ESSA

ESSA

Globalisation


Student Guest

By

January 29th, 2012


My opinion is that globalisation is essential for dealing with poverty. While programs like World Vision’s ADP may be helpful, I would argue they are only a small part of the effort in relieving poverty, because while the motive may seem more pure, it may be a smaller pool of energy to draw from.


By Collin Li

My opinion is that globalisation is essential for dealing with poverty. While programs like World Vision’s Area Development Program may be helpful, I would argue they are only a small part of the effort in relieving poverty, because while the motive may seem more pure, it may be a smaller pool of energy to draw from. I would argue that the profit motive, provided by globalisation, has a far greater and wider appeal, as I believe people are inherently interested in their own well-being than others’.

Usually, only people who are well-off enough have the liberty to care about others (and actually meaningfully devote resources toward the cause). On the contrary, typically everyone will care about themselves primarily. This is why I believe the profit motive is a far more powerful force.

The profit motive that is “legalised” (by which I mean, allowing companies to freely establish, employ/outsource and sell/export) via globalisation encourages self-interested agents to produce better and cheaper goods in order to remain competitive against other organisations and companies. Furthermore, globalisation increases the level of competition, as companies compete on a global scale rather than a local scale.

This is good because in-turn it requires companies to employ at cheaper rates whenever possible, in order to provide cheaper goods, which may mean transferring jobs from rich nations with high wage expectations to impoverished nations with no wage expectations (because they have no better alternative). Basically, it encourages companies to use resources that have lower costs (in this case, impoverished workers, rather than fortunate, and typically unionised workers).

Thus, globalisation is actually a force that impels companies to search for the “best” method of production. This not only benefits them (and their consumers), but it also helps the worst off, as they are the direct beneficiaries of such a scheme. Although the pay and conditions may be deplorable from the “fortunate unionised” worker’s perspective, the impoverished worker would accept the job offered by the multinational in a heartbeat, and hence globalisation is also an equalising force.

We have seen globalisation transform countries that have accepted free-market reforms like Hong Kong, Taiwan, Japan and even China (Shanghai is often believed to be generally free-market overall, even if the entire nation is communist). These countries have flourished and grown, and Made in Taiwan and Made in China is now shifting to Made in Thailand and Made in the Phillipines as they are the next in line (now China and Taiwan have the rich unionised workers, while Thailand and Phillipines have the cheap and impoverished workers). So globalisation has a proven record of success of allowing the worst off to get opportunities as well.

 

The views expressed within this article are those of the author and do not represent the views of the ESSA Committee or the Society's sponsors. Use of any content from this article should clearly attribute the work to the author and not to ESSA or its sponsors.

  • Helen S

    The notion that self-interest can make the world a better place sounds kind of ironic doesn’t it? But I agree that globalization can alleviate world poverty to some extent.

  • Lachlan Vass

    Hi Collin,

    First of all congratulations to ESSA for paving the way for more economic discussion at the student level, because when it comes down to it that is why we all are at uni, to learn and grow.

    I appreciate that globalisation was once a hot buzz word, but the events of past show us that globalisation is not the comprehensive answer you have portrayed it to be. The “profit-motive” and “self-interest” that you describe as aiding the development of poor economies also cause serious damage to the welfare of people in these countries. The idea that a worker in a developing country is earning $2 an hour, when their marginal produce is worth $20 an hour, and they should be happy with that because their alternative is $1 an hour seems a bit short-sighted to me, and a judgement easy to make whilst sitting in our comfortable and affluent surroundings.

    On this note it should be mentioned that the cheapest option for corporations to produce is not necessarily the “best” as quoted above, as this may lead to deterioration in product quality and efficiency of production. Also, does cheaper production costs necessarily benefit consumers? Since sports apparel makers moved their production to Asia the price of sports clothing and shoes has increased not decreased.

    The inter-connectedness that globalisation brings also makes developing countries more susceptible to financial flows, and most significantly leads to financial flows out of their economies as soon as the wider world economy faces difficulties, thus exacerbating the difficulties they face. As soon as financial difficulties are faced in the developed world, it is an automatic reaction to pull financial resources from developing economies as they are seen as more “risky” even though in reality they are no more risky than any developed country.

    Globalisation can also have negative effects on a developing countries cultural fabric, something which is impossible to measure in dollar value.

    I realise the many benefits that globalisation brings developing countries through opportunities to access a global market place and utilise their comparative advantage, however it would be remiss to ignore some of the negative consequences that come with globalisation and sing its praises as the divine answer.

    Regards

    • http://collinli.com.au Collin Li

      With all due respect, this is just the response I expect from a well-off citizen speaking for impoverished people.

      If the impoverished people really value the “cultural fabric” so much, they would and could reject globalisation. And perhaps some do, and maybe some communities that have abstained have not been touched by globalisation – but the voluntary actions of the marketplace have spoken – and they chose Nike jobs over the culture.

      Sure, perhaps it is a shame they don’t have both, but you must accept that they have made their value judgment, and that if there was a system that offered benefits without harming “cultural fabric”, then surely they would have taken that instead – but given the two alternatives, they chose the one that matters to them more.

      This is why I trust the marketplace – it isn’t the benevolent rich folk who decide what is in the best interests of the impoverished, but it is the poor who are empowered to make these choices.

      • Lachlan Vass

        Collin,

        You have failed to address the more important issues of volatility of capital flows, harm to social welfare and the misbelief that cheap production benefits consumers.

        I have been in the company of the poor from the developing world over the past two months, and trust me they do not feel “empowered”. They feel disillusioned, unable to effect any change as the marketplace has allowed politicians and other people in power to corrupt their society. The “self-interest” incentive and “profit motive” you describe is the driving force behind this. A politician sees an opportunity to make excessive earnings for himself and if he has to take advantage of his own populace, so be it. This, as we all know, hinders growth in these countries as investors perceive them to be more risky. An obvious example of this are pastors in Africa living in mansions whilst they preach to the poor who live in poverty.

        Does not history tell us something significant, that China’s slow, restricted and gradual opening up to Globalisation has seen growth beyond belief and precedent.

        Finally, I do not pretend to speak on behalf of impoverished people, I am just speaking from my experience and observations from working in the third world.

        Regards

        • http://collinli.com.au Collin Li

          Volatility of capital flows: if as you suggest that it is no riskier, then why don’t you beat the market and leverage yourself to invest in it? If you are right, you can take steps to prevent that – the market provides a mechanism for people who think they know better to take risks and potentially win.

          Consumer prices rising: you are conflating inflation from excessive spending and printing of reserve notes with the coincidental rise of globalisation. The inflation that is happening worldwide is another issue, and cannot be ignored as a factor as to why prices are rising. Either way, doesn’t take away from added job opportunities to the poor, even if we are better or worse off here from the prices.

          Politicians and corruption: We are both against this, but it would be a mistake to call this a side-effect of globalisation. I put it to you that if you remove globalisation, corruption would still exist. I tend to side with the belief that free markets will foster a free society. Milton Friedman may have taught the dictators of Chile how to take advantage of a prosperous economy, but free markets eventually pushed them out, and they are now a freer society thanks to it (and far better than nations for comparison like Argentina).

  • Christian Maruthiah

    Hi Collin,

    I just discovered ESSA today – it’s a great idea, congratulations to yourself and the other committee members for putting this together.

    I think it is overly simplistic to say globalisation is essential to dealing with poverty. Certainly – in theory – globalisation opens up gains from trade, realisation of comparative advantage etc. But how much of economic growth in the last 50 years can be put down to ‘profit motives’ stemming from globalisation?

    As the world has become increasingly globalised, some countries have prospered (such as the various East-Asian economies you mention), and others have not (certain African economies have experienced no growth, and in some cases negative growth). While almost every economy has become intertwined in the global marketplace, only those with reliable governance and some degree of political/social stability have experienced real gains (compare the economic situation of Botswana and Zimbabwe).

    I agree that globalisation is important – but I think it is the not the ‘concept’ itself – but rather its consequences (technology transfer, the importation of managerial expertise, institutions and governing practices) that has had the greatest impact on improving the wellbeing of those in the developing world.

    • http://collinli.com.au Collin Li

      Thanks for your comment mate.

      I don’t disagree with your comment. But I think we are still saying the same thing. Globalisation must be there, but it may not necessarily be all that you need.

Founding sponsors

 

 

Partner

Gold sponsors

 

 

Silver sponsors

 

 

 

 


Affiliates