Globalization of Poverty
---------by Rochelle Robinson
Poverty is global, and it is globalization that has kept those in poverty all over the world from rising above it. We have been led to believe that globalization is a process that can enrich our local and global economies. Yet nothing can be further from the truth. Its meaning is unscrupulous, and its results, onerous.
Globalization is just another euphemism for capitalism; a system that has had a devastating effect on the poorest of the land. Statistics show that the richest 1 percent of the country own 47.2 percent of all the wealth, while the bottom 90 percent own only 17.1 percent of this country's wealth. Usually, we are left fighting among ourselves for those scarce resources. When the world's largest populations are situated at the bottom of the economic scale while a miniscule number of people hold all the wealth, something is amiss, and that something is the globalization of poverty.

Today, we live with more awareness and concern about global poverty than at any time in our world’s history. More than ever, people can see or read about swollen stomachs of hungry African children, 11 year-old Asian children working in sweatshops, and Haitian families living in mud huts without medical care, electricity, or clean water. At the same time, many of the richest people are global celebrities. Poverty can no longer be kept secret and neither can prodigious wealth. Yet, the growing world recognition of massive disparities between rich and poor does not necessarily mean that economic inequality is worsening or that poverty is spreading.

Ironically, it is the very improvement in the economic well being of hundreds of millions of people that raised the world's consciousness about poverty and inequality. Until a few hundred years ago, almost everyone experienced material poverty. Few saw themselves as poor relative to their neighbors and hardly any were comfortable enough to worry whether other people had enough food, clothing and shelter. Rising incomes created the large middle classes that could worry about the hungry and expose the poor to what they lacked. In addition, economic growth and technological change fueled the expansion and accessibility of mass communication that makes poverty and income disparities readily observable not only in the rich countries but in many poor countries as well.

This growing recognition of world poverty and inequality is significant, but so too are questions about the realities of material hardships and material wealth. What are today's levels of poverty and inequality? Are they increasing or decreasing? The often emotional debate over globalization's role is hardly surprising, given the apparent stakes for organized labor, investors, farmers, and civil servants in rich, middle, and poor countries and the continuing ideological battle over free markets. Other causes of poverty—such as the decline in two-parent families—attract less attention.

Here, I will focus on how the trends of the standard of world poverty have changed over the years and the role of globalization.

It is not easy to determine whether the trends for the standard of world poverty is decreasing or increasing because its meaning differs from one country to another country and the income statistics may not be examined across countries or across individuals.

The most comprehensive recent analysis of trends in poverty and inequality comes from studies by Columbia University professor Xavier Sala-I-Martin (2002). Professor Martin uses data on income gaps between countries and within countries to portray income differences across all individuals in 125 countries, representing 90 percent of the world's population. He adjusts for inflation and for the fact the purchasing power in some countries, especially low-income countries, is higher than it looks based on translating their currencies into dollars or marks on the basis of exchange rates. Professor Martin's poverty measures are $1/day or $2/day per person in 1985 prices (or $1.52/day or $3.04/day in 1998 terms). Unlike some studies, which treat each country as one unit and thus give people in small countries much greater weight than people in large countries, Martin attaches the same importance to each individual regardless of his or her country.

Sala-i-Martin paints a picture of striking progress. He estimates that the share of the world's population in severe poverty $555/year (hereafter I use 1998 dollars) declined by nearly two-thirds between 1970 and 1998, from 17.2% to 6.7%. Using the more generous poverty line of $1,110 per year, he finds an even greater percentage point decline, from 41% in 1970 to 18.6% in 1998. Most of the headway against poverty has taken place since 1980. Even though world population grew by 1.5 billion between 1980 and 1998, the number experiencing severe poverty declined by 160 million people. Still, as of 1998, 353 million people lived below the $1.52/day threshold and another 620 million lived below the $3.04/day threshold. The World Bank's figures are higher, but both sets of poverty figures show marked reductions in poverty since 1980.

More surprising than the declines in poverty are the reductions in inequality. With the 1980s viewed as the "lost decade" for many developing countries, especially in Africa and Latin America, we might have expected a sharp rise in world inequality. Instead, Sala-i-Martin finds that the world distribution of income became more equal since 1980, after changing little change in the 1970s. True, the improvements were modest, ranging from about 5-11 percent, depending on the indicator of inequality. But small gains in narrowing income gaps are a far better outcome than the "explosive" growth in inequality described by the UN and many outside observers. (Quoted from Europe in World Politics)

Could huge numbers of the world's poor really have escaped poverty and could the gap with people in rich countries really have narrowed?

Progress in Asia provides much of the answer. In 1970, 39% of the world's poor lived in China and 37% lived in other parts of Asia. Of the 1.3 trillion people living on less than $3 a day, 85% lived in Asia. The Asian economic miracle of the 1980s and 1990s lifted the living standards of hundreds of millions of people—the majority of the poor. The percentage of those scraping by on $3/day in Asia fell from 48% in 1980 to 16% in 1998. China's bullish performance was quite impressive but so were the improvements in Asia outside China, where $3/day poverty rates declined from 42% to 13% in the 1980-98 periods. Meanwhile, since the 1980s, poverty rates have stagnated in Latin America and worsened in Africa. While Africans accounted for only 16 percent of the world's deep poverty in 1980, they made up two-thirds of the poor in 1998. By the $3/day standard, 64% of Africans were poor in 1998, up from 55% in 1980. Poverty in Latin America—with rates of 2% at the $1.5/day standard and 10% at the $3/day standard—is not nearly as severe as African poverty. Moreover, poverty did fall some in Latin America during the 1990s, though only enough to compensate for the rise in poverty during the 1980s. It is troubling that neither Latin America nor Africa gained on the rich countries or lowered their overall poverty rates in the last two decades.

Continuing growth in populous India and China, where most people in developing countries still live, will mean significant progress in the reduction of world poverty and inequality. But, unless Africa and Latin America fare better than they have in the last two decades, severe poverty will continue to fester and world inequality will increase.

So what is the exactly role globalization played in these developments and maybe the spread of poverty in some areas of the world?

One way of analyzing globalization's impact is to take the long view and assess trends from the perspective of centuries. Jeffrey Williamson (2002) and his colleagues (Lindert and Williamson 2001) have done so and they offer a largely positive verdict. Income gaps did widen in the 1820-1950 period, when rapid industrial development took place in Europe, the United States and other European offshoots, and Japan. Starting from a state of nearly universal poverty, the world became more unequal when some countries developed rapidly while others remained poor. Still, in periods of globalization, income gaps narrowed among countries taking part in global trade, immigration, and investment. By far, the main force closing the gap was large-scale immigration. True to theory, the immigration of 60 million European increased wages in the sending, low wage countries, decreased wages in the receiving, high wage countries, and substantially raised incomes for the immigrants themselves. Trade helped incomes converge as well, boosting the prices received by producers and lowering the prices their consumers and producers paid for imports. Investment was the one component that went against expectations. Flows of international capital moved toward already rich countries, perhaps following the movement of workers and perhaps because additional capital is sometimes more productive in places where concentrations of capital are already present—a phenomenon vividly described by William Easterly (2001) in his thoughtful book on growth.( quoted from Robert I. Lerman’s article)

Overall, globalization helped the poor countries that adopted sound policies and contributed to income convergence among the countries participating in the global system. However, since stagnation continued in many countries isolated from globalization, world inequality still rose.