Economic Globalisation And Rising Global Living Standards Economics Essay
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The notion of economic globalisation has grown to be one of the generally effective in economic development as well as raises the global living standards through economic growth and poverty reduction. Economic Globalization is muscularly believed to result in better social, economic and in the contemporary world. Yet UN1 report (September 1999) show the current trend of economic inequality has increased dramatically as a direct result of economic globalization and current rules of trade. Subsequently, economic globalisation is growing attractive a controversial issue whether it can really lead to a rise in global living standard or aggravate the situation. Several authors in this part look not to convincingly provide or even concur on relation between economic globalisation and living standard. To my understanding, economic globalisation is an essential but not enough condition to hasten living standard
The purpose of this essay is to essentially inspect how aspects of economic globalisation facilitate a rise in global living standards. The essay will commence by introducing the concepts of economic globalisation and living standards and its measurements, using different readings, lectures, Journals and my personal view regarding to the issue.
The first part of this essay will illustrate the link between economic globalisation and contribution of economic globalisation to the process of accelerated economic growth and poverty reduction. Secondly, it will examine some criticism and or challenges associated with economic globalisation. Finally, the essay will draw a conclusion based on review findings.
1.2 Economic Globalisation and Living Standards.
The perception of economic globalisation mean 'global spanning economic relationships in term of markets, finance, good and services and the network create by transactional' (Chase, 1999). According to Nicholas (2009), 'economic globalisation is the increasing of cross border flow of goods and service'. He emphasize that 'It facilitates increasing cross border movement of financial capital', which increase economics activities from private derived from foreign sources. Moreover, movement of productive activities are then totally or partially extended or relocated to another country. It is likely that the integrations of global economic enabling social, economic environment that will broke out of poverty and improved the living standard of a related community.
For better understanding on the Concept of living standard, I will brief discuss on the idea of GNI2 per capita which is broader definition of well being. Michael Todaro (2009) state that GNI per capita is a common measures of economic activities related with economic well being of people globally. He emphasizes that. 'GNI comprises GDP plus the difference between the income residents receive from abroad for factor services less payment made to non residents who contribute to the domestic economy'. Not only that but also as it defined by several International agencies including OECD3 and UN living standards process by HDI4 ranks countries on scale of high and lower ranks. Usually it focus on three indicators: i) life expectancy at birth knowledge as measured weighted average of adult literacy and standard of living by using real per capita gross domestic product with PPP (Todaro and Smith 2009), ii) HDI uses to evaluate standard of living by determine real per capital gross domestic product adjusted by PPP5 of each country's currency reflect cost of living of a particular country (Todaro 2009). The above information gives the connotation of living standards is associated with real income per individual and poverty rate.
2.0 Link between Economic Globalisation and Living Standard.
Before the description of link between the economic globalisation and living standard, this paper will describe in brief the goal one of MDG6 in association with the global living standard.
The endorsement of 'eradicate extreme poverty and hunger' (Todaro 2009) is Goal One among of eight inspiring and much talked about Millennium Development Goals (MDG). In alliance with its target of reduce by half of the people living on less than $1 a day, it aims is to improve living standard, and encourage economic growth and improve equity. In this regards, by achieving these targeted goals, it will help to improve the growth as well as income poverty which is very important in poverty reduction and raise living standards.
Many writers believe that people lives with income level below 1$ per day represents in extreme poverty, indicating that they live in absolute poverty. According to Allen and Thomas (2000) 'the global target for measure living standards by using poverty line which is US 1 $ per day by adjusted by PPP'. The question is what the position is for those living under one or two dollar per day. This is shows that poor people suffer by necessary requirements similar to health care, adequate provisions and appropriate protection.
As I illustrate in the beginning, economic globalisation is the opening of economic to flow of goods and services, capital and business from other nations that integrate their market with that abroad S.Mishkin (2006). Hence is better to look which forces which help to hasten the pace of economic globalisation today. I will consider on the three major forces which helps to accelerate the economic globalisation with living standards according to OECD handbook on Economic Globalisation Indicators (2005). Economic globalisation can increase by different forces. The following are the major forces which supply the swiftness up globally economic: The liberalisation of capital movements, of financial services in particular, the opening of markets to international trade and investments.
Neoclassical point of view transmits trade liberalisation as a source of amenities economic growth by shift to the market liberalisation and growing global amalgamation. Their key thought by having more open market oriented emphasize more choice in trade itself and capital flow in develop the higher the living standards of global population. Todaro and Smith (2009) state that, free market permitting competition to flourish privatisations which promote both economic efficiency and economic growth. Hoekman at al. (2004) agrees that, Trade liberalisation and openness to trade increases the growth rate of income and output. In theory, it offers prediction for foreign firm and local firms citizen to be engaged in production, give confidence in export with domestic and international promote. To a large extent the process observed support sustaining the profitable achievement of counties like South Korea, Taiwan, and Singapore. Moreover, it make possible for large firm allocate individual in to specialise additional product, therefore develop more market and increase consumer preferences.
In addition, Neoclassical agrees that, not only free market but also economic globalisation in term of financial globalisation progress the economic growth. According to S. Mishkin (2006) economic globalisation through financial low has several important in emerging market economies. In this regards movement of capital flow allows to come into a country encourage distribution of capital as well as domestic economic sector become well off.
For Neoclassical perspective, 'capital is physical inputs including money, machine natural resource and human with technology. The expansion of capital production resulted booming saving in financial institution' (Nicholas 2009). In this regards increasing of saving due to higher interest rate will encourage the speed up investment, enabling creation of employment in particular for unskilled labour force in the long run, the income of inexperienced labour will be higher.
On the other hand, Marxists argues that, economic globalisation base on international economic international leads inevitably to uneven gain (Nicholas 2009). Furthermore, they acknowledge that this internationalise trade rise a common European and the emergence in various international institution like World Bank and International Monitory Fund (Hossein 2005). In practice, the exchange of trade is imbalanced trade, for developing countries produces primary goods were sent to advanced countries who subsequently shaped manufactured commodities after that they tried to put on the market reverse to poor countries with value added tax making them unaffordable, resulted is international capitalism.
Myriam Plank (2006) agrees that, In Gambia cheap import of chicken egg and milk loosing local access their domestic market and lack opportunities to earn income hence farmers especially women driven into poverty. This observation emphasize that reduce trade tariff is a key to destroys infants industries agricultural sector and in food in security especially in developing countries.
Different with Neoclassical perspective, New Keynesian theories highlight that the international economic integration is not the result of free choice and not necessarily mutual beneficial, but can be made to be mutually beneficial. Nicholas (2009).This situation exacerbated by historical aspect, the role of colonialism was damaging of global economy particular for those countries became colonies which resulted the existing intercontinental division of labour. Maddison (2001) accepts that, free trade was imposed in India and other British colonies and the same true in Britain's informal empire Hence it is important to realise that the exploitation of resources including inputs in term of human, slave trade and primary product from Africa to the industrial areas is a main reasons of the increasing inequality in economic growth and living standard between North and South.
In additional to that, new Keynesian scholar's argues that world economy is essentially constant. To some extent changing is crucial on internationally policies coordination through international institution like IMF, World Bank and WTO. The World Bank should be refocused with clear goals, and accountability for their success. Specifically, the bank should have one overarching assignment: helping the poorest countries achieves the millennium development goals to reduce poverty, hunger and disease Sachs (2008). International Financial Institutional, might pay support to developing countries by make out barriers to trade, provide debt relief and build capability on international trade as an alternative of supply of loans with higher conditionality.
3.0 CRITICS OF ECONOMIC GLOBALISATION.
This document has assessed the economic globalisation to find out whether it is sufficiently raising the global living standards for human being. To a large extent the process helps to increase growth and wealth and might provide benefits in exports, creation of employment and increasing of capital flow. It is exactly the expanding of international trade and investment put together enlargement of economic activities network worldwide. Yet it face some challenges.
One of the most critics of economic globalisation is that, to a certain degree it has extended the economic gap between South and North. According to UN Report in 1999, the number of developing countries that have benefited from economic globalisation is smaller than 20. Shangquan (2000) emphasize that the difference of income per capita between the richest country and poorest country has enlarged from 30 times in 1960 to the 70 times at present. This indicating that there is also a gap on economic growth and living standards between them. His observation that the hole has been upward together surrounded by and within nations is largely true. The correlation with economic globalisation is to a large extent less comprehensible.
This incompatible of per capita income cause an internationally deviation in incomes and living standards continues a moment, and convergence is slowest between OECD and HIPC7.
Stiglitz (2006) argues that in many countries, unemployment rates are high and those who lose their jobs do not move to higher wage alternative but to the unemployment rolls. This has happened especially in many developing countries around the world when they liberalised so fast the private sector did not have time to respond and create new jobs. Therefore, unemployment rate increases in economic system where there are two dimensions appears low productivity in economics activities and higher rates of dependency and crime increasing in societies.
Shangquan (2000) suggested that this huge amount of floating international capitals may lead up to bubble economies and disorderly fluctuation of foreign exchange rates. To some extent under release economic conditions, meticulous express for international floating capital consequence, there are great constrains on deteriorating capacity on macroeconomic control and regulation, particularly in monetary policy. This impact might suffer by developing countries rather than Industrial Countries.
In conclusion, this paper attempts the economic globalisation endeavour to raise economic growth internationally and helps increasing living standard on people globally. To a large extent, trade liberalisation of capital movements, financial services in opening market to international trade and investment encourage rise higher living standards in OECD rather than developing countries. Thus, while these policies maintain situation which show better off in one side and worse off to another, hence strong institutions should be created to strengthen national and international collaboration towards facing the above mentioned challenges.
The practice of trade liberalisation and market oriented economic improvement that had taking place in many developing countries in the last two decade, yet, no proof for developing countries successful through the trade as well as financial liberalisation as opposed to export encouragement which useful in some of Asian Countries. In this situation, economic globalisation has benefits with OECD and some of Asia countries like Hong Kong, Singapore, Taiwan and South Korea, which involved in global market (Griswold: 2000) has helped their economies, yet Africa and Latin America still becoming poor. For developing countries, this process will take time to take off for particular case. Major reasons that developed countries generate worldwide economic policies in term of price arrangements for production while third world countries engaged on primary and fragmented goods.
Generally, as an economists functioning in developing countries, my personal view on economic globalisation and word economy today, though there is global specialisation focus on competitive advantages and between the highly developed and developing on energetic comparative advantages. Yet, current implementation of economic perspective, in term of economic globalisation should relate with New Keynesian perspectives. The economic growth relate with development distribution of welfare and environmental control. Emphasize redeployment of income and eliminating poverty by using different programmes like pro poor growth and poverty strategy growth programmes. In order to improve the economic growth of developing counties should make sure that income distribute equally, hence it will reduce the national divergence in living standards and the it will help to reduce an international divergence. Economic growth will stimulate development and collaborate poverty reduction programme and facilitate to meet target under goal one of the Millennium development Goal, to eliminate tremendous poverty and hunger.
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