International Trade and Poverty reduction

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Abstract

It is in the search of satisfaction that leads the man to find ways and means to quench his thirsty. By using the means in his possession, the human being tries to procure himself the goods and services through exchange and trade. The man is endowed with techniques facilitating him to surpass both natural and artificial barriers.

The basis of exchange is the shortage both in quality and quantity of resources competent to satisfy human needs and it is as old as the creation of man. Through history, the world experienced the crisis of famines and poverty. The governments and people have been trying to overcome all these obstacles in order to ensure human happiness.

Many research centers were created in different fields with the purpose to control the world and its resources. At the center of all efforts, the man wants to overcome all circumstances causing the poverty and misery for mankind.

This study will discuss the effect of various theories to solve the issue of poverty on the earth through history and their implications to governments' decisions allover the world. The author will elaborate some theories of international trade and their connectivity with poverty reduction initiatives.

Key words: Globalization, poverty and international trade.

Introduction

More often governments have tried to eradicate poverty but they ended up by treating its symptoms instead of the origin of the problems. The only way to make difference is to tackle the poverty issue through its root causes namely family breakdown, education failure, drug and alcohol addiction and economic dependency. All these problems are interrelated and the solutions lie in the communities. The production of a pencil is a source of wealth for people from different countries. The wood from Gabon, the top eraser from Congo's rubber (Caoutchou), the eraser holder from South African aluminium and the inside pencil from China. This is the way the international trade can benefit people from all corners of the world.

Poverty

Poverty is a state when a human being can not afford the basic needs such as food, water, shelter, clothes, etc. The relative poverty is defined as the state where some people have little resources compared to others of the same group. As it is found in the books of history, the poverty is as old as the creation of man. Though some people on the earth possess billions of dollars on their accounts, one can say that relative poverty is common to all people. No one can live without once a time lacking something.

The shortage of resources or means to solve problems of human being has been always the source of discoveries. One can say that poverty is one of the world's concerns and through it, many thinkers and eminent people contributed ideas and means to save the people who were in captivity of this disaster. The needs have always been in advance of researches which led to the invention of new tools to satisfy the needs of man. Governments allover the world struggle to protect their citizens against famines, poverty and other sources of people's instability.

Reducing poverty requires the coherence of the governments' projects affecting the development. The government is required to establish the pro poor program aiming their economic growth. This requires good governance, competitive markets, prudent macroeconomic management, vibrant private sector and efficient institutions. Making growth pro poor requires poor men and women to participate in the growth process.

International aid and Poverty reduction

After colonization, western powers started assessing how to help post independence states growing their economies. The origins of modern aid can be traced to the colonial times. The British colonial Development Act of 1929, adopted to provide grants and loans to the colonies to allow them paying the imports and satisfy their infrastructural needs. Such aids were in the frame of the economic and political interests of the "Metropole". After World War II, the ascendancy of US and the independence movements with African countries together with colonial powers convened to reshape the new context of development donation.

The Bretton Woods Conference adopted the new rationale to institutionalize the logic of multilateral economic rules and financial support. The Marshall Plan and the creation of the World Bank were basically to reconstruct the war-torn Europe from the scars of both world wars. It was in 1949 during the inaugural speech of the US President Truman where the needs for the developing countries were acknowledged, when he declared the objectives to avail the advancement of the science and technology for the growth and improvement of the undeveloped world. International Development act 1950 established the policy of the US to support efforts of facilitating the undeveloped world to develop their resources and their living conditions.

During 50, and 60s, Africa received aid targeting the productive sectors. The bilateral cooperations gave the technical assistance, budget support to develop the production sectors and the infrastructural needs. African continent benefited the donations to improve the welfare of its people and recover from the scars of the world wars and colonization. Between 1970 and 1990, Africa received donations average of US 1500 per capita. International Monetary Fund (IMF), World Bank (WB) and Arab fund agencies continued to support the states activities in the productive sectors and meeting basic needs.

Since 1990, the donors started linking this aid with the steps towards democracy by the beneficiaries. OECD, Commission for Africa, EU, IMF & WB enhanced effectiveness through donor coordination and policy harmonization. These policies are attached to Millenium Development Goals poverty reduction program focusing on health, education and water.

Despite all these initiatives, one can still observe life deteriorating on the African continent and other third world countries. The number of people under poverty line increasing and the role of the African countries in the international trade remains the provision of natural resources. From here one can ask a question if the donations are a key to eradicate poverty.

International trade and poverty reduction

No country has achieved its economic growth and poverty reduction goals by closing its boundaries to the rest of the world. While a country to benefit from the investment and trade depend on the domestic policies and institutions, the country also has to have the access on the global markets.

Trade encourages economy to specialize and produce in the areas where it has a relative cost advantages compared to other economies. With time, this helps the economy to employ human, financial and physical resources where it can get the highest returns, increasing productivity and the returns to workers and investors.

Trade expands the markets which local producers can access, allowing them to produce at more efficient scale to keep down costs. Trade diffuses new technologies and increasing local workers and managers' productivity. Imports tax removal allows the population to have access on cheaper goods and services, increasing their purchasing power and living standards. Producers benefit from cheaper inputs, increasing their margins as a result of cost reduction. One can say that International trade is like a universal democratic system where consumers have rights to buy products from the producers they want depending on their preferences.

Globalization

One can say that globalization has started since the creation of man in a sense that globalization is the attempt of the mankind to be omnipresent and to understand the world in its wholeness. With technology today, a person follows events taking place in ten thousand miles away and even gave contribution without being present.

As it has been revealed the globalization is a gradual process born in the framework to facilitate the exchange activities among communities. History shows how mankind has been attempting to move from one place to another in searching what he has in shortage and bringing what he has in excess for exchange. The globalization aims to narrow the existing distance and barriers which were hindrances to the trade in the past.

Like any other evolution and change, globalization might be accompanied with vices in case all stakeholders are not playing their roles in a proper way. The governments have to insure the free trade where buyers will have access on goods and services according to their preferences and without external hindrances. The state has to insure a fair play by setting rules and regulation guiding the safety of players. Though classical school does not agree with state interventionism, the referees have shown their indispensable role to keep the games safe.

Before coercive intervention, the government plays the educator role by mobilizing the stakeholders to respect the rules and regulations and to insure the conflicts are amicably solved without intervention of courts and penal justice. A prior conflict management reduces costs of firms and insures safety of investment as a result of crimes prevention.

Conclusion

Through history, no country or community has economically been sustained by another through provision of donations. Economic growth of any community has been sustained by visionary community leaders through clear development programs. It has been always important to mobilize the mass population for production of goods and services to serve as tools of exchange. With comparative advantage, the people all over the world will benefit the goods and services they do not produce through international trade and exchanges.

To insure sustainable economic growth, countries have to stop workless attitude and dependency in their population which have done much harm to individuals, families and communities. The aim should be to change systems which have too often undermined the work and other aspirations going with it.

To reduce poverty, governments have to focus on microeconomic entities. The summation of individual economic successes will have an absolute positive impact at national level. The international trade is done to optimize the benefits of talents diversities and it will be maximized if individual firms can produce the excess production to be exported for the compensation of what is being locally produced at low level. Poverty reduction involves a political process. The governments have to empower the poor by strengthening their voices and fostering democratic accountability.

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