The period from the end of the World War II to the mid-1970s saw world-wide sustained and high economic growth. Within a generation Western European society was transformed from predominantly agrarian to post-industrial. Latin America, Asia and Africa also were heading towards higher growth rates. During the 1980s, a new period of integration of national economies led to the intensification of international economic interconnectedness and developing economies were expected to overcome the between-country income gap through openness-growth link. This was seen as the manifestation of neoliberalism as new forms of international economic relations emerged such as industrialisation and the new international division of labour. However, as recent studies point towards increasing world poverty and inequality, scholars have re-examined the validity of the neoliberal argument. After years of implementing prescribed reforms, some developing countries and regions, such as Sub-Saharan Africa, have not experienced the expected growth. Chapter 2 summarizes the implications of the policy-paradigm inspired by the Washington Consensus. Chapter 3 identifies current trends in global poverty and inequality with attention to the different measures used to interpret world economic well-being. The next chapter analyses the openness-growth-inequality-poverty nexus. The final chapter seeks to recognize causes of poverty and inequality transmitted by the globalization process. The factors of poverty and inequality path dependence are grouped in four categories: economic openness and technological progress; macroeconomic policies; financialisation of the economy; and international financial institutions.
Table of Contents
1. Introduction
2. The Policy-Paradigm Inspired by the Washington Consensus
3. Recent Trends in World Poverty and Inequality
4. The Openness-Growth-Inequality-Poverty Nexus
5. Causes of Inequality and Poverty
5.1. Economic Openness and Technological Progress
5.2. Macroeconomic Policies
5.3. Financialisation of the Economy
5.4. International Financial Institutions
6. Conclusion
Research Objectives and Key Topics
This paper examines the impact of globalization on global poverty and inequality, specifically questioning the effectiveness of the neoliberal policy-paradigm promoted by the Washington Consensus. It explores how trade liberalization, technological progress, and macroeconomic policies have failed to generate the promised economic growth, instead contributing to widening disparities between nations and increased vulnerability in developing economies.
- Critique of the neoliberal policy-paradigm and the Washington Consensus.
- Analysis of current trends in global poverty and income inequality.
- Investigation of the interrelationship between economic openness, growth, and poverty.
- Evaluation of the role of International Financial Institutions in shaping developing economies.
- Assessment of the impact of financialisation and technological change on inequality.
Excerpt from the Book
5.1. Economic Openness and Technological Progress
Mankiw offers an explanation of the increasing gap in earnings in Western economies by incorporating two factors seen in popular perception as the primary drivers of income inequality, namely labour skill-level and technology. In this view international trade has altered the relative demand for skilled and unskilled labour, whereas the high supply of cheap unskilled labour on global scale has driven the domestic demand in developed countries downwards and simultaneously has increased the demand for skilled labour due to introduction of new technology. In terms of North-South trade relations, trade with the South is considered responsible for adverse labour market outcomes such as deindustrialization and high overall unemployment due to significantly cheaper factors of production. In parallel to rising unemployment rates in developed economies, deindustrialization in the OECD countries has undergone a positive trend. For example, manufacturing employment in the United Kingdom for the period 1970-93 has experienced a change of -45.7 per cent, representing a clear trend towards deindustrialization. The Stolper-Samuelson theorem of international trade also supports this view postulating that developing countries well-endowed with unskilled labour would experience a decline in income inequality through an increased demand for unskilled labour when opening up their economies to international trade. Cornia argues that the focus on the shift of labour skill-level or skill-biased technical change can guide to misleading conclusions. Empirical evidence shows that the postulated narrowing wage gaps in the Stolper-Samuelson theorem cannot be observed in many developing countries. Furthermore, the North cannot be generalized as a homogenous in terms of skill-level labour. Despite the structural differences in Western labour markets, such as flexible labour markets in the United States and the United Kingdom and rigid labour markets in continental Europe, the rising inequality in each of the cases is widely attributable to the above-mentioned causes: shift of demand from unskilled to skilled labour and the adoption of new technologies.
Summary of Chapters
1. Introduction: This chapter introduces the context of globalization since WWII, highlighting the failure of neoliberal reforms to deliver expected growth and setting the stage for the paper's critique.
2. The Policy-Paradigm Inspired by the Washington Consensus: This section critiques the neoliberal reliance on neoclassical economic theories and the negative impact of aid-liberalisation conditionality on developing nations.
3. Recent Trends in World Poverty and Inequality: This chapter evaluates definitions and data regarding poverty and inequality, noting that measurement discrepancies mask rising global disparities.
4. The Openness-Growth-Inequality-Poverty Nexus: This chapter analyzes the complex, often contradictory links between openness, trade-led growth, and their combined effect on income distribution.
5. Causes of Inequality and Poverty: This chapter identifies four main transmission mechanisms of globalization that drive current inequality, including technological factors, policy reforms, financialisation, and institutional influence.
5.1. Economic Openness and Technological Progress: This section examines how labor skill-level demands and the nature of technological change in global manufacturing contribute to income gaps.
5.2. Macroeconomic Policies: This section discusses how strict stabilization programs, such as inflation targeting, have often penalized economic growth and private investment.
5.3. Financialisation of the Economy: This section explores how the rise of global finance has increased the volatility and vulnerability of developing countries through short-term capital flows.
5.4. International Financial Institutions: This section critiques the role of organizations like the World Bank and IMF in promoting structural adjustment policies that have failed to foster pro-poor growth.
6. Conclusion: The conclusion synthesizes findings, reaffirming that globalization as a neoliberal project has failed to produce equitable growth and has instead entrenched global imbalances.
Keywords
Globalization, Poverty, Inequality, Neoliberalism, Washington Consensus, Economic Growth, Trade Liberalization, Technological Progress, Macroeconomic Policy, Financialisation, International Financial Institutions, Structural Adjustment, Developing Economies, North-South Gap, Income Distribution.
Frequently Asked Questions
What is the primary focus of this research?
The paper focuses on analyzing the impact of globalization on global poverty and inequality, with a critical look at the effectiveness of neoliberal policies.
What are the central themes covered in the study?
The study covers the policy paradigms of the Washington Consensus, trends in poverty and inequality, the nexus between openness and growth, and the influence of international financial institutions.
What is the primary goal of the author?
The primary goal is to examine the channels through which globalization affects income inequality and to challenge the neoliberal argument that liberalization inherently leads to convergence.
Which scientific methods are utilized?
The paper utilizes a critical analysis of existing international political economy (IPE) literature, official data from organizations like the World Bank, and empirical evidence from various scholarly studies.
What is covered in the main section of the paper?
The main section investigates the causes of rising inequality, specifically examining economic openness, technological progress, macroeconomic stabilization policies, financialisation, and the role of institutions.
Which keywords best characterize the work?
Key terms include globalization, neoliberalism, poverty, inequality, structural adjustment, and the Washington Consensus.
How does the author define the "missing middle" in global income?
The author references Milanovic, who observes that the global population is increasingly dispersed at either low or high income levels, reinforcing the dominance of wealthy nations.
Why is the World Bank criticized in this text?
The World Bank is criticized for promoting structural adjustment policies that failed to foster pro-poor growth, and for acting as a tool for political hegemony and knowledge monopolization.
How does the author explain the "sticky locations" of manufacturing?
Wade argues that higher-return activities (R&D, marketing) cluster in developed nations, while lower-return activities (assembly) are outsourced, which prevents technological dispersion to developing countries.
- Quote paper
- Veronika Minkova (Author), 2010, Discuss the impact of globalization on global poverty and inequality, Munich, GRIN Verlag, https://www.grin.com/document/179301
