3. Does globalization cause poverty?
Many people who are concerned about the fate of the world's poor now
attribute their plight to globalization. They argue that globalization
has weakened the position of poor countries and exposed poor people to
harmful competition. Their concern is understandable, especially since
the gap between rich and poor has indeed become more glaring in recent
decades. However, proving a direct link between economic globalization
and poverty is a complex task for several reasons:
Globalization as a single cause. Specifying how globalization
affects the economic status of countries or individuals is not easy. The
effects of "globalization" may be due to competition among workers, or
foreign investment, or trade, or government borrowing. There is no single
measure of integration into the world economy. Each aspect of integration
can have variable effects.
Poverty as a multidimensional phenomenon. Poverty can be measured
in different ways-for example, relative to a country's average, by consumption
capacity, or in terms of overall well-being. Many people in many places
historically have been poor for many reasons. Attributing (increases in)
poverty to globalization therefore requires proving that globalization
has become a dominant factor in producing a new kind of poverty.
Globalization and overall global poverty. By common consent,
globalization has proceeded rapidly since the 1980s. Yet according to
the recent Global Poverty Report, the proportion of the world population
living in poverty has declined from 29% in 1988 to 26% in 1998. Moreover,
social indicators for many poor countries also show improvement over several
Globalization and poverty in specific countries. If globalization
causes poverty, then countries that become more economically integrated
via trade and investment should do worse. But some that have become more
integrated into the world economy, such as China, have made progress.
Others, for example in sub-Saharan Africa, that have remained relatively
isolated have experienced declines. Such overall differences do not settle
the issue, since many other factors may be at work, but they do cast some
doubt on the overall argument.
Poverty vs. inequality. There is ample evidence that the gap
between the richest and poorest countries, and between the richest and
poorest groups of individuals in the world, has increased. But inequality
may increase without an increase in poverty rates, for example if globalization
increases opportunities for the wealthy more rapidly than for the poor.
Since increasing wealth may be due to many causes, showing that the rich
get richer because the poor get poorer is trickier than recording
and lamenting the fact of inequality as such.
Globalization as catchall. One characteristic of arguments linking
globalization and poverty is the generalization from specific instances
of impoverishment to grand global developments. When governments assume
debt in private capital markets and declining world demand for their commodities
depresses prices and they seek funds from the IMF to repay loans and they
agree to conditions for internal reform and these conditions impose hardship
on their people, it is tempting to conclude that therefore "globalization"
This report to the 2000 G8 meeting outlines poverty trends and scenarios.
Is Good for the Poor
A World Bank paper argues that the poor benefit from overall growth,
anti-inflation policies, and economic openness.
This Oxfam paper disputes the analysis in the World Bank's "Growth Is
Good" paper by arguing that while growth helps the poor, the real question
is how to convert growth into a higher rate of poverty reduction.
This Oxfam report finds little progress since 1995 towards official UN
development goals in child health, education and poverty.
This UN report reviews policies to overcome poverty.
Poverty facts, analyses, and links from Global Issues.
(back to the top)
- What is globalization?
- How does globalization affect women?
- Does globalization cause poverty?
- Why are so many people opposed to globalization?
- Does globalization diminish cultural diversity?
- Can globalization be controlled?