GROUP ASSIGNMENT COVER SHEET

STUDENT DETAILS

Student name: Nguyễn Nhật Huy Student ID number: 23005034

Student name: Ngô Trần Phúc Nguyên Student ID number: 23005812

Student name: Võ Chiêu Quỳnh Student ID number: 23005933

Student name: Trịnh Phương Uyên Student ID number: 23006218

UNIT AND TUTORIAL DETAILS

Unit name: Principles of Economics Unit number: ECO101

Tutorial/Lecture: Lecture Class day and time: Thursday 15:30
Lecturer or Tutor name: Lê Trung Thành
ASSIGNMENT DETAILS

Title: Group Project 1 – Micro Project

Length: 2500 words Due date: 26/10/2023 Date submitted: 26/10/2023

X
DECLARATION

I hold a copy of this assignment if the original is lost or damaged.

X

I hereby certify that no part of this assignment or product has been copied from any other student’s work or
from any other source except where due acknowledgement is made in the assignment.
X
I hereby certify that no part of this assignment or product has been submitted by me in another (previous
or current) assessment, except where appropriately referenced, and with prior permission from the
Lecturer / Tutor / Unit Coordinator for this unit.
X
No part of the assignment/product has been written/ produced for me by any other person except where
collaboration has been authorised by the Lecturer / Tutor /Unit Coordinator concerned.
X
I am aware that this work may be reproduced and submitted to plagiarism detection software programs for the
purpose of detecting possible plagiarism (which may retain a copy on its database for future plagiarism
checking).

Student’s signature: NGUYEN NHAT HUY

Student’s signature: NGO TRAN PHUC NGUYEN
Student’s signature: VO CHIEU QUYNH
Student’s signature: TRINH PHUONG UYEN
Note: An examiner or lecturer / tutor has the right to not mark this assignment if the above declaration has not been
signed.
Is globalization destined to drive up inequality among countries?

Group 3 Micro Project

UEH – International School of Business | Global Pathways
ECO101: Principles of Economics
Mr. Le Trung Thanh
October 26th, 2023
 Abstract

The primary objective of this paper is to analyze the positive and negative effects of globalization on
inequalities among countries. While globalization is claimed by some to be the driving force of
disparity in income levels across nations, others hold the belief that globalization is the main factor
in diminishing said inequality, resulting in a more equitable wealth distribution that lifts the
marginalized demographic out of extreme poverty. The paper concludes that although globalization
has a robust influence on the economic advancement of a country, the result in an improved or
worsened economy should not be solely attributed to globalization but also to domestic policies and
institutions.

I. INTRODUCTION TO GLOBALIZATION AND INEQUALITY

Nowadays, globalization is one of the most considerable issues in every nation, and there is a
statement “Is a globalized world a less equal world”, because It's not always clear how inequality and
globalization are related. Globalization is at the heart of many contemporary challenges, including
Brexit, offshore, and China's expanding middle class. However, globalization frequently receives an
excessive amount of praise and, possibly, criticism for transforming the world. In terms of global
income inequality, this is especially true. According to a prevalent narrative, economic integration
has raised inequality within countries while reducing disparity between them by moving low-skilled
occupations from wealthier to poorer countries. So, what is “ Globalization ” ?

The term "globalization" refers to the process by which trade and technological advancements have
increased connectivity and interdependence throughout the world. The breadth of globalization
includes the resulting social and economic transformations as well. One way to visualize it would be
like the strands of a massive spider web that have grown in quantity and range over millennia.
Globalization, to put it simply, is the connecting of various regions of the world. The process by
which companies, organizations, and nations start conducting business internationally is known as
globalization in economics. Although the term "globalization" is most frequently associated with
economics, politics and culture are equally impacted by and influence it. Globalization has generally
been demonstrated to raise living standards in developing nations, although some observers caution
that it may also have unfavorable effects on individual workers as well as local or emerging
economies. What was the start of globalization? Perhaps the most well-known historical example of
sharing concepts, goods, and practices is the Silk Road, an antiquated network of trade routes that
crossed China, Central Asia, and the Mediterranean between 50 BCE and 250 CE. Globalization
took off after European explorers of the New World discovered vast quantities of plants, animals,
foods, cultures, and ideas that were shared widely, a phenomenon known as the Columbian
Exchange. Another example of globalization is the Triangular Trade network, in which ships
transported manufactured goods from Europe to Africa, enslaved Africans to the Americas, and
returned raw materials to Europe (National Geographic, n.d.).

However, what is inequality in global economics? Inequality in globalization refers to the uneven
distribution of income and opportunities within and between countries as a result of increased
economic integration. Globalization-related inequality is now frequently perceived as coming in two
flavors, one "less worse" than the other.

In the "less-worse" variant, inequality is accepted as an inevitable byproduct of a nation's growing

economic development. The theory says that as a result of globalization, certain workers' wages rise
while those of other workers don't, increasing the disparity.

In the "worse" variant, higher-skilled workers' earnings rise while those of a certain segment of the
workforce—typically low-skilled and low-wage workers—drop due to a decrease in demand for their
abilities (The World Bank, 2014).

II. POSITIVE EFFECTS OF GLOBALIZATION ON INEQUALITY

Everything has both positive and negative effects including globalization. However, it is undeniable
that globalization has had a significant impact on the world’s economies and societies. First of all,
there is a widespread belief that increased globalization leads to greater economic growth for all
parties. Globalization gives all nations opportunities to get access to a wider labor pool. An
Employer of Record (EOR), for example, is a global service provider that was established to simplify
international hiring and compliance. For this reason, developing nations with a shortage of highly
qualified workers now can easily import labor to kickstart industry. On the other hand, wealthier
nations might outsource work that does not demand skillful workers to developing nations with a
lower cost of living to optimize the cost of goods sold and pass the savings on to the customer. These
days, it is commonplace for businesses in industrialized countries to outsource functions such as data
processing, customer service, and reading X-rays to India or other less industrialized countries
(Bhagwati et al, 2004). Because of these, developing countries often gain access to more jobs. In
addition, globalization enables many countries to gain access to resources they otherwise would not
have. Without exchanging resources between countries, many modern luxuries could not be
manufactured or produced. For instance, smartphones depend on rare earth metals only found in a
few places around the world. Furthermore, globalization not only stimulates economic growth but
also promotes global cooperation. Globalized economies require nations to put their differences aside
and cooperate to resolve global problems. For instance, the need for global cooperation has been
emphasized in the COVID-19 pandemic. During this period, countries are required to work together
in order to develop and distribute vaccines and share information, and best practices. Besides, when
different countries trade and invest in each other through the global financial market, they become
interconnected and reliant on one another for certain goods and services. Finally, globalization also
increases cross-border investment. Businesses can now more easily set up shop in other countries
and investors can more easily buy shares of foreign companies. This is because governments have
reduced tariffs and other taxes on imports and exports, and they have also made it easier for foreign
companies to invest in their economies. Globalization has created a more open and interconnected
world, where businesses and investors are no longer confined to their domestic markets. This has led
to increased competition, as companies now face rivals from all over the globe. To stay ahead of the
curve, businesses are actively seeking new markets and investment opportunities abroad, expanding
their operations, and diversifying their portfolios to maintain their competitiveness in the global
arena.

III. NEGATIVE EFFECTS OF GLOBALIZATION ON INEQUALITY

There have been several advantages to globalization in society, however, it has also had its
drawbacks. Antiglobalists often raise economic concerns and criticisms as a primary argument
against globalization. They argue that globalization has led to the loss of jobs, particularly in the
manufacturing sector, as companies move production to countries with lower labor costs. This has
resulted in economic hardship for workers in developed countries, particularly in the West.
Additionally, they argue that globalization has led to increased income inequality, as the benefits of
globalization tend to accrue to the wealthy, while the costs are borne by the working class. These
economic concerns are a significant factor driving opposition to globalization, particularly among
conservative or right-wing critics.
Another economic criticism is the exploitation of workers in developing countries. They argue that
multinational corporations take advantage of weak labor laws and low wages in developing countries
to maximize profits, leading to poor working conditions, low wages, and long working hours for
workers in these countries. This exploitation of workers in developing countries is often seen as a
consequence of globalization, as multinational corporations seek to reduce costs and increase profits
by outsourcing production to countries with lower labor costs.

Another common criticism of globalization is its impact on social and cultural values. They argue
that globalization undermines national identity and cultural traditions, leading to a homogenization
of global culture. This is particularly true in the case of Western culture, which is often seen as under
threat from globalization. Antiglobalists also point to the negative social consequences of
globalization, such as the spread of consumerism and the erosion of community values. They argue
that globalization promotes a culture of individualism and materialism, which is detrimental to the
social fabric of society.

Globalization is also criticized for widening income inequality and concentrating wealth in the hands
of a few. They argue that globalization has led to a concentration of wealth and power in the hands of
multinational corporations and the global elite, while the majority of people are left behind. This
concentration of wealth and power has led to growing income inequality within and between
countries, with the gap between rich and poor widening. This trend is particularly evident in
developing countries, where neoliberal policies have enabled the exploitation of resources and labor,
leading to increased inequality and poverty.

On the downside, globalization has led to a decrease in the independence of nations as they are
required to adhere to certain decisions made on an international scale. Moreover, it restricts the
ability of states to intervene in areas such as trade and compels them to adopt specific fiscal policies
that may not be entirely advantageous in order to remain competitive and attract investments in a
globalized society. Additionally, it has been argued that globalization promotes the undemocratic
functioning of multinational organizations, with larger countries typically exerting control over
decision-making at the expense of smaller nations. Furthermore, globalization has contributed to an
increase in corruption and the evasion of taxes in various regions around the globe.
IV. EVALUATION ON THE ULTIMATE EFFECTS OF GLOBALIZATION ON
INEQUALITY

Before the emergence of globalization and its critical impacts on levels of income across the globe,
there have been significant efforts in eliminating poverty through the improvement of the nation’s
overall economic circumstances. With these movements taking place before the wave of free trade, it
can be inferred that globalization is not the only panacea in alleviating poverty and income
inequality.

In China, rural poverty reduction can be majorly attributed to internal innovations, most prominently
the Agricultural Reform in 1978. This movement effectively repulsed poverty with its initiatives in
promoting liberalization of markets, which eventually led to decreased income inequality and a more
secure social safety net. The promotion of free markets through urbanization created more job
opportunities, allowing rural residents to seek better employment with improved wage compensation.
Land reforms and rural economy initiatives also provided farmers with better access to credit,
allowing them to invest in agricultural inputs and other profitable resources. Overall, the land
reforms helped reduce income inequality by providing land and economic opportunities to a wider
scale of population.

Similarly, in India, poverty was substantially reduced with the help of the Green Revolution in the
1960s. Through a collective of agricultural initiatives and government antipoverty programs, the
movements improved the livelihoods of marginal farmers which enabled them to escape poverty. In
addition, increased agricultural productivity and income provided a basis for financial inclusion,
allowing farmers to invest in their farms and diversify income sources. In general, the Green
Revolution considerably reduced poverty rates by increasing rural incomes and generating economic
opportunities. From data collection and analysis, it is speculated that poverty alleviation efforts were
particularly effective in regions that saw the most revolutionary impact.

As Winters, McCulloch and McKay (2004) conducted a review of the relations between trade
liberalization and poverty, they presented a meticulous evaluation:

“Theory provides a strong presumption that trade liberalization will be poverty-alleviating in the
long run and on average. The empirical evidence broadly supports this view, and, in particular, lends
no support to the position that trade liberalization generally has an adverse impact. Equally, however,
it does not assert that trade policy is always among the most important determinants of poverty
reduction or that the static and micro-economic effects of liberalization will always be beneficial for
the poor.”

Although globalization can be one of the most fundamental and powerful forces in eradicating rural
poverty and lifting marginalized groups out of extreme scarcity, there are more crucial factors
accounting for the improvement of economic conditions. Among those, domestic policies and
institutions play an essential role in deciding whether the merits of free trade actually have beneficial
impacts on an economic situation.

Given the opportunities when integrating into the international economy, it is important for nations
to encompass institutional regimes that facilitate critical changes following the emergence of free
trade. Nonetheless, the majority of developing countries provide inadequate social and antipoverty
programs when dealing with the forces of globalization. The constraints prohibiting economic
growth from international trade benefits are mainly domestic, including limited access to credit, poor
infrastructure, corrupt government officials and insecure property rights. Fragile government,
disproportionate wealth distribution, venal politicians and bureaucrats frequently unite to inhibit
access to opportunities for poor individuals. If markets are opened without addressing these domestic
constraints, it forces people to compete with significant disadvantages. Conversely, liberalizing trade
will be free of detrimental effects given that appropriate domestic policies and institutions are
established, especially in the eradication of the relevant vested interests. Bardhan (2006) concluded
in his research:

“Globalization is not the main cause of developing countries’ problems, contrary to the claim of
critics of globalization - just as globalization is often not the main solution to these problems,
contrary to the claim of overenthusiastic free traders.”

Therefore, the effects of globalization on poverty and inequality remain a subject of debate, with no
clear consensus among economists or the general public.

References
Effects of Economic Globalization (n.d.). National Geographic.
https://education.nationalgeographic.org/resource/effects-economic-globalization/
Theorist Eric Maskin: Globalization Is Increasing Inequality (2014, June 23). The World Bank.
https://www.worldbank.org/en/news/feature/2014/06/23/theorist-eric-maskin-globalization-is-
increasing-inequality
Effects of Globalisation (n.d.). Study Smarter.
https://www.studysmarter.co.uk/explanations/geography/globalisation/effects-of-
globalisation/?
fbclid=IwAR1FTjlmeYF1yamgqh2cOc2w0uhYekkLNiVCmOp6gGuBOLm6j8pGE_HXV7s
Alden, E. (2022, May 3). The Dangerous New Anti-Globalization Consensus. Foreign Policy.
https://foreignpolicy.com/2022/05/03/globalization-deglobalization-inflation-economy-trade-
borders/
Bardhan, P. (2006, March 26). Does Globalization Help or Hurt the World's Poor?:
Overview/Globalization and Poverty. Scientific American.
https://www.scientificamerican.com/article/does-globalization-help-o-2006-04/
Fuchs, C. (n.d.). Antiglobalization | Social, Economic & Political Impact. Britannica.
https://www.britannica.com/event/antiglobalization
George, L. (2023, June 23). The West's Anti-Globalist Backlash | USAPP. LSE Blogs.
https://blogs.lse.ac.uk/usappblog/2023/06/23/the-wests-anti-globalist-backlash/
Globalization: Threat or Opportunity? An IMF Issues Brief. (2000, April 12). International
Monetary Fund. https://www.imf.org/external/np/exr/ib/2000/041200to.htm
Krueger, A. O. (2004, May 18). Willful Ignorance: The Struggle to Convince the Free Trade
Skeptics, Address by Anne O. Krueger, Acting Managing Director, IMF. International
Monetary Fund. https://www.imf.org/en/News/Articles/2015/09/28/04/53/sp051804a
Populist Anti-Globalization. (n.d.). ECPS. Retrieved October 23, 2023, from
https://www.populismstudies.org/Vocabulary/populist-anti-globalization/
Schuftan, C. (2003, March 19). Poverty and Inequity in the Era of Globalization: Our Need to
Change and to Re-conceptualize - International Journal for Equity in Health. International
Journal for Equity in Health. https://equityhealthj.biomedcentral.com/articles/10.1186/1475-
9276-2-4
Walter, S. (2021, February 12). The Backlash Against Globalization.
https://www.annualreviews.org/doi/abs/10.1146/annurev-polisci-041719-102405
Bardhan, P. (2006, March 26). Does Globalization Help or Hurt the World's Poor?:
Overview/Globalization and Poverty. Scientific American.
https://www.scientificamerican.com/article/does-globalization-help-o-2006-04/
L. Alan Winters, Neil McCulloch, Andrew McKay (2004). Trade Liberalization and Poverty: The
Evidence So Far. Journal of Economic Literature, 42(1), (pp. 72-115)
https://www.aeaweb.org/articles?id=10.1257/002205104773558056