October 9, 2017

Globalization
Javier Ismael Morales lvarez #729480

Act. 6 Globalization and Poverty

Teacher: Melvin Moses Duke

Delivery Date: October 9, 2017
 October 9, 2017

Globalization and Poverty

Introduction

Globalization and Poverty are two topics that are of extreme relevance in our

modern society, they both relate with one another and shape our global economy.

As we know economic growth is the main channel through which globalization can

affect poverty, what researchers have found is that, in general, when countries

open up to trade, they tend to grow faster and living standards tend to increase. In

this document I will list some of the ways poverty can be diminished from an

economic perspective, and show how globalization is so important for the

development of countries and decreasing their poverty rates.

Strategies

Strategy 1 Specialization: Specialization is a very effective strategy for countries

who count with competitive advantage which means they might have access to na-

tural resources, such as high-grade ores or a low-cost power source, highly skilled

labor, geographic location, high entry barriers, and access to new technology.

When a country dedicates itself to produce a good that they are highly efficient at

making this means the opportunity cost of trade is lower, so they should continue

making this product and then trading in the global market, all of this is backed by

the economic theory of comparative advantage; as Adam Smith said in the Wealth

of Nations "If a foreign country can supply us with a commodity cheaper than we

ourselves can make it, better buy it of them with some part of the produce of our

own industry employed in a way in which we have some advantage.

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What this means as I previously explained is that we should produce the goods

that are of lower cost to us to produce and if every country follows the same prin-

ciples then each one ends up having their own comparative advantage over that

product.

Strategy 2 Economic Liberalization: Economic liberalization is the reduction of

government regulations and restrictions in an economy in exchange for greater

participation by private entities. Thus, liberalization in short is "the removal of

controls" in order to encourage economic development. Economic liberalization is

a strategy that is heavily utilized in our current economy; three of the fastest gro-

wing economies in the world (Brazil, China, India) nowadays are clear examples of

why economic liberalization is one of the best strategies to reduce poverty. Bet-

ween 1981 and 2001 the percentage of rural people living on less than 1 dollar a

day decreased from 79 to 27 percent in China and 63 to 42 percent in India. Anot-

her example of this is Vietnam, in the mid 90s Vietnam liberalized its trade. Prior to

that, Vietnam limited the amount of rice that farmers were able to export. When

the government eliminated that quota, demand for Vietnamese rice increased and

prices of rice in Vietnam increased. This led to higher standards of living for Viet-

namese rice farmers, globalization helped many of them get out of poverty.

Strategy 3 Increase Access to Education and Skills Training Programs: Evi-

dence shows that workers that do not have education beyond a secondary school

diploma are three times less likely than their university educated peers to take part

in employer sponsored training. This shows how companies value the human ca-

pital that each individual offers to the company, while highly skilled workers go th-

rough training programs to get raises and better positions, people with low levels

of educations stay in the same low income jobs.

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This could be because well educated and trained workers are more likely to be

more productive and highly efficient. Workers increase their potential income by

learning more about a specific job or improving their capabilities.

Countries with a greater portion of their population attending and graduating

from schools see faster economic growth than countries with less-educated wor-

kers. As I mentioned previously educated workers tend to be more efficient and

this translates as a whole; when a country has high levels of education, technology

based and value added industries are developed and contribute as a huge part of

a countries GDP. As is the example of Silicon Valley in the United States, which is

the result of very high level of workers (critical thinking, development of techno-

logy, great ideas) which have produced some of the worlds biggest companies.

Conclusion

As I have listed there are many ways in which Globalization can help to reduce po-

verty in a country but there are some barriers that can sometimes prevent this from

happening, for example as we can see poverty has been reduced in many asian

countries but this hasnt happened as much in Africa, this is because many com-

panies dont want to go into some of those countries because of lack of political

and economic stability. Weak states, wealth distribution, and inept or corrupt poli-

ticians often combine to reduce the opportunities for poor people. This is the case

for our country Mexico we have many natural resources and big markets to exploit,

but the lack of a strong connection between government and private institutions

make us lose a lot of opportunities we should be talking advantage of.

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References

BANCO MUNDIAL (1999). Formulacin de estrategias de reduccin de la pobreza

en los pases en desarrollo. En lnea: En lnea: http://www1.worldbank.org/prem/
poverty/strategies/strspan.pdf (consulta: Septiembre 2002).

Kumar Sharma, Chanchal (2011). "A Discursive Dominance Theory of Economic

Reform Sustainability: The Case of India.

"The Theory of Comparative Advantage: Overview". Flat World Knowledge. Re-

trieved 23 February 2015.

MacDougall, G. D. A. (1952). "British and American exports: A study suggested by

the theory of comparative costs.

Steven M Suranovic (2010). "International Trade Theory and Policy.

Warf, Frederick P. Stutz, Barney (2007). The World Economy: Resources, Location,
Trade and Development (5th ed.).