Globalization and the poverty issue in the developing countries

Azadi Behnam Muhammed oqlu,

Islamic Azad University, Ardabil Branch, Iran.

Глобализация и проблема бедности в развивающихся странах

Азади Бехнам Мухаммед оглу,

университет Азад Ислам, филиал Ардебиль, Иран.

Globalization phenomenon in international and national scale and for different countries especially developing countries brings some challenges and troubles and confronting with these troubles needs expert investigation and logic approach. The developing countries are worried for poverty aggravation and their inability in international competition. This study attempts to recognize problems and obstacles of developing countries for incorporation into global economy using documentary accounts and experiences and ideas of the agreeing people and opponents of globalization and introduces necessary grounds in order to enter this are. It is clear that globalization like every other phenomenon follows some opportunities and limitations and the developing countries should recognize its governing rules and confront with globalization in the best way through applying appropriate economic policies and acknowledging its talents and relative advantages as well as providing grounds and prerequisites of the area.

Явление глобализации в международном и национальном масштабе представляет для различных, особенно развивающихся стран, определенные проблемы и столкновение с этими проблемами приводит к необходимости опытных исследований и научного подхода. Развивающиеся страны проявляют тревогу по поводу ухудшения бедности и их неспособности выдержать конкуренцию с развитыми странами. В данном исследовании мы пытаемся выявить проблемы и препятствия развивающихся стран на пути к объединению в мировое экономическое сообщество, на основе анализа соответствующих статистических документов и мнений поборников и противников глобализации, а также имеющихся прогностических моделей общественного развития. Ясно, что глобализация как любое социальное явление, имеет как некоторые возможности, так и ограничения, и развивающиеся страны должны признать его основные правила и развиваться в условиях глобализации путем применения соответствующей экономической политики и использования ее относительных преимуществ для обеспечения необходимого уровня жизни, основных прав и свобод граждан.

Some scholars believe that globalization isn’t a planned issue and it is the result of technologic revolutions in transportation, communication, media, internet, telecommunication, etc. So they evaluate the globalization as an inevitable trend which involves, willy-nilly, all of countries and all of life grounds like economy, culture, policy and so on. It is only reason that it is recommended that the developing countries should revolute their political, social, cultural, and economic structures in harmony with governing rules of this process and adapt themselves with new conditions in order to exploit the advantages of globalization and avoid its negative consequences.

 Another group of scholars recognize the globalization as a process of planning of the world’s economic super powers and forming international mechanisms like World Trade Organization (WTO), although they don’t reject technologic grounds of the globalization. They believe that the globalization phenomenon deletes the developing countries in many constructive grounds through emphasizing on the principle of relative advantage of production and exports.

 This group considers that tariffs deletion and reduction of supporting the interior economy in this stage of development results in weakening of national economy, bankruptcy of internal producers, and limiting the country’s economy to sell just one or two initial goods (exporting raw material like oil, copper, zinc …). Thus, the globalization has no consequences except weakening national government and poverty aggravation in developing countries.

The Globalization Concept

The existing related definitions are often under the influence of attitudes of the agreeing people and opponents of globalization and in many cases, scholars’ definitions are affected by expert attitude and expertise of scholars. That’s why the attitudes of sociologists, economists, historians, and scholars of communication and political science are rarely similar.

 But it is obvious that globalization is a process resultant of technologic progress in every aspect of human life which increases exchanges and global will to flourish world economy and to confront with global problems. The globalization can be considered as the process of fee circulation of good, capital, work force, and even culture and thought.

The Globalization Literature

Considering economic and technologic aspects, three main waves are recognizable in the process of globalization formation:

 The first wave was established through transportation progress and possibility of more exploitation of the resources from 1870 to 1914 A.D. the circulation of goods, capital and the work force has been wonderfully increased and exports was duplicated in comparison with global income. The foreign investment was increased three times in comparison with income in developing countries of Africa, Asia, and Latin America. The immigration had dramatic growth and work force circulation was almost 10% of the world’s population.

 From 1950 to 1980 A.D., the world was experiencing the second wave of globalization which had been focused on the unity of wealthy countries. The Europe, the North America and Japan attempted to revive their commercial relationships through lifting the multiple bans on the commerce and in the framework of general agreement of tariff and trade (GATT). In this event, the many developing countries could export just the raw material and they were often deprived from capital circulation.

 The new wave of the globalization began since 1980 and is continuing until today. This event has been under the influence of technologic progresses in transportation and communication and in the other hand, it is resulted from the developing countries’ decision to improve their investment and to open the doors for foreign commerce and investment.

 For the first time, the poor countries could enter global market using abundant workforce in construction and services. The constructive goods were increased to 80% in 1998 while it was less than one forth of developing countries’ exports in 1980, so that the economy of these countries enjoyed amazing growth.

 The globalization’s economic effect on the poor can be evaluated using three criteria: 1. Reduction of absolute poverty, 2. inequality problem, 3. the effect of globalization on political systems. But considering the poverty and economic growth, it is seriously proposed that the poverty and back warded state of both undeveloped and developing countries is resultant of the performance of their government as well as official or political systems which are affected by corruption and mismanagement, rather than external factors or the globalization.

 In the last decades, the economic globalization resulted in amazing revolutions in increase of construction, consumption, as well as goods and services trade in global scale. So the global economy is going to be flourished day to day and some developing countries enjoyed the highest rate of economic growth. For example, China’s economic region including China, Hong Kong, and Taiwan has had more than 7% average rate of growth. The volume of exports has been increased to 6.5% in 1990s while it was 0.5% in 1913-1950.

 A number of the developing countries are providing optimal conditions for absorbing direct foreign investments. There was a dramatic reduction in tax average especially in south of Asia and it is 30% now while it was 65% in 1980s.

 There is a reduction in duties from 47% in 1947 to 3% in recent years. But the economic growth resulted from the globalization in all developing countries hasn’t had equal distribution, so that the growth rate of real share construction has been – 0.9% in Africa Sahara from 1980 to 1990.

 The fact is that the opportunities and benefits of the globalization have not been distributed equally for all of countries and regions and some developed countries as well as developing countries of Latin America and east and southern east of Asia have been more benefited than others. Many poor countries have been left aside because of the globalization process, and in fact, they have been located in margin of global economy and are faced with income reduction and increasing poverty. Of course, some of these countries have inappropriate geographical position and some suffer poor policy-making and governmental foundations and others are involved in civil wars.

 Although the globalization has helped to reduce the absolute poverty in countries which have been incorporated into in global economy to higher degree, the globalization has resulted in intensifying poverty considering inequality index. The inequality aggravation has been clear among families, income groups, and different areas of the poor countries. The poverty crisis and indigent are the facts occurring in the world especially the developing countries and statistical evidences indicate that the world fight against poverty has been trivial. In Eastern Europe and central Asia, the percentage of population with share income less than one dollar per day has been increased from 1.6% in 1990 to 3.6% in last years of the decade (from 7 million people to 17 million people). At the end of 1990s, almost one milliard people were living with less than one dollar income per day.

The Multinational Companies and the Globalization

These companies played the main role in the process of the globalization, so that the most amount of direct foreign investment absorbed in the developing countries has been from the above-mentioned countries. There are two opposite attitudes toward the performance of these companies. One emphasizes on the positive effect of multinational companies and direct foreign investments on the progress of the poor countries and poverty reduction but the other one indicates that the performance of these companies has had negative effect and it causes the aggravation of poverty and inequality in the developing countries.

 According to supporters of the globalization, the increase in foreign investment and activities of multinational companies in the poor countries results in benefits such as capital increase, technology access, management skills acquisition, and market availability in these countries and reduces the poverty through increasing job opportunities and income.

 But critics believe that the focus of direct foreign investments on a small number of the developing countries is because of serious structural problems for movement of international capital. The countries can absorb the capital which are more developed and are being industrialized as quickly as possible resulting in high investment output. Consequently, the capitals are flying out of the poorer countries whose economies submit fewer benefits. More risk, undeveloped financial markets, limited and ineffective market demands, difference in construction relations, and other economic or uneconomic obstacles have restricted the circulation of capital in the poor countries. Other point proposed by opponents is the flight of capital out of undeveloped countries to high degree. On the other hand, directions of multinational investments are different from purposes for development of these countries. For example, the most amounts of direct foreign investments in Africa Sahara has been for exploitation of natural sources especially oil, or 100% of direct foreign investments in Nigeria and Angola has been in oil ground.

 It is clear that the performance of multinational companies as one of main role-players of the globalization process has not been satisfying in most poor countries and has aggravated inequality and dependency. These companies have less responsibility for problems of undeveloped countries.

The Globalization and Agricultural Crisis

Agriculture is one of those issues which in the poor countries enjoy relative advantage. These countries can provide the opportunities for economic growth, poverty reduction especially rural poverty through omission duty tariffs in developing countries and exporting their agricultural products to markets of developing countries. Despite the economy of many poor countries depends on production and exporting agricultural products, their share in business of agricultural products are continuously reducing.

 Although some countries have benefited the globalization process, they enjoyed no benefit in the development of rural regions and the increase in price of agricultural products. In fact, the price of many export products of poor countries such as coffee, tea, cotton, sugar, banana, and so on has been decreased in comparison with constructions.

 The biggest obstacle for business of agricultural products is supportive policies of wealthy countries about their own agricultural products. Also, the globalization can change the consumption pattern. The up-to-date cars, various drinks, and new consuming things (like cell phone) can be a part of people’s everyday life quickly and increase relative poverty. This consumption pattern can increase the absolute poverty through damaging to production of the goods which the poor people are dependent financially on its income.

 At the other hand, the development of modern agriculture through amazing technologic revolution and achievements of genetic science (biotechnology) has changed the agriculture to a global complex industry which puts the agriculture under the control of the developed countries.

References

1.                   Economic-political information magazine - no. 267-268 – 2009.

2.                   World Bank, “Economic prospects and the developing world”. Oxford university press.1993.

3.                   World Bank “Globalization, Growth, and poverty” oxford university press, 2002.

4.                   ILO, “sustainable agriculture in a globalized economy» Geneva, 2000.

5.                   UNDP, “Human Development Report”. Oxford university press, 2002.

6.                   United Nations (UN) “World Investment Report” New York, 2000.

Поступила в редакцию 21.03.2010 г.