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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 decades.

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" causes poverty.

Global Poverty Report

This report to the 2000 G8 meeting outlines poverty trends and scenarios.

Growth Is Good for the Poor

A World Bank paper argues that the poor benefit from overall growth, anti-inflation policies, and economic openness.

Growth with Equity

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.

Missing the Target

This Oxfam report finds little progress since 1995 towards official UN development goals in child health, education and poverty.

Overcoming Human Poverty

This UN report reviews policies to overcome poverty.

Poverty resources

Poverty facts, analyses, and links from Global Issues.

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  1. What is globalization?
  2. How does globalization affect women?
  3. Does globalization cause poverty?
  4. Why are so many people opposed to globalization?
  5. Does globalization diminish cultural diversity?
  6. Can globalization be controlled?



Copyright 2000-2001 - Frank Lechner