Globalization and Poverty

The 21^st century is characterized by the increased interdependence between countries in the sphere of economy, social sphere, ecology, and culture. This interdependence and relations that are called globalization define the state and the line of development of all the countries. Globalization as a new type of social development provides more questions than answers. Each person in the world, regardless of nationality, wants to define the regularity of globalization influence on the development of the modern world, as it causes the creation of new geostrategic reality, the formation of new value coordinates, the change of world principles and structure and the modernization of social, political, and economic systems.

Globalization is an objective phenomenon that does not depend on the will of people. The processes of globalization at present time are extending and spreading at the high rate. None of the countries or societies can avoid these processes. They are connected with the peculiarities of the post-industrial technology introduction, international labor division, internationalization of trading, fundamental changes in the information sphere, socialization of economic processes, democratization of political institutes, and internationalization of social life. The paper will discuss economic globalization and its impact on the development of countries and the life of people.

In the course of its development, globalization has got a number of features: interdependence of national economies and their interpenetration; formation of international production complexes beyond national boundaries; decrease of the countries’ possibilities to establish independent economic policy; extending of the scope of exchange and intensification of goods, capital, and manpower resources movement; creation of the institutes of international regulation of global problems; tendency of the world economy to common standards, values, and principles of functioning.

The evidence of the increased interdependence of national economies is their sensibility to the processes that occur in other regions of the planet. In particular, the mortgage crisis in the housing market of the USA has impact on different regions reducing the rate of the global economy growth. On the contrary, favorable economic situations are accelerators of the dynamic growth in all parts of the Earth. In this respect, economic globalization is interpreted as higher, more developed level of internationalization of national economies and their subjection to the global economic organizations.

The term “globalization” appeared at the beginning of the 90’s and became rather popular supplanting the obsolete word “imperialism” (Vilas, 2002). However, the term globalization is considered to be unclear and vague, it has not got precise universally adopted definition. Everyone understands this process in his own way and uses it in different situations like a synonym to the word imperialism.

Such substitution of the notions is bad for social sciences and practices as it confuses people and disguises the truth. The exclusion of the word imperialism from the political lexicon makes impression that the imperialism has disappeared. There is no word, so there is no object that it designates. But, instead of imperialism, globalism appeared, concealing the inwardness of modern capitalism – monopolist capitalism.

Imperialism is the monopolist capitalism. Modern capitalism is a monopolistic capitalism as it was before. Moreover, the tendency towards further monopolization and increase of economic power and political influence of monopolies striving for global domination has been preserved and even became stronger (Vilas, 2002). No word substitution can reverse this fact. Another issue is that the modern imperialism is not the imperialism that was connected with Lenin at the beginning of the previous century. It took on specific features in connection with globalization, but the nature of modern imperialism is the same as that of the classic one.

In this respect, globalization is a natural historical process of the creation of united global economies, the process of definitive overcoming of economic and cultural disconnection between countries and nations, unification of their economic, political, and cultural structures, the process of integration of all productive forces into one system, and, on its basis, the formation of humanity as a single unity.

Nowadays, globalization is taking place under conditions of capitalism, in the period of imperialism. That is why globalization does not serve the interests of all people in the world, but the interests of capital. Only capitalists, not all of them, but mainly the representatives of international financial and monopolistic capital can reap the benefits of globalization (Gibson, 2003). The other part of humanity does not benefit and even suffers from it.

If we consider all the problems and negative processes such as worsening of labor conditions, impoverishment of underdeveloped countries, worsening of ecological crisis, infringement of human rights and freedoms, and escalation of wars and terrorism at the present time, there may be an impression that they were caused by globalization. Hence, there are innumerable complaints about it that remind performances of Luddites against technology at the beginning of the year before last. However, globalization in itself is a progressive phenomenon. What is bad about the integration of the mankind and its productive forces, in the boundary-spanning? What is bad about the establishment of close economic and cultural relationships between countries?

The problem is not boundary-spanning, but this phenomenon under conditions of capitalism and in the interests of capitalists – in the interests of developed, civilized, imperialistic countries. The main economic law of the capitalism directs globalization at the way to secure maximum incomes to world capital at the expense of workers’ exploitation, enslavement and plundering of Third World countries, at the expense of uncontrolled use of natural resources and destruction of environment (Gibson, 2003). As a result, there is a need to fight capitalism not globalization.

At the modern stage of global economy development, transnational corporations became the motive force of globalization. They control more than 85 percent of the world export and direct foreign investments. Transnational corporations actually decide the key issues concerning new economic and territorial partition and form the largest group of foreign investors and carriers of new technology in productive and non-productive spheres. Such corporations are companies that produce goods and services and control them outside the country they are located in. The main feature of the corporations is their ability to plan, organize, and control economic operations in different countries (Gibson, 2003). This specific feature of their activity distinguishes them from other participants of the world economic system. Such participants are labor force, consumers, local, regional, and national governments.

As a result, transnational corporations play an important role in the process of globalization, because their activities and demands form the basis for organizational and technological innovations. It means that they form the basis for the productive forces development. Second, they control the greatest number of international transactions and transfrontier activities. Third, unlike any other subject of the global economy, transnational corporations are more active than passive participants of globalization processes.

It is difficult to object to progressive and positive effects of globalization. Among them there are such changes as the formation of new production structure and the pattern of industrial democracy relationship, the expansion of industrial democracy and production stimulation. Globalization provided the acceleration of new production structure formation, the basis of which is the integrated automation that is followed by the introduction of flexible information technology. The latter appeared when machine production and conveyor system changed (Shangquan, 2000). Globalization revealed the necessity for radical labor reorganization and emphasis on industrial democracy relations. The question is a new pattern of such relations that is oriented to knowledge, qualification, and creative potential of hired workers.

Globalization also has power to increase production effectiveness owing to the differentiation of labor and increase economy owing to the scope and reduction in expenditure. The world process of globalization leads to the increase of world competition that causes strengthening of specialization and distribution of labor with the peculiar results – the increase in labor productivity and expenditure shortage. There is a change in the national banks roles: orienting towards the global market with its strict competitive conditions, national manufacturers strive for high effectiveness and more complete and qualitative satisfaction of domestic demands.

Economic globalization can lead to the expenditure shortage and price reduction and, correspondingly, to stable economic development. The advantages of globalization are connected with the trading gains based on mutually advantageous conditions that meet the demands of all parties (individuals, businesses and other organizations, countries, trade alliances, and the whole continents).

Despite all the advantages, globalization causes a great range of negative effects or potential problems that are considered extremely serious by the critics. One of the main problems is connected with the following question: who takes the benefits of globalization. In fact, the largest part of benefits is got by rich countries and individuals. For the last 25 years the gap in the income levels between countries and societies has not reduced, but increased (Shangquan, 2000). The inequality of wages and incomes has increased almost in all countries.

For some countries globalization has created new opportunities, while others have faced new perils. Globalization provides gains for rich people, companies, capital and technology exporters, and international leading business firms. But the countries with unilateral undeveloped economies and weak infrastructure, small businessman, unskilled laborers, and immobile sections of the population are usually in financial difficulties.

The next problem is connected with potential regional or global instability through the interconnectedness of national economies at the global level. Local economic fluctuations or crises in one country may have regional or even global effects. Such possibilities are not just theoretical, but quite real. The example is a financial crisis in Asia that started in 1997 in Thailand and then spread to other countries of South-East Asia reaching South Korea (Shangquan, 2000). Such phenomena affirm great vulnerability of interconnected economies.

One more negative impact of globalization is social dumping practice in the sphere of employment: the use of coercive methods to derive benefits, exploitation of child labor and the labor of other groups of people, creation of illegal labor market, and human trafficking. The migration of the capital in the world usually destabilizes national economy. Stock jobbers can undermine national currencies stability compelling governments to take costly measures (Shangquan, 2000). The majority of the countries, except for those that are industrially developed, are powerless, because they have no experience and instruments of economic policy. In such situations it is much easier to conduct fraudulent schemes on the global scale. The attainments of globalization provide new opportunities for criminals to launder money, to carry hidden economy, and to create drug market.

Globalization processes lead to serious changes in the institutional and management structure transforming not only power-holding structures, but the whole system of the state coordination. The role, structure, functions, and authority of the state are reinterpreted. New organization schemes and technologies undermine former institutions changing the typical form of power. There is a tendency towards the estrangement of the power from the decision taking and  the social regulation substitution with alternative, informal, transnational power.

Under the influence of globalization, the dysfunctions of the administrative-command state are becoming more obvious. Traditional pattern of the state administration had a great success and was introduced in the majority of countries of the civilized world at the industrial stage of social development. Based on the principles of hierarchism, centralization, stability of public service, formalization of working rules and procedures, direct supply of goods and services by the state, and bureaucratic form of administration had its advantages and disadvantages, but they are gradually disappearing (Weiss, 2000). It is not considered to be an ideal type of organization in private and public sectors because of its bureaucracy, remoteness from the institutes of civil society, insufficient flexibility, and inefficiency.

Globally oriented economy impairs mechanisms of home policy regulation, makes states be controlled by world financial markets, whose interests oppose national interests. Economic globalization reduces the role of the state and undermines the basis of national sovereignty and independence. A lot of researchers state that not all countries can fit in with new market zone (Weiss, 2000). International economic processes that were regulated bilaterally are being involved into relations beyond the states causing the state controlling functions devaluation. The state loses its mechanisms for the influence on the society, but the society cannot put forward its demands to the state institutions as they do not solve questions that were previously in their competence.

The analysis shows that modern global economy is a complex combination of economic systems and the markets related to them. It complicates quantitative measurement of globalization process. Nowadays, its constituents are defined by the experts of the World Bank (the rate of integration of certain country in the global economy on the base of commodity trade volumes consideration, changes in international trade, volumes of gross private capital flow and gross foreign direct investment).

The problem of income inequality is becoming more significant for the world economy. Despite the economic growth that has lead to the creation of millions of working places, the inequality of incomes in the majority of world regions has increased dramatically (Sutcliffe, 2005). There is no doubt, that income inequality is the most serious threat to social stability all around the world. The practice shows that if politicians neglect the structure of profit sharing, the results can be rather serious for individuals and society. On the one hand, one can observe the loss of people’s interest in the country’s stability and belief in its potential. On the other hand, the decrease in the middle class role leads to the decrease of consumption in the country and that does not stimulate domestic demands and decreases economic development in the long-term perspective.

In the modern international practice different approaches and methodologies can be used to measure social stratification. First of all, the level of social and economic development of the country is taken into account. It is defined by the output of GDP for one person, sector structure of GDP, level and quality of human life. One of the indicators for the measurement of the country’s economic welfare level is GDP per head. At the beginning of the 19^th century the richest countries of the world according to GDP were only 3 times as rich as poor countries, but during the 20^th century this interregional gap began to extend rapidly (Sutcliffe, 2005).

The most widespread for the analysis of income inequality is Gini coefficient that shows the extent of income inequality in some countries or regions. It is known that Gini coefficient in the world ranges from 0,23 in Sweden to 0,71 in Namibia (Sutcliffe, 2005). This coefficient gives opportunity to turn the gaps in the incomes into single measure. If each member of certain society has the same income as others, than the Gini coefficient is equal to null; if the whole income goes to one person, it is equal to one.

The relation of purchasing power of certain currencies to some goods or services in two countries is defined by the PPP (purchasing power parity). According to the PPP theory, the exchange rate is being changed to the extent that is needed to compensate the difference in the price movement in different countries (Sutcliffe, 2005). In other words, the unit price in one country should correspond to the unit price in another country converted into spot exchange rate. However, as there is difference in the levels of economic and political development of all countries, the assessment and prognostication of the exchange rates on the base of the PPP theory has limited practical use.

Globalization and poverty are two topics highly debated in science and literature. Some studies prove that the main negative impact of globalization is the increase of poverty. As it was already mentioned, all countries have rich and poor people. Poverty exists even in socially developed societies. Poverty is one of the oldest social problems but it still has no clear definition. The absence of poverty is identified not only by provision of physical living conditions (dwelling, nourishment, clothes, health), but also with the possibility to live, consume, and participate in the public life at the level that meets the most spread qualitative demands of the society.

One can define two types of poverty: absolute and relative. Absolute poverty is related to a set standard that is usually the same in different countries and remains stable for a period of time.  Relative poverty refers to living standards that are defined in the society and differ between countries. Clearly, absolute poverty is a more serious issue. This type of poverty is inherent in the countries of the Third World with the focus on fixed income thresholds. Such thresholds typically comprise 1-2 dollars a day in the underdeveloped countries (Foster, 1998). Relative poverty is defined by the property differentiation of the population (for example, 10-30 percent of the population with the lowest incomes is considered to be poor).

The reason for poverty is inequality that is created by a number of causes. The most significant ones are global causes among which is the existing economic order, the domination of financial capital and international financial institutions, global economic and ecologic cataclysms (Foster, 1998). General economic reasons are connected with the type of economic growth, limited recourses, and competitiveness of national economy. Market reasons are connected with the mechanism for income distribution and the rate of the social security system development. A great number of reasons are related to transformational: the duration of transformational crisis, differentiation of human incomes, and violation of financial liabilities by the state or other financial institutions.

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