Details of Module and its Structure

Module Detail
Subject Name Sociology
Paper Name Development, Globalisation and Society
Module Name/Title Globalisation and Poverty (Conceptualising Globalisation)
Pre-requisites Introduction, Concept of Globalisation, Poverty, Globalisation
and poverty, Factors which lead to poverty, negative and positive
effects of globalising process on developing countries, summary.
Objectives This module seeks to provide a deep understanding of the
sociological perspective on globalisation, its positive and
negative effects, concept of poverty, types of poverty, factors
leading to poverty due to globalisation The module also looks at
the criticism and remedies of elimination of inequality and
poverty.
Keywords Globalisation, poverty, Absolute and relative poverty, inequality,
corruption, population growth, migration, economic
development.

Structure of Module / Syllabus of a module (Define Topic / Sub-topic of module)

Conceptualising Introduction, Concept of Globalisation, Poverty, Globalisation
Globalisation and poverty, Factors which lead to poverty, negative and
positive effects of globalising process on developing countries,
Summary

Role Name Affiliation

Principal Prof Sujata Patel Department of Sociology,
Investigator University of Hyderabad
Paper Coordinator Prof Sherry Sabbarwal Department of Sociology,
Panjab University, Chandigarh
Content Ratika Sharma and Department of Sociology,
Writer/Author (CW) Panjab University, Chandigarh (UT)
Department of Sociology,
Dr. Manoj Kumar Post Graduate Government College
for Girls, Sector-11, Chandigarh (UT)
Content Reviewer Prof Sherry Sabbarwal Department of Sociology,
(CR) Panjab University, Chandigarh
Language Editor Prof Sherry Sabbarwal Department of Sociology,
(LE) Panjab University, Chandigarh

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 Course: Development, Globalisation and Society
Unit: Conceptualising Globalisation
Module Title: Globalisation and Poverty

Introduction

Globalisation is a multidimensional process which came into existence in the nineteenth century,
notably in the ideas of Karl Marx. But it has been in the last three or four decades back that
globalisation has entered the popular imagination in a really big way. Globalisation is often
related to economic terms, although some associate it with modernisation leaning more towards
westernisation. It leads to movement of people, cultural changes, new trade practices and
interconnectedness among various countries, both economically and politically. Worldwide,
globalisation is taken as challenge to governments in international affairs and global economy. It
is a process in which the barriers to cross-border movement are being reduced not just for
economic flows but also for the global extension of knowledge, information, belief systems,
ideas and values. It is an outcome of technological advances which is fired by easily available
advanced and cheap communication systems.

Globalisation is not a single concept that can be defined and encompassed within a set time
frame, nor is it a process that can be defined clearly with a beginning and an end. It includes
economic integration; the exchange of policies across borders; knowledge transmission and
cultural stability. It is a global process, a concept, a revolution, that has been studied and defined
many times over the years, with some connotations referring to progress, development and
stability, integration and cooperation, and others referring to regression, colonialism, and
destabilisation. Despite these challenges, globalisation brings with it a multitude of challenges.

There are different views on globalisation highlighting its positive and negative aspects. While
globalisation is considered positively by many as it assumed to make societies richer through
trade and culture, it also brings knowledge and information to people around the world. Others
believe that it contributes to the exploitation of the poor by the rich, and is a threat to traditional
cultures.

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Definition

Frank Vorhies, Head of the Economics Unit of the IUCN-The World Conservation Organisation
quotes Rudd Lubbers, the former Prime Minister of the Netherland, one of the world’s well
known experts on globalisation, as saying: “The emergence of a global economy compels
national governments to reappraise their assumptions of economic governance and, in doing so,
to adopt a more systematic approach to the implementation of socio-economic policies. At the
same time, the new global economy also demands a reconsideration of the role of international
institutions (the GATT, WTO, IMF, OECD, NATO, WEU, UN) as fashioners and sustainers of
the ground rules for numerous international transactions in the domains of security, human rights
and sustainable development” (1999).

Globalisation is defined as a process that widens the extent and form of cross-border transactions
among peoples, assets, goods and services and that deepens the economic interdependence
between and among globalising entities, which may be private or public institutions or
governments (Lubbers, 2000). This process is driven by economic and technological advances
such as information and communications technology and political developments. Globalisation is
different from other forms of intensified interdependence between national economies: true
economic globalisation involves a qualitative shift toward a system based on a consolidated
global market place for production, distribution and consumption rather than on autonomous
national economies. Globalisation involves more than economics or economic
interconnectedness. Various opportunities and risks are there for individuals and communities
seeking to transform local traditions, simultaneity, pluralism and alternate routes to the
satisfaction of needs and services.

Globalisation is referred as a multidimensional set of social processes that create, multiply,

stretch and intensify worldwide social inter tendencies and exchanges while at the same time
encouraging people by increasing awareness on various related aspects between the local and the
distant (Steger, 2003). According to the economist Joseph Stiglitz (2002) globalisation is the
elimination of hindrances to free trade and the closer integration of national economics. For
Giddens (1990) globalisation is the strengthening of worldwide social relations that connect even
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remote localities in such a way that local occurrences are shaped by events taking place many
miles away. He adds that it is not only one of the most used but also one of the most misused and
the confused terms.

Globalisation and Poverty

It is very crucial and important to understand globalisation and its impact on self and identity.
There are various aspects related to globalisation such as demographic, economic, ecological,
and political interconnections on a global scale which impact everyday life of people in entire
world. Globalisation is a process which engenders discussion and debates among and between all
types of political and ideological groups. As far as industrialised countries are concerned, there is
a fear of financial crisis, that the dual forces of technological change and global shifts in the
location of economic activities are adversely transforming employment prospects.

Globalisation and poverty are important issues in every nation’s agenda. As Xavier Sala-i-Martin
(2002a) says, one of the few statements on which the politicians tend to agree with the common
man is that in the last twenty years poverty and inequality have both increased. Since the last few
decades are known as the globalisation years, it is almost automatically inferred that
globalisation is bad as it raises poverty and inequality among people. However, although
politicians, political and social movements, international organisations and the media have been
debating these issues for years, only recently has systematic economic research been conducted
into the nature of the relationship between income distribution and globalisation.

Conflicting Perspectives on Globalisation

There are two viewpoints which make globalisation a highly conflicting and debatable topic: the
Neo-liberals or pro-globalisers and the Hyper Globalisers. For those in the former category,
globalisation is an ideological project that will bring great benefits. They believe that the
ideology of efficient free and market regardless of national boundaries should be introduced both
in trade and finance. Although, the neo-liberal pro globalisers concede that such an ideal state
has not yet been achieved, the major issue, in their opinion is that there is too little rather than
too much globalisation. For them, globalisation is the solution to the world’s economic problems
and inequalities.

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 Those who are called hyper globalisers as also the anti-globalisers, believe that globalisation
is the problem and not the solution. The introduction of free market regardless of national
boundaries so as to prove beneficial by the other group, is regarded as the main problem by
them. According to them, they are the malignant and destructive forces. Free markets
inevitably create an inequality which ultimately leads to poverty. Through the extension of
free markets by globalisation, there will be an increase in the scale and extent of inequalities.
Regularisation of markets must be there for wider interest. Unregulated markets thus lead to
a reduction in wellbeing for all but a small minority in the world, as well as creating massive
environment problems. To some anti-globalists the only solution is elimination of
globalisation process.

Poverty

Simply put, poverty is the condition where people's basic needs for food, clothing, and shelter
are not being met. It is general scarcity or dearth, or the state of one who lacks a certain amount
of material possessions or money. It is a state or condition in which a person or community do
not have the financial resources and basics to enjoy a minimum standard of life and well-being
which is deemed adequate in society. Poverty status is assigned to people who do not meet a
particular level set by the state.

Poverty is a multifaceted concept, which includes social, economic political elements. Poverty
seems to be chronic or temporary, and most of the time it is closely related to inequality. As a
dynamic concept, poverty is changing and adapting according to consumption patterns, social
dynamics and technological change. Poverty refers to a situation when an individual cannot
provide for oneself with the minimum subsistence essential for survival in a society. According
to United Nations poverty is the inability of getting choices and opportunities, a violation of
human dignity. It means lack of basic capacity to participate effectively in society. It means not
having enough to feed and cloths for a family, not having a school or clinic to go to, not having
the land on which to grow one’s food or a job to earn one’s living, and not having access to
credit. It means insecurity, powerlessness and exclusion of individuals, households and

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communities. It means susceptibility to violence, and it often implies living in marginal or fragile
environments, without access to clean water or sanitation.” (UN, 1998).

According to Seebohm Rowntree (2000), poverty is a multidimensional problem which results

from a combination of economic, political and environmental factors. Generalised poverty can be
defined as a situation in which a major part of the population lives at or below income levels
sufficient to meet their basic needs. There are two types of poverty first is absolute poverty
which is the absolute standard of living, reflected in satisfying the minimum basic needs required
for survival. Second is relative poverty that is the gap in income between rich and poor.

Poverty is generally of two types: absolute poverty, which is the same as destitution and occurs
when people cannot get hold of sufficient resources (measured in terms of calories or nutrition)
to maintain a minimum level of physical health. Absolute poverty means the same almost
everywhere, and can be eliminated as proven by some countries. Relative poverty occurs when
people do not enjoy a certain minimum level of living standards as determined by the state and
enjoyed by the majority of the population. These standards may vary from country to country
and sometimes within the same country. Relative poverty occurs everywhere, is said to be
increasing, and may never be eradicated.

Extreme poverty, or absolute poverty, was originally defined by the United Nations in 1995 as a
condition exemplified by acute deficiency of basic human needs, including food, safe drinking
water, sanitation facilities, health, shelter, education and information. It involves not only income
but also on access to services. Currently, extreme poverty widely refers to earning below the
international poverty line of a $1.25/day (in 2005 prices), set by the World Bank. This measure is
the equivalent to earning $1.00 a day in 1996 US prices. The vast majority of those in extreme
poverty – 96% – reside in South Asia, Sub-Saharan Africa, The West Indies, East Asia and the
Pacific; nearly half live in India and China alone. World Bank adopted an indicative definition of
a minimum income of US $1 a day as the yardstick, which was close to the average of national
poverty lines across 10 countries. In 1998 as many as 1.2 billion out a world population of 6
billion were below that level. In 2004, this number had fallen to 986 million. The growth of
China and India at 10% and 6% respectively, during the last two decades of the 20th century is
reported to have dropped poverty from 28% to 9% in China and 51% to 26 % in India. With the

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Millennium Development Goals, it is hoped that targets, at least with regard to the poverty are
likely to be reached. Although the proportion of world poverty has been falling, the absolute
numbers have been rising. This is partly due to huge population growth.

Relative poverty views destitution as socially defined, hence relative poverty is a measure of
income inequality. Usually, relative poverty is measured as the percentage of population with
income less than some fixed proportion of median income. There are several other different
income inequality metrics. Relative poverty is the most useful measure for ascertaining poverty
rates in wealthy developed nations. Relative poverty measure is used by the United Nations
Development Program (UNDP), the United Nations Children’s Fund (UNICEF), the
Organisation for Economic Co-operation and Development (OECD) and Canadian poverty
researchers. In the European Union, the relative poverty measure is the most prominent and most
quoted of the EU social inclusion indicators.

Once economic development has progressed beyond a certain minimum level, the rub of the
poverty problem – from the point of view of both the poor individual and of the societies in
which they live – is not so much the effects of poverty in any absolute form but the effects of the
contrast, daily perceived, between the lives of the poor and the lives of those around them. For
practical purposes, the problem of poverty in the industrialised nations today is a problem of
relative poverty. According to UN Development reports, the opportunity and rewards of growth
and economic globalisation can be spread unequally, benefiting same and marginalising others.
The proportion of poor people rises to 2.6 billion in 2004. One region where the incidence of
poverty is particularly severe is sub Saharan Africa. Between 1990 and 2004, although the
poverty rate fell from 46.7 % to 41.1 %, the number of poor rose from 240 million to 298
million. The excessive inequality creates social tensions and political instability, but it can be
argued that excessive income equality is not good for the economy, as it tends to push down the
incentives to invest in both physical and human capital. This view originated with Arthur Okun
(1975), who identified the existence of a trade-off between equity and efficiency, showing that
an increase in inequality is necessary to foster economic growth and raise living standards.
Although poverty and income inequality are usually mentioned together, they are very different
concepts and retain different policy implications. While it can be unanimously agreed that either
a growing proportion of the world population or a greater number of individuals living in
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extreme poverty is bad, it is less clear that income inequality represents a threat to economic
development and that it is socially undesirable. Sala-i-Martin (2002a) pointed out that increases
in inequality can arise from the worsening situation of the poor or from the improving situation
of the rich. In this sense, income inequality is seen as the rate of return to investment.

Factors which led to Poverty due to Globalisation

There are various factors which are responsible and also contributing to widening the gap
between rich and poor.

1) Differing rates of population growth between the rich and poor whether between
countries or within the country: At the beginning of the twenty first century the world’s
population reached a total of 6.1 billion. One hundred years earlier, it was less than 2
billion. The UN largest medium projection is that world population in 2050 will be
around 9.2 billion. The most striking feature of world population growth is that is
increasingly growing in developing countries. In 2005, 815 of the world population, i.e.,
6.5 billion in the developing countries. Despite high mortality rates through various
diseases, the population of developing countries is tending to grow from 762 million to
1.67 billion by 2050.

2) The downward movement of commodity prices affecting the poor countries more than
the rich and the different capacities (education, access to technology etc.) that enables
some to take more advantage of opportunities than others.

3) Skewed income distribution has various repercussions. Whether within a country or

between countries it leads to political instabilities and migration of people from poor to
rich areas. Unequal distribution of income is often a reflection of the unequal access to
the economic opportunities in society. Global inequality of income distribution is also a
matter of concern. Economist Robert Wade points out the globally the richest 20% of the
population garner about 85% of the world’s income and the bottom 60 % accounts for
6% . This is very high concentration of income. The equality can be measured in different
ways. This trend shows that inequality has been largely increasing over the past 20 years.
The trend of unequal distribution is quite shocking in poor countries. Rich countries like
Japan and the United States have also seen a widening of the income gap.
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4) The urban population of the world is estimated to increase by 4.98 billion by 2030. On
contrary, the size of the rural population is expected to grow by 2.29 in 2030. The highest
rates of urban growth are now in developing countries where the number of large cities
has increased. In the cities within the developing industrialising economies, urban growth
is driven and sustained by the economic dynamism. High rate of fertility among poor
people leads towards poverty and inequality. This is the process which we call over
urbanisation, where the basic physical social and economic infrastructure is not
commensurate with the size and rate of growth. The over populous towns in developing
countries shows the physical expression of this explosive growth.

5) Migration is one of the reasons for uneven economic status of many. The number of
international migrants in the world represents only around 3 % of the total global
population. One of the most important outcomes of the international migration is that it
created geographically dispersed communities called as transnational migrant
communities particularly in developed countries. Most of the times migrant workers are
discriminated in host countries. In many cases migrants are employed in very low grade
occupation, they may have few, if any rights and their employment security often may
not exist. Sometimes they may also be abused and maltreated.

Positive and Negative Effects of Globalising Process on Developing Countries

Globalisation has both positive and negative effects. Following are some of its positive
impacts.

Positive effects

i) Higher export generated income promotes investment in productive capacity with

a potentially positive local development impact depending on inter firm linkages,
the ability to maintain competitiveness etc.
ii) Employment growth is relatively labour intensive and causes an increase in
overall employment or reduction of employment in lower wage sectors. Either of
these outcomes tends to increase wages.
iii) Exposure to new technology leads to improvement in skills and labour
productivity which facilitate the upgrading of industry into more value added

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 output, while either enabling further wage growth or relaxing the downward
pressure.
iv) The considerable increase in employment and thus in wages leads to reduced
social inequality, if the social structure, political institutions and social policies
play a vital role.

Negative Effects

The employment problem in developing countries is infinitely greater than that faced by
older industrialised countries. The higher rate of labour force growths in many developing
countries continues to exert enormous pressures on the labour markets of both rural and
urban areas. Such pressures are unlikely to be exerted by the development of manufacturing
industry alone. There is considerable development of manufacturing industries in developing
countries. Nonetheless, manufacturing industries have barely made a dent in the
unemployment and under employment problems of most developing countries. Only in a few
small countries like Hong Kong and Singapore the manufacturing sector absorbs large
number of people. Singapore has a labour shortage and has had to resort to controlled in-
migration while Hong Kong firms have had to relocate most of their manufacturing
production to southern China. In some other cases, the problem is different. Large numbers
of people have been absorbed into employment but the rate of absorption cannot keep pace
with growth of labour force. Globalising processes often benefitted some developing
countries but it remains the double edged sword for most of the developing nations.
Therefore, following are some of the negative impact of globalising processes according to
Stiglitz (2002):

1) The rules governing globalisation favour developed countries, while the developing
countries sink even lower.
2) Globalisation only regards monetary value of items, rather than other factors involved,
one being the environment.
3) Developing countries are controlled by globalisation and it has negative effect on their
democracies. Developing countries borrow a large amount of funds from other countries

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 and the World Bank which essentially causes them to give up the benefits of their
democracy because of the strings attached to the loan repayment.
4) The notion that it does not live up to its original expectations. Globalisation was
advertised to boost countries economically; however, it has not shown improvement in
developed nor developing countries.
5) The new system of globalisation has basically forced a new economic system on
developing countries. This new economic system is seen as the “Americanisation” of
their policies as well as culture. This has caused quite a bit of resentment and financial
damage.

Many other negative aspects are as follows:

1. The increase in employment and wages are in contradiction to the supposed positive
effects and are unlikely to be sufficient to reduce inequality. In most of the developing
countries, inequality is likely to grow because unequal control.

2. Pressure to create local employment and international competition in bidding for it often
put international firms in a powerful position to impose or negotiate labour standards and
labour management practices that are inferior to those of industrialised countries.

3. Relocation of relatively mobile, labour intensive manufacturing from industrialised to

developing countries in some conditions, can have disruptive social effects. If there is an
absence of effective planning and negotiations between international companies and the
government or companies of the host country, the relocated activity promotes urban bound
migration and it will stay for a shorter period.

There are various reasons for the deep poverty of low income countries. Corruption is one of
the reasons which play a major role in creating imbalance and poverty. It is apparent that
corruption in a society distorts efficient resource allocation and also leads to financial crisis.
The rich can purchase and have access to the power while those who are poor remain
marginalised. Corruption includes abuse of public offices for private gain. Corruption does
exist in private sector as well, and the major type of corruption that exists in a country like
India is political corruption. There are various sources of corruption. Complex bureaucracies
and restrictive rules push people to adopt easy or corruptive ways to get their work done.
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The inefficiency of political institution is also an important factor that retards economic
growth because political institution can determine how wealth is created and distributed. If
the governance of the country is not supportive, then it will impede the conditions needed for
generating economic development. The protagonists of globalisation argue that to accelerate
the economic growth, trade barriers and free markets should be regularised. They feel that it
is due to lack of restrictions on trade and markets, the sad condition of the farmers and lack
of opportunities for the poor to improve their status that economic distress abounds.
Government should regularise and try to balance the needs of economic growth with social
equity and also the demands of external institutions. If we ignore the issue of poverty we will
lay the grounds of unstable societies. Elimination of poverty becomes a major problem across
the globe. In addition, income and wealth inequality has been increasing around the world
even in the developed nations.

Summary

Globalising processes do not just happen. They depend on different “structures” to make the
processes possible. There is a heated debate about the true effects of globalisation and if it
really is such a good thing. Globalisation is the process of increased interconnectedness
among countries most notably in the areas of economics, politics, and culture. It plays a very
important role in deciding every country’s fate. It leads to a greater access to foreign culture
in the form of movies, music, food, clothing, and more. In short, the world has more choices.
It helps in economic and social development of a country. Due to globalisation governments
are able to work better towards common goals and no one can deny that there is an advantage
in cooperation, an improved ability to interact and coordinate and a global awareness. But
although globalisation helps in better job opportunities, it also is an undeniable fact that
while it provides jobs to a population in one country, it takes away those jobs from another
country, leaving many without opportunities. Moreover, as it leads to different cultures from
around the world to interact, they begin to meld, and the contours and individuality of each
begins to fade. Many economists and world leaders agree that globalisation is supposed to
create higher living standards, facilitate increased access to foreign markets, more foreign
investment and open borders. But as the former World Bank Chief Economist and Nobel
Prize winner Joseph Stiglitz argues, globalisation is desperately failing the 80 percent of the
world’s population that lives in developing countries and the 40 percent that lives in poverty.
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Most people find the concept attractive but face problems when it comes down to their jobs,
communities and nations. Various challenges that nations and individuals face are global in
nature, presenting opportunities and difficulties in global solutions.

The question that still remains unanswered is does globalisation create and spread wealth and
prosperity or does it affect the poor adversely. Has globalisation made the planet more equal?
Economist Ann Harrison (2007) believes that the poor will benefit from globalisation if the
suitable policies and institutions support it. She says that the evidence on the links between
globalisation and poverty is inconclusive. It is true that as developing countries have become
progressively more integrated into the world trading system over the past few decades, world
poverty rates have fallen. But various studies in globalisation and poverty also suggest that
globalisation has resulted in rising inequality, and that the poor do not always share in the
gains from it. Similarly, new export and import policies might help some workers and harm
the others.

She believes that the relationship of globalisation and poverty does not depend only on trade
or financial globalisation but on the interaction of globalisation with the rest of the economic
environment which includes investments in human capital and infrastructure, promotion of
credit and technical assistance to farmers, creditable and credible institutions and
governance, and macroeconomic stability. She believes that the needs of the poor in different
countries who are likely to be hurt by globalisation must be studied carefully as evidence
suggests that relying on trade or foreign investment alone is not enough to fight poverty. The
poor also need education, improved infrastructure, access to credit and the ability to relocate
out of contracting sectors into expanding ones to take advantage of trade reforms.

Inequality can decline only with economic development and demands for redistribution.
Although recent evidence suggests that in the developing countries the growth in inequality
may have slowed, but as things stand, globalisation is still not able to engender equality in
the world’s poorest countries.

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