TOPIC- GLOBALIZATION IS AN ENGINE OF ECONOMIC DEVELOPMENT AND

POVERTY

SEMESTER – II

ECONOMICS

SUBMITTED TO – Prof. Neha Satoliya

SUBMITTED BY – Shivansh Shubham

Division – A
Roll No. – A027 BA LLB (Hons.)
 CONTENTS

SL NO. TOPIC PAGE NO.

1 ABSTRACT 3

2 INTRODUCTION 4-5

3 PURPOSE OF SELECTING THIS TOPIC 5

4 LITERATURE REVIEW 6-7

5 RESEARCH OBJECTIVE 8

6 RESEARCH METHODOLOGY 8

7 HYPOTHESIS 8

8 CH-1. THE RISE OF GLOBALIZATION 9

9 CH-2. THE CORRELATION BETWEEN GLOBALIZATION, 10-11

ECONOMIC GROWTH, AND POVERTY REDUCTIONS.

10 CH-3. THE LINK BETWEEN GLOBALIZATION AND 12

ABSOLUTE POVERTY
11 CH-4. WHICH WAY FORWARD? 13-14

12 FINDINGS 15

13 CONCLUSIONS 16

14 REFERENCES 17

15 BIBLIOGRAPHY 18
 ABSTRACT

The goal of this research was to determine how economic globalization influenced OIC
nations' economic progress. The research also looked at the effects of complementary policies
on the globalization growth effect. It also looked into whether a country's income affects the
growth consequences of globalization. Using the generalized method of moments (GMM)
estimator within the framework of a dynamic panel data approach, we provide evidence that
economic globalization has a statistically significant impact on economic growth in OIC
countries. According to the findings, countries with more educated people and well-
developed financial systems have a larger beneficial influence. According to our findings, a
country's socioeconomic position influences the impact of economic globalization. High- and
middle-income countries profit from globalization, whereas low-income ones do not. To gain
from globalization, governments must have sufficient revenue. Directly and indirectly,
economic globalization promotes growth by bringing about complementary changes.
 INTRODUCTION

What role does globalization play in the growth of economies? The responses will differ
greatly depending on who or what group you ask. Globalization is critical to a country's
capacity to extract maximum value from its available resources. The best use of those
resources usually leads to a boost in the country's economic development. The flourishing
economic growth that occurs as a result of growing interconnection between countries usually
leads to a higher standard of living and a higher overall quality of life. A country's capacity to
globalize is critical to its economic progress. Given the magnitude of the impact of
international economic integration on national economies, globalization is a critical factor in
shaping the future of the world.

Globalization is the process of countries becoming more linked. Trade between the two
countries for hundreds, if not thousands, of years, countries have come together. The scope
of commerce, on the other hand, was quite small. The primary distinction between
international commerce and domestic trade and globalization refers to the size of the
market. It was due to technological advancements and when it came to communications in
the nineteenth century, globalization began with the first phase. Even though there is no
universal agreement among academics. Historians think that the first phase of globalization
began in the mid-nineteenth century. S started in the early 1800s and ended in 1914. “For
most economic historians believe that this is because of these factors the first period of
globalization began a century before 1914."

All individuals in today's globe have reaped some of the advantages of globalization: the rise
of international commerce has resulted in vaccinations and medicines developed in a few
countries being extensively utilized to eliminate illnesses and treat severe infections all across
the world. Every country's life expectancy has grown since 1900, and the worldwide average
life expectancy has more than doubled. Globalization has also been a major engine of
exceptional economic progress, resulting in a world with far less poverty.

These accomplishments, however, are the result of a variety of factors, not the least of which
is globalization. Another factor is governments' growing ability to collect income and
redistribute resources through social transfers. A significant contributor to higher living
conditions throughout the world Economic progress has not been achieved only through free-
market capitalism or social democracy. On the contrary, they frequently collaborate. In this
blog article, we go over the evidence for these statements in further depth.

Globalization is the process of countries becoming more linked. Economic growth that occurs
as a consequence of growing interconnection between countries usually leads to a higher
standard of living and a higher overall quality of life. A country's capacity to globalize is
critical to its economic progress. Globalization has a crucial part in shaping the world's
destiny since the worldwide integration of national economies has such a significant impact.
The purpose of this study is to describe the function of globalization and its overall influence
on economic growth.

PURPOSE OF SELECTING THE TOPIC

Purpose of selecting this topic was because it is about the interconnectedness of people and
businesses across the world that eventually leads to global cultural, political and economic
integration and I wanted to study about it and this research paper was a great way to do it.
Also, there is a lot of importance of globalization in higher education in the field of
economics, and this paper provided a wonderful opportunity to understand about it from the
very basics.
 LITERATURE REVIEW

Globalization and its Effect on World Poverty and Inequality: Rahim, H. L., Abidin, Z.
Z., Ping, S. D., Alias, M. K., & Muhamad

Poverty in the face of affluence, according to former World Bank President James D.
Wolfensohn, is the world's most important problem. According to the United Nations General
Assembly in 1996, poverty elimination is a moral, political, social, and economic goal for
mankind. This claim was supported by international development, trade, and financial
organizations, as well as practitioners and experts in the field (World Bank, 2001). In a world
of 7 billion people, 80% live on less than $10 a day, and 3 billion people, or roughly half of
the population, live on less than $2.50. The poorest 40% of the world's population creates
around 5% of global revenue, while the wealthiest 20% generates 75%. (Shah, 2013). Poverty
is estimated to be the cause of daily mortality for 22,000 children aged five and under in
2009, according to the United Nations Children's Fund (UNICEF, 2011). As a result, about
eight million children do not reach the age of five in a calendar year. Poverty has two distinct
meanings. The first refers to an absolute level of life that is expressed in meeting the bare
minimum of survival requirements. The second is relative poverty, which is defined as the
difference in income between affluent and poor people. Economists commonly use an
artificial currency called "purchasing power differential dollars" to assess relative poverty.
One would wonder how, in an age of globalization and no borders, poverty remains a serious
concern in some areas of the world. Why are certain nations' living standards significantly
higher than others, but a big portion of the world remains impoverished? Globalization is the
process through which many countries become increasingly interconnected through
international technology transfers, trade liberalization, and increased information and
financial mobility. The debate over whether it helps or hinders the global poverty rate is
never-ending.

Does Globalization Reduce Poverty? Some Empirical Evidence for the Developing
Countries: E. Santarelli, P. Figini

In this study, we look at the impact of globalization on poverty, which is a hot topic in today's
economic development debate. We examine empirical data on the link between globalization
(in its broadest sense) and poverty in emerging countries (Dcs). Standard indexes of trade
openness, financial openness, and privatization are used to measure globalization. We utilize
relative and absolute poverty indices averaged over five and 10 years to quantify poverty.
Researchers can use relative poverty indices to look at a specific aspect of poverty, adding to
earlier studies. To sketch a few stylized facts in an enormously complex system of
interactions, descriptive statistics and econometric analysis are applied.

Globalization For Development: Meeting New Challenges: Ian Goldin, K Reinert

The relationship between globalization, poverty reduction, and development is complex. This
book investigates whether globalization benefits or harms the poor. The book looks at how
trade, money, aid, migration, and ideas may all contribute to economic success. The book
presents policy proposals for improving globalization as a vehicle for shared prosperity and
poverty reduction by assessing what works and what doesn't. Students, scholars, and anybody
else interested in the consequences of globalization on international development will find it
fascinating.

Globalization, growth, and poverty: Building an inclusive world economy: P Collier, D

Dollar
Examines the effects of globalization, such as rising inequality, changing power, and cultural
homogeneity, as well as strategies for making globalization more beneficial to disadvantaged
nations and individuals. Considers the new wave of globalization and its economic
implications, as well as measures to improve the international architecture for integration so
that locations currently excluded from globalization can participate and benefit, what should
be done to strengthen domestic institutions and policies, and issues of power, culture, and the
environment.

The blessings and challenges of globalization: Daniel T. Griswold

Mr. Griswold claims that globalization promotes economic growth by providing many
triggers. Globalization also helps to reduce poverty by increasing life expectancy and
lowering infant mortality. Globalization opponents say that it would result in widespread
degradation of labor and environmental protection (see the recent rallies in Seattle against the
World Trade Organization). Mr. Griswold, on the other hand, claims that multinational
corporations set higher criteria for their foreign manufacturing plants than they do for those in
home markets. "WTO laws do not exclude governments from implementing environmental
actions.
 RESEARCH OBJECTIVE

 The objective of this research paper is to analyze the impact of globalization on the
world market and poverty.
 This paper will also entail the two phases of globalization before and after the Second
World War.

RESEARCH METHODOLOGY

 The research has been conducted through secondary sources of data.

 Reference to existing data, literature, and statistics has been taken from the internet
journals, and articles.
 The data analysis and statistics are taken from World Bank, Bourguignon, and
Morrison for the historical estimates and the World Bank data from 1981 onwards.
(2002)

HYPOTHESIS

H0- Globalization has no impact on world market and poverty.

H1- Globalization impacts the world market and poverty level.

Chapter I: THE RISE OF GLOBALIZATION

For thousands of years, international commerce has been a vital aspect of the global
economy. Despite this lengthy history, overseas commerce was very minor until the early
nineteenth century, with global exports and imports never exceeding 10% of global
production until 1800.

This first wave of globalization came to an end with the beginning of the First World War,
when the decline of liberalism and the rise of nationalism led to a collapse in international
trade. But this was temporary and after the Second World War, trade started growing again.
This second wave of globalization, which continues today, has seen international trade grow
faster than ever before. Today, around 60% of all goods and services produced in the world
are shipped across country borders.

Since 1800, foreign commerce has grown at a phenomenal rate, as shown in this graph. The
series depicts the value of global exports at constant prices—global exports have been
indexed, so values are relative to the value of exports in 1913. This graph's overall pattern is
striking: The growth of trade was exponential. Other trade indicators, such as the proportion
of imports and exports in total production, support this conclusion. Globalization transformed
the international economy in just a few generations.
Chapter II: THE CORRELATION BETWEEN GLOBALIZATION,
ECONOMIC GROWTH, AND POVERTY REDUCTIONS.

During the time of rising international commerce, the average global income climbed
significantly, and the proportion of people living in extreme poverty decreased steadily. A
typical statistic for gauging national average earnings is GDP per capita. Average salaries
grew in a similar trend to international trade, according to this metric. For thousands of years,
global GDP per capita grew at a minimal rate: in the preindustrial era, technical development
produced people rather than riches. However, this altered dramatically throughout the
nineteenth century, coinciding with the first wave of globalization. Economic growth began
to accelerate during this period, and global GDP per capita has been steadily increasing for
the previous two centuries, except for reduced growth rates in the years between the two
world wars.

In terms of extreme poverty, data suggests that up until 1800, the great majority of people in
the world lived in extreme poverty, with just a small elite enjoying improved living
conditions. We began to make progress in the nineteenth century, and the percentage of
people living in extreme poverty began to drop. This trend is seen in the graph below. As we
can see, two hundred years later, the proportion of individuals living in severe poverty has
decreased to fewer than 10%. This is an accomplishment that our forefathers could never
have imagined. In terms of extreme poverty, data suggests that up until 1800, the great
majority of people in the world lived in extreme poverty, with just a small elite enjoying
improved living conditions. We began to make progress in the nineteenth century, and the
percentage of people living in extreme poverty began to drop. This trend is seen in the graph
below. As we can see, two hundred years later, the proportion of individuals living in severe
poverty has decreased to fewer than 10%. This is an accomplishment that our forefathers
could never have imagined.

When we consider that the global population rose sevenfold during the same period, the
dramatic rise in the prevalence of poverty is even more astounding. Such a rise in the
population would have resulted in less and less consumption for everyone in a society
without economic progress. Yet, as the graphic illustrates if you switch to the 'absolute'
approach, the exact reverse occurred: we were able to raise more and more people out of
poverty during a period of tremendous population expansion. Living with less than 1.90
dollars per day is difficult by any standard—the term ‘extreme poverty is appropriate.
However, recent estimates show that no matter what global poverty line you choose, the share
of people below that poverty line has declined.
Chapter III: THE LINK BETWEEN GLOBALIZATION AND
ABSOLUTE POVERTY

Of course, the fact that trade and average earnings rose in lockstep during a time of
unparalleled poverty reduction does not prove a causal link. However, both data and theory
imply that what we're seeing isn't just a coincidence. Trade enables efficiency improvements,
which result in increased overall economic development. International commerce, from a
theoretical standpoint, promotes economic progress by allowing countries to specialize to
create things that they are relatively effective at while importing other items. This causal
process is supported by a large body of empirical evidence.

What does it mean for poverty if trade leads to an increase in average income? David Dollar
and Aart Kraay experimentally showed in a widely referenced 2002 academic essay that, on
average, the poorest people's income climbed one-for-one with average national earnings
throughout the last four decades of the twentieth century. 3 This indicates that trade has aided
in the rise of the poor's earnings just as much as it has aided in the rise of average incomes.
Dollar and Kraay's original findings have been validated in more subsequent research. When
seen as a whole, the data suggests that globalization has helped to alleviate poverty
throughout the world.
Chapter IV: WHICH WAY FORWARD?

Has globalization been a catalyst for economic growth? Yes, it is correct. Globalization has
boosted economic growth, resulting in higher living standards and a reduction in severe
poverty throughout the world.

Is it reasonable to infer that we should aspire for a "hyper-globalized" world economy in

which commerce is entirely unrestricted and public policy and regulation have no place? No,
that is not the case. The argument is that the global historical successes we may credit to
globalization are not independent of other variables, such as governments' ability to transfer
resources. Indeed, as the last graphic demonstrates, the process of globalization that we have
witnessed over the previous couple of centuries occurred concurrently with the formation of
governments.

What level of global market integration would be ideal? Anyone who claims to have a
conclusive solution has my skepticism. However, neither "hyper-protectionism" nor "hyper-
globalization" appear to represent the ideal degree of integration. Different organizations
regularly push for policies aimed at liberalizing trade and policies aimed at creating social
safety nets, and it is typical for these groups to claim that these are at odds. However, both
economic theory and empirical data from effective efforts to combat severe poverty imply
that this is a mistake: globalization and social policy should be considered as complements,
not replacements.
 FINDINGS
Globalization has both negative and positive impacts in the contemporary age. The typical person
has been damaged by our policies. Globalization will benefit the government if pro-people policies
are formulated and implemented to attract foreign direct investment. Many developed and
developing countries, such as China and the countries of Southeast Asia, have reaped significant
benefits from globalization as a result of global trade. According to Forbes, India's expanding number
of billionaires indicates how powerful companies and elites shape our policies. Even our elections
are funded by corporations, meaning that corporate interests have a strong effect on government
policy. China and Russia have utilized foreign direct investment to help millions of people escape
poverty. Such policies and attitudes toward globalization should be adopted by India. According to
those who believe in the trickle-down effect, only pro-poor policies and a willing workforce will
benefit the government. The Indian people have yet to detect the impact. The Indians continue to
wish for brighter days.
 CONCLUSION
There are several advantages to globalization. For example, when more money is pumped
into developing nations, the people in such countries have a higher chance of achieving
economic success and raising their general level of living. Global competition fosters
creativity and innovation while keeping commodity/service pricing in check.

Developing countries may profit from current technology without having to go through many
of the growing pains that come with technological growth. Governments are more able to
collaborate on shared goals now that there is a benefit to cooperating, a greater capacity to
interact and coordinate, and a worldwide understanding of challenges. Foreign culture is
more widely available in the form of films, music, food, clothes, and other forms of
expression.

The amount of emphasis a country places on education is linked to that country's capacity to
innovate. Innovations resulting from a country's investment in education increase efficiency
and, as a result, contribute to a greater quality of life, among other things. "Scientific may be
related to economic growth at the most fundamental level since science discovery leads to
productivity growth, which promotes capital accumulation, output growth, and overall
economic expansion." The human race has benefitted from globalization. Globalization has
enabled scientists/medical professionals from different nations to share advances in medicine.
The increase in the global population can be largely attributed to the advances made in
medicine. Each discovery helps to progress another’s research. Essentially, one innovation or
discovery leads to many more.
 REFERENCES

 Hasan MA, “Does Globalization Accelerate Economic Growth? South Asian

Experience Using Panel Data - Journal of Economic Structures” (SpringerOpenJuly
26, 2019)
<https://journalofeconomicstructures.springeropen.com/articles/10.1186/s40008-
019-0159-x> accessed January 18, 2022
 The role of globalization in Economic Development SSRN,
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2233648#:~:text=Globalization
%20is%20the%20process%20of,overall%20improved%20quality%20of%20life. (last
visited Jan 18, 2022)
 Rahim, H. L., Abidin, Z. Z., Ping, S. D. S., Alias, M. K., & Muhamad, A. I. (2014).
Globalization and its effect on world poverty and inequality. Global Journal of
Management and Business, 1(2), 8
 Santarelli, E., & Figini, P. (2002). Does globalization reduce poverty? Some
empirical evidence for the developing countries.
 Goldin, I., & Reinert, K. (2007). Globalization for development: trade, finance, aid,
migration, and policy. World Bank Publications.
 Collier, P., & Dollar, D. (Eds.). (2002). Globalization, growth, and poverty: Building
an inclusive world economy. World Bank Publications.
 Griswold, D. T. (2000). The blessings and challenges of globalization. International
Journal on World Peace, 3-22.
 BIBLIOGRAPHY

 Is globalization an engine of economic development? Our World in Data,

https://ourworldindata.org/is-globalization-an-engine-of-economic-development (last
visited Jan 18, 2022)
 How globalization impacts international investors and economic growth The Balance,
https://www.thebalance.com/globalization-and-its-impact-on-economic-growth-
1978843 (last visited Jan 18, 2022)
 Effects of economic globalization National Geographic Society,
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(last visited Jan 18, 2022)
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https://repository.upenn.edu/cgi/viewcontent.cgi?article=1079&context=bepp_papers
 Does Globalization Reduce Poverty? Some Empirical Evidence for the Developing
Countries, https://ideas.repec.org/p/bol/bodewp/459.html
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