Module 3

Topic 3: Economic Globalization, Poverty,

and Inequality

The Contemporary World (Coworld)

Economic Globalization, Poverty,
and Inequality
Most big companies search for
cheapest sources of raw
materials and labor because of
economic and trade
globalization. The result is that
labor-intensive products like
shoes are often produced in
countries with the lowest wages
and the weakest regulations.
The multiplier effect means an increase in one economic activity
can lead to an increase in other economic activities. For instance,
investing in local businesses will lead to more jobs and more
income. Economic globalization has helped millions of people get
out of extreme poverty but the challenge of the future is to lift up
the poor while at the same time keep the planet livable.
Opponents of economic globalization called the outsourcing of
jobs as exploitation and oppression, a form of economic
colonialism that puts profit before people.
Globalization and inequality are closely related. There are two main
types of economic inequality: wealth inequality and income
inequality. Wealth refers to the net worth of a country; all assets of a
nation – natural, physical and human less than liabilities. Wealth
inequality speaks about the distribution of assets. To measure global
economic inequality, economists look at income using Gross
Domestic Product (GDP).
This “explosion” of industry and modern technology causes
economic differences among nations. The result is economic gap.
Today, economic globalization and international trade are the
forces responsible for global inequality. Access to technology also
contributed to worldwide income inequality. In modernized
economies, jobs are more technology-based, generally requiring
new skills. This is referred as skill-based technological change.
Division of the world comes in different labels. The term “First,
Second and Third World” date back to the Cold War, when Western
policymakers began talking about the world as three distinct
political and economic blocs. Western capitalist countries were
labeled as the “First World”. The Soviet Union and its allies were
termed the “Second World”. Everyone else was grouped into “Third
World”.
After the Cold War ended, the category of Second World countries
became null and void, but somehow the terms “First World” and
the “Third World” stuck around in the public consciousness. The
Third World became associated with impoverished states, while
the First World was associated with rich, industrialized countries.
But the term “First World” and “Third World” aside from being
outdated, are also inaccurate because of different levels of
economic stability. Another classification was North-South, when
the Second World joined either the First or the Third.
United States, Canada, Western Europe, and developed parts of
Asia are regarded as the “Global North”, while the “Global South”
includes the Caribbean, Latin America, South America, Africa, and
parts of Asia. These distinctions point largely to racial inequality,
specifically between the Black and the White. According to Ritzer
(2015), “At the global level, whites are disproportionately in the
dominant North, while blacks are primarily in the south; although
this is changing with South-to-North migration”.