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Effect of Globalization on Social and Economic Inequality

Info: 5032 words (20 pages) Essay
Published: 8th Feb 2020 in Politics

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Globalization, does its associated policies lead to greater social and economic inequality?

 

It hasn’t been hard to find the idea of globalization leaves people behind. Individuals that

argue against the globalization state “the poor have next to no capital, partly due to lack of

entitlement rights and destitution. Second, due to uneven development, globalization exacerbates

social and economic gaps within and among states by reinforcing a process of creative

destruction” (Kacowicz 2007, 572). The first point, I will be looking at is international

organizations’ role in globalization and how nation-states have been forced to follow the

neoliberal economic policy. In addition, forfeiting the concept of the countries to follow their

own creative economy policies because debts that are owned by international organizations. The

second point will look at the role of neo-liberal economic policies and the false discourses that

resulted in more impoverished conditions than the keynesian economics model. In addition,

looking into the stats of poverty in developed and undeveloped countries, and the role

technologism and how it should advance under neoliberal economic policies. The third point, I

will look at is the rise of the new public-sector managements’ role in inequality. Furthermore,

has transferred social responsibility to the individual, resulting in economic hardship for

individuals. The fourth point I will look at, is the voluntary sector’s reliance on funds from

governments’ due to the neoliberal economic policies that has promoted inequality. The last

topic I will argue, is proposing a different alternative, looking at Cubas resistance to the

neoliberal ideology. I argue that globalization and policy decisions resulting from globalization,

enhanced inequality globally.

                                           The problem of international banks.

              The international monetary fund and the world bank are two organizations linked to the

promotion of the globalization model. Globalization is the notion all markets cooperate to ensure

the economy is fully functioning on a global scale (Harvey, 2005). When countries’ start to run

into deficits is how international banks take a foothold in the nation states’s respective economy

(Harvey, 2005). Therefore, to get out of a deficit and to continue to build your economy,

international banks will provide bailout packages (Harvey, 2005). Thus, if you buy into their

philosophy, resulting in cutting social services within the country and replacing it with

international trade, in detail, is the core of the neoliberal model (Harvey, 2005). As Miller (2011)

states “the World Bank and IMF use of conditions on desperately needed loans to shift over

seventy countries toward greater reliance on market forces and away from state-directed

development is the current paradigm of this domineering influence. The benefits of this altered

political framework for self-advancement to the people of developing countries are, to put it

mildly, subject to dispute” (P.91). Schneider (2012) gives a recent example, of the scenario

within Greece now where the International Monetary Fund will provide funds, also known as a

bailout package, to Greece in exchange for them to drop social welfare programs and adopt strict

neoliberal policies. It seems like the consensus within Greece, is that they do not want to accept

the International Monetary Fund’s original proposal. Schneider (2012) states the figures of the

original proposal of the international monetary fund was that it “agreed to contribute $36 billion

toward Greece” (Schneider 2012, 1). Likewise, these bailout packages are not only happening

within Greece but Globally. In fact, Miller (2011) suggests the issue is occurring, when you

adopt these loans along with their policies attached to the loans. Hence, can lead to actions of

these policies lead to less economic sovereignty within a country (Miller, 2011). As a result,

reduces a country chance from independence for the neoliberal system, at the current moment

and in the future (Miller, 2011).

 This specific philosophy of thought leaves the nation-state with little power. For

example, Miller (2011) states an account if the United States or the European Union decide to

change policy or go in a different direction, the countries that borrow from these the world bank

or the international Monetary Fund would be doomed. Thus, countries are now tied to the

direction because these countries have limited economic freedom (debts) and their nation-state,

which leads to control by a foreign bank or countries that developed the international banks

(Miller, 2011). For example, Miller (2011) uses greenhouse gas and omissions to demonstrate his

point in which the undeveloped countries have little control, due to the developed country’s

agenda which gives them little independence. Due to the little independence, they cannot protect

themselves from such issues such as the environmental concern because they are bound to what

economic fate of developed countries (Miller, 2011). This keeps undeveloped countries with an

impossible place to prosper and keeps the developed countries rich exploiting nation states that

have weak power on the global stage through law or corruption. In addition, this contributes

to social inequality within these undeveloped nations which offer them next to no assistance.

Dutt & Mukhopadhyay (2009) conduct a study to see if international institutions and

globalization cause inequality, the method was “to apply econometric time series analysis to

measures of the extent of inequality across countries and the degree of globalization using as

large a set of countries as data allows” (P.328). Furthermore, this study focused on “inequality

with the standard deviation of the logarithm of per capital income, a measure of inequality across

nations” (Dutt & Mukhopadhyay 2009, 328). In conclusion, international organizations and

globalization was directly correlated with an increase of a gap between wealthy and non-

wealthy countries, which has resulted in inequality (Dutt & Mukhopadhyay, 2009). In addition,

“if international institutions are to reduce the inequality among nations, they should be following

policies other than the type of globalization that they have advocating and promoting around the

globe” (Dutt & Mukhopadhyay 2009, 336). If equality among developing countries are to be

realized, international banks must allow for developing countries to be their own creating agents

in terms of their economy (Dutt & Mukhopadhyay, 2009).

                                            Striking the liberal model down.

 The liberal model tells us that Neoliberalism will reduce poverty. When looking at “the

liberal globalization thesis, a quantum leap in human affairs has taken place as the cross-border

flow of large quantities of trade, investment, people, and technologies have expanded from a

trickle to a flood” (Kacowicz 2007, 573). The liberal globalization thesis argues that through

processes such as humanitarian aid will bring “about a brave new world of increasing prosperity

and international cooperation and will eventually lead to greater equality and convergence in the

performance of national economies across the world” (Kacowicz 2007, 573). For example, if we

look at examples such as India and Spain to demonstrate proof that globalization is reducing

property, but the fact is India has a 25% of its population living below the poverty line (CIA

World Factbook, 2012). Thus, a quarter of India’s entire population, which tally’s 1,205,073,612

are living below the poverty line (CIA World Factbook, 2012). Furthermore, if we look at the

example of Spain a developed nation that follows the European union and its neoliberalism idea

(CIA World Factbook, 2012). Thus, the stats indicate that 19.8% of its population living below

the poverty line (CIA World Factbook, 2012). In turn, this has increased now when you include

the financial crisis in Europe with 21.7% of its population unemployed (CIA World Factbook,

2012). Furthermore, Spain ranks in the bottom 30 in the world which rarely is seen by a

European or developed nation (CIA World Factbook, 2012). The liberal theorists tell the public

that globalization will reduce poverty (Kacowicz, 2007). As a result, this promise that has fallen

extremely short also within Canada. As the Standing Senate Committee (1999) that earnings

among young individuals has fallen 30 percent and the average income has fallen 6 percent in a

span of six years. Furthermore, the Standing Senate Committee (1999) states the homeless

problem in Canada has gone on unaddressed for years and is only getting worse. Likewise, to the

point where now it could be addressed as a national emergency (Standing Senate Committee,

1999). Therefore, the discourse around the promise of neoliberalism seems to have been an

empty one.

 Liberal theorists argue that advancement within technology in the north (developed

countries), will reduce poverty when it is transfered to the south (undeveloped countries)

(Kacowicz, 2007). As a result, will raise the living standards within these undeveloped countries

(Kacowicz, 2007). This statement seems to be completely misleading, when the whole idea

conflicts with transnational exploitation. Consequently, explaining how globalization leads to

greater social and economic inequality. Furthermore, globalization “generates transactions

between people and firms in developed countries and people in developing countries that are

immorally exploitive unless the benefits of commerce are used to relieve desperate needs”

(Miller 2011, 90). This states that the payback the developing nations receive are barely enough

to keep them out of debt. In addition, providing them with fewer social services, in return the

developed nation’s gain a massive profit. Within this system, developed countries promote

competition, which forces undeveloped countries with less power to negotiate and accept the

terms because there is no other option available (Miller, 2011). Another way of putting this is

that exploitation that happens on an international stage, which one state benefits off another

without something in equal in return (De-Shalit, 1998). In this relationship, one party finds a way

to keep the exploited party poor, thus limiting their purchasing power (De-Shalit, 1998). Thus,

leads to a country being dependent of them sort of like protectorate status (De-Shalit, 1998).

When developed countries are exploiting underdeveloped countries, anyone would have a tough

time understanding that liberal intention is a good one.

Liberal theorist’s say they give back, but I disagree it looks like they are taking more
 

than giving. For example, this can be clearly demonstrated within a simple stat which is personal

computer per 100 people. In addition, if we look at the statistics outside of Europe and North

America there is a low percentage per 100 people with computers (The World Bank, N.D). In a

perfect liberal view, Individuals’ would be supplied with more computers (The World Bank,

N.D). Thus, if we look over the existence of computer available to the public from 1990 onward,

the stats have remained stagnant (The World Bank, N.D). Furthermore, this maintaining the

same imbalance in the world when it comes down to computers (The World Bank, N.D). If we

did deeper into the subject, we find that information technology is an important ally to the

neoliberalism ideology (Harvey, 2005). Harvey (2005) states that the sectors associated with the

entertainment industry have shifted public focus from social sectors and debates. Thus, heavy

funding in private sphere could continue while social welfare programs and basic income took

the backseat, sustaining inequality problems globally. So, in practice the liberal ideology is

flawed, as most individuals’ see more exploitation within a liberal perspective than a reducing of

inequality.
 

                                                          Public Sector Reform.

            The public-sector reform has been closely tied to the neoliberal ideology. However,

Suzan (2009) states the public sector reform indicates that to “absolve the state of responsibility

for the distribution of society’s resources and demand the demonstration of entrepreneurship,

autonomy, efficiency, and individualism” (P.211) This has transferred the states previous

ideology that supported individuals in the nation-state to one of the individual reliance. The new

public sector reform stated by Suzan (2009) informs us that “individuals to become self-

disciplined, multiskilled, entrepreneurial and resilient” (P.211). consequently, this has affected

inequality at a global level, that once the public responsibility of the state has been transferred to

the individual inequality increases. For example, Suzan (2009) gives an account of this problem

within the health care sector, such as the raised medical fees and increased the costs of surgeries.

Thus, within the health care sector, what has happened is that due to new public management.

In the event, that governments have reduced subsidized payments to health care sectors, resulting

in higher payments for users of the medical system and those who do not have proper health

insurance. Thus, these individuals would be left with options of going into debt for health care

services are not addressing their health care needs. Suzan (2009) gives an example of labour in

Canada relating to Canada employment insurance act were changed, to give individuals less

access to employment insurance by raising the hours deemed to qualify. Furthermore, labour

training markets provided by the state where given to the private sector. In addition, these

following changes resulted in individuals having to pay for education to upgrade their skills and

for some without any assistance from time granted by employment insurance. Thus, pushing

individuals without savings into circumstances where they can’t improve their situation as

previous generations have. As a result, of the fact the costs previously subsidized programs by

the state become completely unsubsidized. In addition, this has given the unrestricted market

access to labour market and how the overall labour market is conducted. As a result, has likely

resulted in such results located in the Standing Senate Committee (1999) report that of a high

discrepancy with older workers’ high skilled jobs with good pay and benefits, and young

workers with low pay and low skilled jobs. Where as, the uncontrolled market has resulted in the

increase of contract and seasonal work by 7 percent and the rate of involuntary part time

employment which has raised by 24 percent in 19 years (Standing Senate Committee, 1999).

 

The fall of the voluntary sector.

 
 The voluntary sector was established to meet the needs of individuals that the state or

market could not incorporate. This concept changed in the 1980s in connection to the neoliberal

economic policy. Evans and Shields (2005) state that the neoliberal ideology has attempted to

overhaul the voluntary sector as the third sector. Thus, in doing so Evans and Shields (2005)

suggests this has resulted in the transferring the state social services to the newly acquired third

sector, resulting in the overburdening of the voluntary sector. The voluntary sector is now tasked

with difficult circumstance, such as losing money at an alarming rate due to the fact the sector

has grown more independent from the state. Evans and Shields (2005) state that the voluntary

sector has fallen into the choice of either being philanthropic or being merchants of care industry. 

Thus, this has been tied back to the public sector reform that has expanded not only to the public

sector, but the voluntary sector as well to create profits. In addition, Phillips (2009) gives a

Canadian example relating to how the conservative government cut one billion in funds under

four premises unused funds, money for value, efficiency and non-core programming.

Furthermore, Phillips (2009) states in economic crisis of 2008 the conservatives did not include

any funding to help the voluntary sector. This has resulted in the problem if the federal

government does not inject any money into the voluntary sector who suffers? The answer is

voluntary sector does because the lack of funds it can contribute to helping individuals in the

community. In addition, individuals suffer as the Standing Senate Committee (1999) states that

“social exclusion, poverty, the marginalized, the underclass, the ‘have nots’ – there is a shared

concern that the benefits of the macroeconomic and social policies that we are pursuing are

failing to reach some groups; that some people are ‘falling through the cracks’ and them, as a

result is losing the capacity for full social and economic participation” (P.1). In turn, the

neoliberal ideology has legitimized through funding, inequality of people through

financialization.

                                                                  Alternatives?


             Alternatives to the globalization and neoliberal economic tradition have always been

sustainable development. Cuba faced one of the most difficult times in its history with the

collapse of the Soviet Union in 1991, the country found its largest ally and trade supporter

transferring into the global market, a direction that was undesirable at the time for Cuba to

follow (Stricker, 2010). What is the alternative? The alternative is sustainable development and

the only country by the world-wide fund for nature to meet all the criteria (Stricker, 2010). A
 

system where you “elevate the status of nature and community above that of the accumulation of
 

capital; equality and justice above individual greed; and democracy above the market. A new
 

accord with nature is needed” (Stricker 2010, 186). In addition, this system places more

emphasis on not exploiting people in international markets, instead an emphasis on just

providing for the citizens of its country with the right amount of product (Stricker, 2010). Thus,

to sustain the population, while adding in a factor of environmentalism, to preserve the land for

future generations.


 How does Cuba Accomplish this? As a result, by a variety of factors such as through

food security. For example, “the government continues this commitment through a universal

food subsidy programme that roughly covers 65% of a family’s needs. Elderly people, children

and pregnant women are given extra rations of milk and other goods in addition, to the

traditional offerings” (Stricker 2010, 187). Thus, aside from food services the Cuban government

provides “a free health care system that is considered as one of the best in the global South.

Health care in Cuba is a right and offered without cost to Cubans. Through the decentralised

policlinico system of local-based health centres and a focus on preventive care, Cubans have

healthcare service in proximity to their homes. Despite its tiny per capita GDP, Cuba rivals the

more “developed” neighbours to the north, Canada and the US, in all standards of living and

notably outperformed them in terms of physicians per person” (Stricker 2010, 188). Furthermore,

Cuba also gives the right to free education past the high school level, which is considered not a

privilege but a right and this has contributed to Cuba 100% literacy rate (Stricker 2010, 188). In

addition, sustainable agriculture, which Cuba created a revolutionary technique that “they formed

the Vegetable Biotechnology and Biological Agriculture, an inter-disciplinary group of scientists

and technicians from 36 institutions to perfect such alternative technologies as biological

fertilisers, plant tissue cultivation and the biological control of pests and plant diseases and to

implement the successful techniques in the field as soon as possible” (Stricker 2010, 190).

Thus, after implementing this system, there became less opposed to it and more productivity

(Stricker 2010, 190). The retreat of the state in favor of the global market has only hampered

social cohesion in nation states. Sustainable development may not be perfect, but it has provided

a better sense of welfare and equality for the people.

                In conclusion, I have discussed several topics. The first is that International banks are a

major problem contributing to inequality, as they fund programs of neoliberal policies, In

addition, they cut social welfare programs such as the situation that has been proposed within

Greece. Furthermore, these countries are stuck because they can’t adopt other policies because

neoliberal policies restrict their economic freedom such as the European union. The second

issue is the liberal theorist’s modernization theory is falling short. For example, globalization has

been producing more equality and has been shown computer stats. This has showed computers

are not even nearly as common in developing or countries as they are within developed

countries. Thus, in liberalism theory globalization technology would expand, but this is not the

case. The third point is the public service reform that has transformed the public sphere into a

business and the responsibilities have been transferred to the private sphere or the voluntary

sector. The last issue revolved around the transferring of social responsibility of the state to

individual responsibility in turn, resulting in further inequality. The final point is there is an

alternative to neoliberal policy, such as in Cuba’s case that demonstrates low levels of inequality.

Bibliography

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         Schneider, Howard. 2012. “IMF approves its share of new Greek bailout.” March 15. http://www.washingtonpost.com/business/economy/imf-approves-its-share-of-new-greek-bailout/2012/03/15/gIQApec9ES_story.html

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