Ryle Ibañez

2ITB

Globalization and Poverty

Globalization provides humanity with a once-in-a-lifetime opportunity to contribute significantly

to global poverty reduction. While there is a lot of potential for poverty reduction, the extent of it will be
determined by several factors, including rich and developing countries' growth patterns, as well as the
overall global policy framework. The question of whether the actual distribution of profits is fair, and
whether the poor benefit less than proportionately and, in some situations, are damaged by globalization,
is frequently raised. dangers and costs of globalization can be considerable for fragile developing
countries and the world's poor. The disadvantage of globalization is most visible at times of recurring
global financial and economic crises. The developing world appears to have borne the weight of the costs
associated with recurring crises linked with financial and economic globalization, with the poor suffering
a disproportionate amount of the burden. During prosperous times, however, the benefits of globalization
are not always widely and evenly distributed throughout the global community.

Globalization is responsible for the concept of inequality, which serves as a barrier between
growth and poverty. Though no trend in poverty or income inequality has been discovered that can be
totally or even mostly attributable to the 'globalization' effect, these varied estimations, even the most
optimistic can't deny that the globalization process has had some negative effects on poverty and income
distribution. These challenges have created a global debate as well as a strong anti-globalization
movement. The process of globalization allows hundreds of people to live in the comfort of not having to
worry about food, money, health care or education. They are lucky enough to take such basics for granted
and to be oblivious to the gap of inequality and poverty (Bardhan 2006). Many of the studies under
Globalization and Poverty imply that globalization has been linked to increased inequality, and that the
poor do not necessarily partake in trade gains. One is that trade reform does not always benefit the poor in
nations with a surplus of unskilled labor. Another is that when employees have maximal mobility,
especially from contracting economic sectors into increasing ones, the poor are more likely to share in the
benefits of globalization. Nowadays, the income distribution impacts caused by a change in relative
product prices throughout the process of trade opening are well recognized. The poor are often vulnerable
to these induced effects in addition to changes in absolute and relative prices of wage goods. While
developing countries with larger demand of unskilled labor should see a reduction in income inequality
because of increased demand for unskilled labor, the postulated narrowing wage gaps between skilled and
unskilled labor have not been observed in many developing countries, particularly in Latin America and
Africa. All of these might be caused by many factors such as the nature of the new technology heavily
biased in favour of skilled and educated labour; the entry into the world markets of low income Asian
economies with abundant reserves of unskilled labour such as China, Philippines, etc. Another reason on
how globalization could affect income inequality and poverty is the nature of technology growth and the
technological diffusion process. Technical change is labor-saving, capital-intensive, and skill-biased, and
it has the potential to widen wage disparities in both developed and developing countries. Unskilled labor
and capital have a high degree of substitutability, compared to skilled labor and capital, which have a high
degree of complementarity. Furthermore, technological dispersion and new technology availability are
rarely universal or spontaneous. As a result, global productivity disparities may develop over time,
potentially increasing economic inequality. Globalization has hastened the privatization process,
including the privatization of research, which may make it more difficult and, in certain cases, more
expensive for poor countries to access new technologies. The poor are frequently bad to take advantage of
new opportunities created by the massive increase in global information flow. Finally, while global
disinflation benefited macroeconomic and monetary stability, the latter may have been achieved at the
cost of some additional growth in some cases.

Given that globalization gave rise to global inequality, developing countries must take strategic
steps to protect themselves in order to benefit from the dynamic forces of globalization, with a long-term
vision of upgrading their comparative advantages to high-value-added activities. To be successful in this
endeavor, developing country governments must consciously engage in the development of institutional
capacity for integration, including a capable nation-state capable of meeting the huge difficulties offered
by globalization. Thus, there are a lot of reason why globalization causes a negative impact especially for
those third-world country and we may be able to stop this if we all have an effective global governance
that can keep the world peace.

References:
Bardhan, P. (2006). Does Globalization Help or Hurt the World’s Poor?: Overview/Globalization and
Poverty. [online] Scientific American. Available at: https://www.scientificamerican.com/article/does-
globalization-help-o-2006-04/.