Development Programme (UNDP) in the 1997 Human Development Report. humanistic poverty is different from income poverty although it is related to income poverty. While income poverty measures focuses on absolute income, the concept of humanistic poverty can be defined as lack of basic human skills such as literacy, undernutrition, short life span, inadequate parent-child health and catching preventable diseases.

 

 

 

 

Global View of Poverty

In order to assess poverty, we need a criteria for the distinguish poor people from not poor. The traditional approach is based on the creation of a revenue threshold and the calculation of how many individuals, households or family under the this threshold (Townsend and Steven, 2004: 13). The generally accepted method is the World Bank’s method of accepting people who have to maintain their lives with income below $ 1.25 or $ 2 per day which is calculated on the purchasing power parity. According to this, $ 1.25 per day means the hunger limit. This limit only determines the minimum food requirement needed to maintain a person’s life.

The $ 2 level is the lowest level for basic needs, not just for food, but also for heating, dressing, sitting in a dwelling, in short, the minimum level of socialization.

 

The global view of poverty is explained by the tables below which show the different levels of poverty and regional poverty indicators.

 

Table 1 gives different levels of poverty in the world, taking into account the income acquired in dollar terms in one day.

 

 

Table 1: Different Poverty Levels in the World

(Accoring to Purchasing Power Parity in 2005)

 

 

 

 Table 2 contains data on the proportion of the poor in the total population by years and regions.

 

Table 2: Regional Poverty Indicators (%)

(Accoring to Purchasing Power Parity in 2005)

 The above data also show that poverty has reached serious dimensions and poverty is a global problem that needs to be resolved urgently.

 

Globalisation-Poverty Relations

 

IMF, WB and WTO are the main actors of globalisation. The economic policies proposed or imposed by these institutions are described as applications that complement each other and serve the same purpose. Applications are generally shaped in the interests of developed countries thus affecting poverty. I will explain how the WTO, IMF and WB policies affect poverty.

The WTO is one of the cornerstones of the institutional structure of the global order. The WTO has played an important role in the creation of new supervision mechanisms over underdeveloped countries which is restrict their decisions in the economy area. WTO, emerged as an effective force in terms of expanding its liberalization tendency towards intellectual property rights and investment areas in relation to service trade and foreign trade beyond commodity trade. WTO, regarded as an institution that removes the obstacles to the movement of multinational corporations with making underdeveloped countries more open to foreign trade, foreign capital investments and technology flows (Şenses, 2004: 3-4).

 

   Parallel to globalisation trends; together with financial liberalization the short-lived and speculative decisions of financial capital have overtaken the industrialization targets. On the other hand, however, financial bloat encouraged by speculative gains have gradually become an element of instability in itself. The value of exports made in 2010 is 15 trillion 237 billion dollars. In the same year, only about 4 trillion dollar transaction volume was realized in one day. This figure corresponds to 26.25% of total exports made by the world during the year. Therefore it shows how the foreign exchange markets are important for the country’s economies (Noğay,2012).

 

   According to a study conducted by the WTO, world trade will increase %10 and world income will increase $ 260 billion within the next decade because of the liberalization in international trade. It is predicted that 80 billion dollars of this will go to Japan, 70 billion dollars to the EU and 75 billion dollars to the USA.  In other words,  $ 225 billion of $ 260 billion will be shared by three countries. For other countries with 84.5% of world population, only 35 billion dollars will be left. When we look at the this statistics, we can clearly see who will benefit from economic globalisation (Leba, 2001: 9).

   When countries (who have economic difficulties) want to take economic support, they apply IMF and WB to take credit from them. The policy on these loans basically depends on the “conditionality” principle. ”Conditionality” refers to the policies that borrowing countries have to implement in order to obtain credit (Allegret and Dulbecco, 2007: 309).  According to this; countries who want to take credit from IMF, have to prepare a stabilization program for ensuring the balance of external payments and submit it to the IMF and agree with it. This program, which shows economic and financial policies to be implemented by the country, is called the “letter of intent”.

Agreements made are called structural adjustment programs. The use of the given credits and their continuation depends on the condition of applying the mentioned program. The IMF is trying to integrate countries into the global economic system through its integration program. These policies point to a liberal economic process and these policies are seen as the key to integrating with the world economy. Approval from the IMF for the economic measures which prepared by the member state, is also have great importance in terms of the borrowing from the international finance circles. The official or private international finance circles gives credit to member states with evaluating the IMF’s report (Seyidoğlu, 1998, s.566).

In the international commercial relations, developed countries want to see stand-by agreements which made between underdeveloped countries and the IMF because developed countries consider IMF criteria in their decision to give credit and make investment in developing countries (Alpago, 2002: 155). That’s why underdeveloped countries have to agree with IMF and WB. There are various criticisms to the IMF and WB’s policies about the removing poverty. Parallel to the cyclical developments in the world, that criticisms are gradually increasing despite the change in these policies. WB is a developmental institution that provides resources, technical assistance and policy advice to countries where a significant portion of the population is below the poverty line.  There is a motto in the WB building which is ‘’ “Our world is a world without poverty.” That’s why the main mission of WB is to eliminate poverty. However, there are very different evaluations about the policies of the World Bank and these evaluations about how World Bank’s policies reduced poverty. The Bank’s policies on poverty are criticized especially in terms of structural adjustment programs.

According to the common view, these policies are claimed to bring heavy burden to the poor. Some economists have argued that structural adjustment programs can not bring growth and also poor countries have marginal benefit from these programs. For some economists on the other hand, IMF and WB policies since the 1980s caused hundreds of millions of people to become impoverished and that structural adjustment programs are largely responsible for the destabilization of national currencies. This point of view accuses the institutions like IMF and WB to cause the globalisation of poverty. It is clear that this opinion has found great support in the world scale. Since years, the IMF and WB have been imposing policies such as liberalization of trade, removal of price controls, privatization, and budget spending constraints to underdeveloped poor countries.

 

The results of the practice have brought a complete disappointment. Insistent privatization practices imposed by the IMF and WB, especially for public services such as water and infrastructure, open the way for foreign companies to supply and produce these services. The services mentioned by these firms will be driven to the market at commercial prices, after that the poor people are faced with higher prices and access to goods and services becomes increasingly difficult. Therefore the people become more and more impoverished from day to day (Mekay, 2003:2).

 

Underdeveloped countries take this structural adjustment programs like a ready-made clothes from IMF and WB. Agricultural reforms, which are part of these programs, are among the priorities of the IMF. The IMF and WB officials who came to save the country from the trouble, primarily focused on agricultural reforms (Şahinöz, 2000: 38).

   Still 70% of the world’s poor live in rural areas. A development in the agricultural sector will play an important role in increasing the incomes of the poor by providing agricultural employment opportunities (FAO, 2002: 2). However, the programs proposed by the IMF and WB insist on the abolition of subsidies for agriculture. When developed countries continue to support their agricultural sector despite the WTO rules, underdeveloped countries are forced to give up their subsidies in the framework of structural adjustment programs. For this reason, underdeveloped countries seen as a market from developed countries because their surplus agricultural products need a new market. This is done through with the IMF and WB in the framework of the structural adjustment programs. As part of these programs, underdeveloped countries are being asked to give up protectionism in the importation of agricultural products. The world price which is not deemed appropriate for producers in developed countries has been imposed on these countries.

However, in the developed countries, price differences between the producers and the market are paid to the producers by the state. In this situation, When these IMF programs forced in the underdeveloped state, these programs pushing to the producers in a point where production can not be sustained with these prices (Oyan, 2001: 33-34). As a matter of fact, these policies applied in the African countries in the 1970s and resulted in a bad way. Because Africa importing 20% of its food needs at the beginning of the period but after a decade later, they had to import half of their food needs. Also in the former production regions, lots of deaths observed from poverty.

 

Also we can see IMF and WB ‘s  applications in the education, health and other social policies towards underdeveloped countries.  However, these social political policies is not meaningful to support with other economic policies because the support loans provided by the WB in the context of education and health projects and these loans provided for only using in the external financing of the related projects. That’s why, when it creates new market opportunities for the lenders, it also means additional debt for the other countries. Therefore, there are serious critisms to the WB about their support loans because these kind of support loans increase the debt burden of countries and impoverish them (Chossudovsky, 1999: 37).

 

 

5. Conclusion

 

Globalisation is a multidimensional concept which is commonly used in the world, especially since the late 1980s and early 1990s. Globalisation has economic, social, political and cultural dimensions but generally economic dimension is more important than others. There is no common definition about ‘’Globalisation’’ and also there is no consensus about this subject. According to some people, globalisation means modernization and development and globalisation is a process that will widen international trade and investments. So these are increase world wealth. According to the others, globalisation is the name of imperialism and neoliberalism in the early 21st century.

 

However in a both way, globalisation is a fact of today’s world. Countries faced with this reality, regardless of their level of development. Globalisation emerges as a process that affects countries in various fields. One of the important effect of globalisation is poverty. The relationship between globalisation and poverty is interpreted in different ways. The group which argues that globalisation has negative effects on poverty, uses UNDP’s definition of human poverty. But those who argue that globalisation reduces poverty, try to prove their claims with using WB’s definition of absolute poverty.

 

 

 

 

Those who claim globalisation reduces poverty, use the WB’s data and claiming that; since 1981, there have been significant reduction in poverty rates according to 1.25 and 2 dollars a day. However, WB also considers the universality of poverty and considers the differences in the purchasing power parity, so absolute poverty line is determined $ 1 per person per day for underdeveloped countries, $ 4 for Eastern European and Latin American countries and and $ 14.40 for developed countries. In this case, the figures given in Table 2 become contradictive, and based on this evidence, the arguments of those who claim that globalisation reduces poverty lose their validity. Therefore, in general, globalisation can be expressed as a process that increases poverty.

 

Here are some facts showing the dimensions of poverty in the world:

• Nearly half of the world’s population lives with an income below $ 1 a day.
• The gross domestic product of 41 poor countries (567 million people) is less than the wealth of the world’s seven wealthiest people.
• About 1 billion people entered the 21st century without reading a book or even writing their name.
• All children can be able to go to the school with less than 1% of the money spent on weapons every year in the world.
• 20% of the population in developed countries consume 86% of the goods in the world.
• In developing countries 1.1 million people do not have enough water and 2.6 million people can not access basic health services.
• Cosmetics products in the US cost $ 8 billion a year, $ 17 billion is spent on pets in the US and Europe, $ 50 billion is spent on cigarettes in Europe,$ 105 billion is spent on alcoholic beverages. On the other hand, 6 billion dollars needed to provide basic education and only 13 billion dollars needed for basic health expenditures and nutrition for everybody living in the world.

 

These facts shows us, poverty is a global problem that has reached serious dimensions. We need to global cooperation for solving this problem. In this context, the economic policies of global organizations should be redesigned, not only for developed countries but also redesigned for underdeveloped countries and also implementation of these redesigned policies should be ensured by states.

Hüseyin Güroğlu

References

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