Globalization, Trade, Political Economy & IR

Many claims about the relationship between globalization and poverty are not well
founded. By examining both the processes through which globalization takes place
and the effects that each of these processes can have on global poverty alleviation,
current discussions can be better informed. The processes we examine in this book
constitute the main global economic channels affecting poverty: trade, finance, aid,
migration, and ideas. By considering each of these processes in International
Relations, confusion about globalization can, to some extent at least, be resolved.
In the absence of these policies, however, this catalyst role is diminished. In a few
particular instances, globalization without corrective policies can actually
exacerbate certain dimensions of poverty. We identify what actions are needed to
produce positive global outcomes. Globalization and Global Poverty Globalization
is an often-discussed but seldom-defined phenomenon. At a broad level,
globalization is an increase in the impact on human activities of forces that span
national boundaries. These activities can be economic, social, cultural, political,
technological, or even biological, as in the case of disease. Additionally, all of
these realms can interact. For example, HIV/AIDS is a biological phenomenon, but
it affects and is affected by economic, social, cultural, political, and technological
forces at global, regional, national, and community levels. In this book, we focus
primarily on economic activities, referring to the other realms of globalization only
tangentially.2 This no doubt reflects our bias as economists, but also our
observation that global poverty is very much (but certainly not exclusively) an
economic phenomenon. In adopting this economic focus, we in no way wish to
imply that social, cultural, political, technological, and biological aspects of
globalization are unimportant. They are important. But having cast our net widely
already to include multiple dimensions of economic globalization, we consider it
unwise to cast it even more broadly. The changing natures and qualities of the five
economic dimensions of globalization characterize its process.

These dimensions are ■ trade ■ finance ■ aid ■ migration ■ ideas.

Trade is the exchange of goods and services among countries. Finance involves the
exchange of assets or financial instruments among countries. Aid involves the

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transfer of loans and grants among countries, as well as technical assistance for
capacity building. Migration takes place when persons move between countries
either temporarily or permanently, to seek education and employment or to escape
adverse political environments. Ideas are the broadest globalization phenomenon.
They involve the generation and cross-border transmission of intellectual
constructs in areas such as technology, management, or governance.

This first modern stage of globalization was followed by two additional stages, one
from the late 1940s to the mid-1970s and another from the mid1970s to the
present. These, however, were preceded by World War I, the Great Depression,
and World War II. During this time, many aspects of globalization were reversed
as the world experienced increased conflict, nationalism, and patterns of economic
autarky. To some extent, then, the second and third modern stages of globalization
involved regaining lost levels of international integration. The second modern
stage of globalization began at the end of World War II. It was accompanied by a
global, economic regime developed by the Bretton Woods Conference of 1944
establishing the International Monetary Fund (IMF), what was to become the
World Bank, and the General Agreement on Tariffs and Trade (GATT) This stage
of globalization involved an increase in capital flows from the United States, as
well as a U.S.-founded production system that relied on exploiting economies of
scale in manufacturing and the advance of U.S.-based multinational enterprises.12
This second stage also involved some reduction of trade barriers under the auspices
of GATT. Developing countries were not highly involved in this liberalization,
however. In export products of interest to developing countries (agriculture,
textiles, and clothing), a system of nontariff barriers in rich countries evolved.
Also, a set of key developing countries, especially those in Latin America, pursued
import substitution industrialization with their own trade barriers.13 These
developments, along with the Cold War, suppressed the integration of many
developing countries into the world trading system. The third modern stage of
globalization began in the late 1970s. This stage followed the demise of monetary
relationships developed at the Bretton Woods Conference and involved the
emergence of the newly industrialized countries of East Asia, especially Japan,
Taiwan (China), and the Republic of Korea. Rapid technological progress,
particularly in transportation, communication, and information technology, began

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to dramatically lower the costs of moving goods, capital, people, and ideas across
the globe.

Globalization is a process with a long history. People have been exploring,

migrating, and trading with each other throughout human history, and these
activities have created interactive networks connecting the different parts of the
planet and producing dependent economic relationships. In modern times,
globalization can be recognized by noting iconic global corporations, such as
Walmart, McDonald’s, or Toyota, that trade across international borders and
integrate labor and resources from different countries to sell a product or service in
the global marketplace. In a number of countries, people have protested against the
building of new Walmart’s or McDonalds’, and such protests exemplify concerns
about globalization and the growing expansion of dominant global economic units
into local communities. These ubiquitous corporations represent corporate interests
that are primarily concerned with company profits. Global corporations tend to
view countries or communities as either markets for their products or sources of
labor or raw materials. Globalization can seriously impact local communities for
better or for worse, depending on local circumstances. The main force that
encourages globalization is economic activity based on technological
advancements. Cultural and societal changes often occur as a consequence and are
no less significant.

Political geography examines geography’s influence on political systems and

globalization, which are related to issues concerning the development of borders
and the distribution of government types. One of the most significant events in
political geography was colonialism, which is connected to the development of
capitalism. Eric Wolf, in his book Europe and the People without History, details
the expansion of European powers throughout the world to control both human and
natural resources as well as expand a country’s world power and promote
Christianity. The British parliamentary system of government was exported to
various areas of the British Empire. Now the parliamentary system is used
throughout the world in former British colonies and throughout the British
Commonwealth. Additionally, colonialism helped spread the English language
throughout the world, for example, to India and the United States.

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European colonialism was an early wave of globalization that changed the planet
and shaped most of the world’s current political borders. This early wave of global
conquest was fueled by the Industrial Revolution. Colonialism transferred
technology, food products, and ideas around the globe in merchant ships that
centered on the European power bases of the colonial empires of Europe—mainly
Britain, Spain, France, Portugal, and the Netherlands. When the United States
became independent of these European colonial powers, it began to extend its
power and influence around the world. Thus, the first major wave of globalization
was a result of European colonialism.

Brain drain also happens on an international level—that is, students from periphery
countries might go to college in core countries, such as the United States or
countries in Europe. Many international college graduates do not return to their
poorer countries of origin but instead choose to stay in the core country because of
the employment opportunities. This is especially true in the medical field. There is
little political power in the periphery; centers of political power are almost always
located in the core areas or at least dominated by the core cities. The core areas
pull in people, skills, and wealth from the periphery. Lack of opportunities in the
periphery pushes people to relocate to the core.

Power, wealth, and opportunity have traditionally been centered in the core areas
of the world. These locations are urbanized and industrialized and hold immense
economic and political power. Ideas, technology, and cultural activity thrive in
these core areas. Political power is held in the hands of movers and shakers who
inhabit the core. The core depends on the periphery for raw materials, food, and
cheap labor, and the periphery depends on the core for manufactured goods,
services, and governmental support.