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An explanation and critique of neo-liberal economic theorists’ claim thateconomic globalisation can reduce poverty and global inequalities.

An explanation and critique of neo-liberal economic theorists’ claim thateconomic globalisation can reduce poverty and global inequalities.

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While Proponents of globalisation claim that it encourages economic growth and thus, ultimately human development in the less developed countries many do not agree with this assessment. This paper examines how globalisation is seen in many different and contradictory ways and critiques neo-liberal economic theorists’ claim that economic globalisation can reduce poverty and global inequality.
While Proponents of globalisation claim that it encourages economic growth and thus, ultimately human development in the less developed countries many do not agree with this assessment. This paper examines how globalisation is seen in many different and contradictory ways and critiques neo-liberal economic theorists’ claim that economic globalisation can reduce poverty and global inequality.

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Published by: Undergraduate Awards on Sep 01, 2012
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05/13/2014

 
An explanation and critique of neo-liberal economic theorists’ claim thateconomic globalisation can reduce poverty and global inequalities.
Economic globalisation has become an extremely contested issue within both academic and public discourse over the past few decades. Proponents of this phenomenon claim that it en-courages economic growth and thus, ultimately human development in the less developedcountries (LDCs) of the world. Many, however do not share this view and see the process asthe continuation of western imperialism (Sen, 2002) which has caused a widening of the gap between rich and poor and an increase in inequalities both between and within nations. Therichest two percent of the world’s population now own half of all global household wealthwhile the bottom fifty percent own just one percent (UNDP, 2007). In a recently published re- port, Kemal Dervis, administrator of the The United Nations Development Programme(UNDP) stated that “Globalization has fundamentally altered the world economy, creatingwinners and losers. Reducing inequalities both within and between countries, and building amore inclusive globalization is the most important development challenge of our time”(UNDP, 2007). Thus Dervis believes that a reformed pattern of globalisation could be ameans to development through the reduction of inequality, even though the process hasalready created winners and losers within the world economy. This essay will examine andcritique the neo-liberal arguments in favour of economic globalisation as a means for the re-duction of poverty and global inequalities.Globalisation has been defined in many different ways. The difficulty in finding one singleand universally accepted definition reflects the complexity of the process itself. Holton(2005) notes that globalisation should not be thought of as one single process, but rather a setof processes shaped by human agency which is too complex to be encompassed within asingle master process. Therefore, it is inevitable that globalisation means different things to
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different people or groups. However amorphous it may seem, this process has had importantand wide-ranging impacts on the peoples and countries of the world. Many of these impactshave been linked to changes in the world economy, which itself has been hugely effected bythe processes of globalisation. For the first time, through the use of new transport and com-munication technology, there exists the possibility of a world or global economy. The processof creation of such a global economy is known as economic globalisation. The question of whether this is desirable and/or beneficial in relation to development and the reduction of in-equality has been greatly debated. Neo-liberal economic theorists believe economic globalisation to be a desirable and beneficial process that advances, rather than inhibits, the achievement of social agendas such as the pro-motion of gender equality, the shifting of children from work to school and the reduction of  poverty in less developed countries (Bhagwati, 2005; Friedman, 2000). These theorists be-lieve that the free market economy is the only arrangement capable of generating sustained in-creases in prosperity and opportunities for human beings to seek what they desire in life(Wolf, 2004b). Liberal economic globalisation can be defined as:“[the] free movement of goods, services, labour and capital, thereby creating a single[global] market in inputs and outputs; and full national treatment for foreign investors(and nationals working abroad) so that, economically speaking, there are no for-eigners” (Henderson, 1999 in Wolf, 2004a).For some of its proponents, this is an irresistible and desirable force which demolishes fronti-ers, liberates individuals and improves the lives of those affected by it (Wolf, 2004a). Accord-ing to neo-liberal economic theorists, globalisation increases income and in turn reduces
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 poverty (Bhagwati, 2005). India and China serve as examples where market liberalisation andthe opening to trade and direct foreign investment in the 1980s led to dramatic poverty reduc-tion. Bhagwati claims that, due to a rapidly growing economy, people were able to securegainful employment and thus ‘pulled up’ out of poverty. Neo-liberal economists have noted that many globalising countries experience reductions in poverty through economic growth and that China and India are not isolated examples of where this has occured. Countries as diverse as Uganda, Vietnam and Mexico have experi-enced growth as a result of increased participation in global trade and investment. Indeedmost countries that have become more open have experienced some economic growth (Dollar and Kraay in Lechner and Boli, 2004). Holton (2005) and Sen (2002) argue that, at the ag-gregate level, the global economy has produced a world whose wealth and material resourcesare greater than at any pervious stage in human history. This absolute growth of the worldeconomy is often cited as evidence of the benefits of economic globalisation by many neo-lib-eral economists. The World Bank (in Holton, 2005) states that there was an absolute declinein the numbers living on less than $1 per day between 1980 and 1998 from 1.4 billion to 1.2 billion. Neo-liberal theorists claim that this reduction has occurred as a result of the growthand increased integration of the world economy through the opening of markets to trade andforeign investment. Neo-liberal theorists claim that economic globalisation reduces inequalities between the richand poor (Wolf, 2004a). It has been argued that global inequality peaked in the mid 1970sand that since 1980 inequality has been on the decline. The argument states that since 1980the largest economic growth has occurred in the LDCs and that this growth has facilitated anabsolute reduction in the number of people living in poverty by 200 million (Dollar and Kraay
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