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Question

“Like most human phenomena, globalization has ill, as well as good, effects. But the latter predominate. In most ways for most people, globalization is a positive. (…) Bringing more of the world’s poor into the global economy is the best hope for raising them out of poverty”. Evaluate critically this claim by Doug Bandow, CATO institute, 25/04/2001, in the light of current IMF and WB policies.
2000 words

Answer

Title: GLOBALIZATION

 

Contents

Introduction. 2

Theoretical framework. 2

Argumentation. 3

The good effects of globalization outweigh bad effects. 3

Globalization is positive thing in most ways or most people. 4

The best way of raising the world’s poor out of poverty is by bringing more of them into the global economy. 5

Conclusion. 5

Works Cited. 7

 

 

Introduction

Doug Bandow is right when he says that globalization creates both winners and losers. He says: “globalization has both ill and good effects but latter tend to predominate”. Bandow’s view is that globalization is a positive phenomenon by virtue of “bringing more of the poor into the global economy, thereby providing the best hope of raising them out of abject poverty”. Doug Bandow, a senior fellow at the Cato Institute, has in the worked in many top-level positions, including as a special assistant to former US President Ronald Reagan. He is a regular contributor to leading publications such as Fortune Magazine, Washington Times, and Wall Street Journal. Therefore, it may be worthwhile to critique his views by bringing in opposing perspectives.

Indeed, not everyone views globalization as an opportunity for poor countries to improve their standards of living. Many left-wing activists argue that globalization will wipe out the wonders of rural living by introducing economic openness that will work largely to their disadvantage (Fischer, 2003). The aim of this paper is to evaluate critically Bandow’s claim in the light of current International Monetary Fund (IMF) and World Bank (WB) policies. The paper begins with a theoretical framework where different theories of globalization are presented. This is followed by an argumentation section where the main arguments raised in Bandow’s quote are critiqued. The paper ends with a conclusion section where the main findings are presented.

Theoretical framework

There are disagreements among scholars regarding the meaning of globalization and the most appropriate theoretical tools for understanding it. Nevertheless, on a number of points consensus among researchers may be said to have emerged. For instance, few people would dispute the claim that during the last three decades, the pace of global transformation and social change has suddenly accelerated. Also, social change has brought about connectivity among countries and peoples worldwide. Moreover, no disagreements have arisen regarding the claim that globalization is multidimensional in that it affects all aspects of human life.

A number of theories have been propounded to explain the impact of globalization and free trade agreements on development in the world’s poor nations. One of them is the theory of input trade. The theory of input trade is founded on the view that globalization creates a situation where inputs such as capital and labor are internationally mobile (Jones, 2000). In this case, it is assumed that in a world of globalization, ownership patterns of a physical, non-depreciating input such as labor can be spread in different parts of the world. This can be done by reallocating the input in response to changes in its return in different countries.

However, not all theories support globalization as a catalyst for poverty eradication. A case in point is the theory of defensive skill-based innovation and globalization, which is founded on the view that globalization increases the threat of technological imitation, thereby creating bias in the direction of innovations (Thoenig & Verdier, 2003). In this regard, Thoenig & Verdier (2003) argue that skilled-labor-intensive technologies are likely to dominate the modern world if globalization continues to thrive. It is assumed that this will increase wage inequalities in both developed and developing countries, thereby perpetuating the existing conditions of poverty (Thoenig & Verdier, 2003).

In contrast, the world-system theory is based on the view of globalization as a phenomenon that is synonymous with the birth and subsequent spread capitalism around the world (Ritzer, 2007). In this theory, the rise of supranational economic, political, and planning agencies such as the IMF, World Bank, and the World Economic Forum is seen as a sign of an emerging global governance structure that is transnational in nature. This theory is the most appropriate paradigm for use in critiquing Bandow’s claim that the benefits of globalization for poor countries outweigh its ills. It also provides an appropriate platform for the analysis of IMF and World Bank policies and the extent to which they may be said to be promoting world capitalism. In this way, it is possible to determine whether on the overall globalization is beneficial or not.

Argumentation

In his statement, Doug Bandow raises three main points that form the subject of discussion in this essay. The first point is that the good effects of globalization outweigh bad effects. The second point is that globalization is positive thing in most ways to most people. The last point is that the best way of raising the world’s poor out of poverty is by bringing more of them into the global economy. At this point, these three points are critiqued one after the other with reference to evidence from literature and in the light of current IMF and WB policies.

The good effects of globalization outweigh bad effects

Bandow argues that the benefits of globalization are too many and its disadvantages too few. This view is supported by a number of scholars. Lindert & Williamson (2003) support this view by stating that although the global economy has become more unequal during the last two centuries, things would have been worse if globalization did not set in. During different episodes, inequality within different countries have been rising and falling. In most cases, it has been rising in developing countries (Lindert & Williamson, 2003). Conversely, industrialized and developed countries have been experiencing a reduction in inequality levels (Lindert & Williamson, 2003). For critics of globalization, a major area of concern has been the frequent episodes of rising inequalities in the developing world. On this basis, these critics express the view that globalization may not help poor countries catch up with their richer neighbors in terms of economic inequality.

In some OECD (Organization for Economic Cooperation and Development) countries, the trend of falling inequalities has shown promising reversal signs (Lindert & Williamson, 2003). It should be noted that in virtually all the situations where inequality levels have been falling, this phenomenon has been driven largely by widening gaps between individual nations. It is hard to find even one case where gaps have been widening within nations.

In the meantime, the world economy continued to be increasingly integrated (Ukpere & Slabbert, 2009; Tisdell, 2001; Piasecki & Wolnicki, 2004). Those who interpret correlation to mean causation may derive the implication that globalization has led to rising inequality between nations but has prevented inequality within nations from rising. According to Lindert & Williamson (2003), globalization has played an important mitigating role by preventing the continued rise in income gaps among nations. To benefit from globalization, these nations needed to change their policies in order to exploit all the opportunities that came with globalization (Zhang & Zhang, 2003; Birdsall, 2006).

Going by the history of inequality, one may find out that globalization has mitigated a trend whereby income gaps among nations were dramatically widening (Turner 58; Thoenig and Verdier 720; Guillen, 2001). This is mostly the case in situations where factor and commodity markets have been globalized in countries that have been integrated into the global economy. To appreciate this fact, one may need to look at the early 20th century where international trade as well as movement of factors of production across national borders greatly lowered economic community (Keohane & Nye, 2000). Moreover, emigration was found to have a massive influence on inequality reduction. Remittances sent by emigrants back to their home countries greatly contributed to economic development in the home countries.

In the case of labor-scarce countries, the move to open up international trade and movement of factors of production has raised inequality considerably (Mosley & Uno, 2007). In the post-war OECD countries, globalization may also be said to have resulted to a rise in inequality (Wade 2003). However, in these countries, this was the main source of the increase in inequality levels. Other factors such as poor economic planning and corruption were responsible for massive disparities. On the overall, it appears that increased globalization has resulted to less inequality in the world.

According to Harjes (2007), the world would still be affected by the problem of inequality even if the goal of complete global integration was achieved. In the US, the world’s most advanced economy, economic disparities continue to exist. Things are not any different in poor countries as well as in the global economic order that is being created by globalization. In essence, the main factors that should be put into consideration when determining whether the good effects of globalization outweigh the bad effects include sources of globalization, components of inequality in the world economy, historical period, and the nation-specific encounters with globalization. According to Sutcliffe (2004), an analysis of these dimensions shows that globalization causes more good than harm to the world.

Globalization is positive thing in most ways or most people

The convention notion in the contemporary world is that globalization is a good thing that will contribute to the wellbeing of humankind. This is the same point that Doug Bandow sets out to make in his quote. This explains why even major international financial and economic planning institutions such as IMF and World Bank continue to support initiatives that promote globalization (Nissanke & Thorbecke, 2006; Dreher, 2006; Stiglitz, 2004; Bhalla, 2002). The idea of industrial convergence is often promoted as a way of bridging the North-South divide (Arrighi, Silver &Brewer, 2003). However, critics of globalizations, particularly left-wing activists, argue that although First and Third World countries have been converging with regard to the pursuit of the industrial cause, a similar level of convergence with regard to income levels has not yet been achieved (Dinopoulos, Elias ‎& Segerstrom, 2003; Khor, 2000; Morgan, 2006; Scott & Storper, 2007). In response, proponents of globalization blame this phenomenon to low education and skill levels in the developing world (Wade 2004; Fontagné, Gaulier & Zignago, 2008; Kacowicz, 2007; Li & Reuveny, 2003).

Not much has been done to determine whether the benefits of globalization are being felt by most of the world’s population. In the meantime, one may need to look at citizens of Brazil, China, India, and most of East Asia to have an idea regarding the positive impact of accelerated economic growth that has been made possible by globalization. Specifically, reference is often made to five emerging national economies: Brazil, Russia, India, China and South Africa (BRICS). The extremely promising prospects of rapid growth of these economies seem to have come to light against the backdrop of rapid globalization. In this case, it becomes extremely difficult not to recognize globalization as a major cause for this economic growth. As more developing countries continue becoming economically stable in a globalized environment, it will become increasingly evident that globalization is a positive thing for most of the world’s population.

The best way of raising the world’s poor out of poverty is by bringing more of them into the global economy

Bandow also argues that the best way of raising the world’s poor out of poverty is by bringing more of them into the global economy. This same view is currently held by the IMF and the World Bank. The IMF and the World Bank have been staunch supporters of policies that promote deregulation, liberalization, and privatization (Lee & Vivarelli, 2006). All of these policies have contributed immensely to globalization. Critics of these policies argue that sometimes economic shocks spread to different parts of the world, and poor countries tend to suffer the most severe effects (Chusseau, Dumont & Hellier, 2008; 415; Goldman, 2005; Fischer 12). However, this is not always the case. For example, during the 2008 global economic crisis, developing countries suffered smaller economic losses compared to the world’s largest economies such as the United States, the UK, Spain, Italy, and Germany (Fisher & Ponniah, 2004; Sen, 2002).

Conclusion

This critical evaluation has generated several findings in relation to Doug Bandow’s claims regarding globalization. First, it is evident that globalization is a good thing although it also has its share of negative effects. The outstanding conclusion is that the positive effects by far outweigh its ills. Complexity arises whenever researchers set out to decide whether to use correlation or causation when defining relationships between globalization and instances of falling and rising inequalities in different parts of the world.

Moreover, globalization is a positive thing only if properly managed. Global economic planning institutions such as the IMF and World have a responsibility to ensure that poor countries are bailed out whenever they are affected by the negative effects of globalization such as economic recessions. Lastly, it probably helps for more of the world’s poor to be brought into the global economy as a way of raising them out of poverty. Although inequality has increased during the last two decades, it is likely that this phenomenon could have worsened if the world’s mainstream international economic management institutions such as the IMF were not leading the way in the journey of globalization.

 

Works Cited

Arrighi, Giovanni., Silver, Beverly and Brewer, Benjamin. “Industrial convergence, globalization, and the persistence of the North-South divide.” Studies in Comparative International Development, 38.1 (2003): 3-31.

Bhalla, Surjit. Imagine There’s No Country: Poverty, Inequality, and Growth in the Era of Globalization. Washington, DC: Institute for International Economics, 2002. Print.

Birdsall, Nancy. “Rising inequality in the new global economy.” International Journal of Development Issues, 5.1, (2006): pp.1 – 9.

Chusseau, Nathalie. Dumont, Michel and Hellier, Joël. “Explaining Rising Inequality: Skill-Biased Technical Change and North–South Trade.” Journal of Economic Surveys, 22.3 (2008): 409–457.

Dinopoulos, Elias ‎and Segerstrom, P. A theory of north-south trade and globalization. Washington, DC: Centre for Economic Policy Research, 2003. Print.

Dreher, Axel. “Does globalization affect growth? Evidence from a new index of globalization.” Applied Economics, 38.10 (2006): 1091-1110.

Fischer, Stanley. “Globalization and Its Challenges.” The American Economic Review, 93.2 (2003): 1-30.

Fisher, William and Ponniah, Thomas. Another World is Possible: Popular Alternatives to Globalization at the World Social Forum. Claremont: David Philip Publishers, 2004. Print.

Fontagné, Lionel., Gaulier, Guillaume and Zignago, Soledad. “Specialization across varieties and North–South competition.” Economic Policy, 23.53 (2008): 51–91.

Goldman, Michael. Imperial Nature: The World Bank and Struggles for Social Justice in the Age of Globalization. Boston: Integrated Publishing Solutions, 2005. Print.

Guillen, Mauro “Is Globalization Civilizing, Destructive or Feeble? A Critique of Five Key Debates in the Social Science Literature.” Annual Review of Sociology, 27 (2001): pp. 235-260.

Harjes, Thomas. Globalization and Income Inequality: A European Perspective, New York: International Monetary Fund, 2007. Print.

Jones, Ronald. Globalization and the theory of input trade. Westwood: MIT Press, 2000. Print.

Kacowicz, Arie. “Globalization, Poverty, and the North–South Divide.” International Studies Review,9.4 (2007): 565–580.

Keohane, Robert and Nye, Joseph. “Globalization: What’s New? What’s Not? (And So What?).” Foreign Policy, 118 (2000): 104-119.

Khor, Martin. Globalization and the South: Some critical issues. New York: Third World Network, 2000. Print.

Lee, Eddy and Vivarelli, Marco. “The social impact of globalization in the developing countries.” International Labor Review,145.3 (2006): 167–184.

Li, Quan and Reuveny, Rafael. “Economic Globalization and Democracy: An Empirical Analysis.” British Journal of Political Science, 33.1 (2003): 29-54.

Lindert, Peter and Williamson, Jeffrey. (Eds.). Does Globalization Make the World More Unequal? Chicago: University of Chicago Press, 2003. Print.

Morgan, Kevin. “Devolution and Development: Territorial Justice and the North-South Divide.” Publius, 36.1 (2006): 189-206.

Mosley, Layna and Uno, Saika. “Racing to the Bottom or Climbing to the Top? Economic Globalization and Collective Labor Rights.” Comparative Political Studies, 40.8 (2007): 923-948.

Nissanke, Machiko and Thorbecke, Erik. “Channels and policy debate in the globalization–inequality–poverty nexus.” World Development, 34.8 (2006): 1338–1360.

Piasecki, Ryszard and Wolnicki, Miron “The evolution of development economics and globalization.” International Journal of Social Economics, 31.3, (2004): 300 – 314.

Ritzer, George. The Blackwell Companion to Globalization. London: Blackwell Publishing, 2007. Print.

Scott, Allen and Storper, Michael. “Regions, Globalization, Development.” Regional Studies, 41.1 (2007 ): 191-205.

Sen, Amartya. “Globalization, Inequality and Global Protest.” Development, 45.2 (2002): 11-16.

Stiglitz, Joseph. “Capital-market Liberalization, Globalization, and the IMF.” Oxford Review of Economic Policy, 20.1 (2004): 57-71.

Sutcliffe, Bob. “World Inequality and Globalization.” Oxford Review of Economic Policy, 20.1 (2004): 15-37.

Thoenig, Mathias and Verdier, Thierry. “A Theory of Defensive Skill-Biased Innovation and Globalization.” The American Economic Review, 93.3 (2003): 709-728.

Tisdell, Clem. “Transitional economies and economic globalisation: Social and environmental consequences.” International Journal of Social Economics, 28.5 (2001): 577 – 590.

Turner, Bryan The Routledge International Handbook of Globalization Studies. New York: Routledge, 2010. Print.

Ukpere, Wilfred and Slabbert, Andre. “A relationship between current globalization, unemployment, inequality and poverty.” International Journal of Social Economics, 36.1 (2009): 37 – 46.

Wade, Robert. “Is Globalization Reducing Poverty and Inequality?” World Development, 32.4 (2004): 567–589.

Wade, Robert. “What strategies are viable for developing countries today? The World Trade Organization and the shrinking of ‘development space’.” Review of International Political Economy, 10.4 (2003): 621-644.

Zhang, Xiaobo and Zhang, Kevin. “How Does Globalization Affect Regional Inequality within A Developing Country? Evidence from China.” The Journal of Development Studies, 39.4 (2003): 47-67.

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