The term globalization evokes different feelings in different people. There are those who view it as an opportunity to attain high living standards all over the world. On the other hand, there are those who consider it a tool for propagating inequalities. There is a consensus that global integration is an inevitable process because of technological advancement and interdependent financial systems. Like any other human endeavor, the process has produced winners and losers. The major criticism against global integration is that it is skewed to favor developed nations. Developing nations are feeling excluded from the global process that targets to reduce inequality.
The challenge for the current generation is to create a more inclusive global integration process. This paper will extrapolate five issues and how they contribute to globalization and poverty eradication. The issues are the World Trade Organization and NAFTA organization and how they make the world better, net import, Asia financial crisis, and how terrible it was, jobs opportunities, and eradicating poverty.
World Trade Organization (WTO) and The North American Free Trade Agreement are two global organizations working to eradicate poverty by fostering trade. NAFTA aims to facilitate trade between North America and Mexico. The geographical proximity between the two countries provides an opportunity for bilateral trade. The 1980s were financially difficult for Mexico. Poverty was escalating, and foreign investors’ confidence in the economy was dwindling. Skilled jobs were hard to get, and the agricultural sector was collapsing. Through bilateral trade and investment agreements, America was able to help Mexico in jumpstarting its economy. In recent years, however, America has been toying with the idea of renegotiating NAFTA terms. In spite of the influx of foreign multinationals, wealth has not trickled down to the neediest in society. This is a classic example of how globalization does not help everyone. The balance of trade continues to favor the USA, which is already rich.
The gap between rich and poor nations is increasing each year. Shockingly, fifty percent of the world’s household wealth is in the hands of only two percent of the adult population. This reflects an unequal distribution of global wealth. In 2011, more than 1.5 billion people in the world lived on less than a dollar per day. This population had insecure jobs and spent half of their incomes on food.
Consequently, they remained with very little for other basic needs like decent housing, primary healthcare, and basic education. Economic globalization was meant to ensure that everyone has a chance to get a decent living. Some nations have exploited the opportunity and lifted their people out of abject poverty. However, other nations find it difficult to navigate the global tides and tap into it for the benefit of their citizens. Even in cases where these countries have succeeded, wealth has had little impact because it has not trickled down to the most vulnerable people in society. The way to get out of poverty is to bridge the gap between the rich and the poor.
World Trade Organization was started with the sole aim of facilitating trade between nations. Through trade liberalizations, it was expected that nations would create jobs and experience economic growth. Some countries have benefited from WTO trade policies. Ghana, for instance, imports cocoa to Europe and America markets. However, WTO has done very little for developing nations. Trade policies continue to favor rich nations at the expense of the poor ones. The organization has failed to reign into powerful nations that dictate the prices of commodities to producers. The protectionism policies towards developing nations are facing enforceability challenges. The unfair balance of trade between rich and poor nations has gone unaddressed by the global organization mandated to do so. In Africa, for instance, the net import from China has quadrupled, and net export from Africa has remained low.
To make global integration work for all, there must be radical reforms of global trade and financial systems. Studies show that the optimism that greeted globalization in the 1990s is gradually fading away. The disaffection with the system went a notch higher when massive riots rocked the World Trade Organization meeting in Seattle. This unhappiness emanated from reports indicating that poverty levels, especially in Africa, had risen by four percent. The situation was exacerbated by the East Asia financial crisis of 1998.
With the end of the cold war, America was keen to establish a world economic order based on its values and principles. Corporations took advantage of their influence on the government to bargain for trade policies that did little to eradicate the world’s poverty and create more opportunities even for Americans. The first step to making globalization work for all, therefore, is to reform global trade and financial systems. The new policies should be fair and inclusive so that globalization benefits the entire global community.
The other way to make globalization work for all is to adopt a new approach that encourages open policy formulation. In the current regime, rules governing the integration process are made in an opaque and closed manner. The new approach must allow countries to contribute to all policies concerning international financial organizations. While donors should continue supporting the programs in poor states, beneficiary nations must drive the policies. International financial organizations should actively support these programs but allow nations a free hand in running projects.
The Asian Financial crisis started in Thailand and crippled most of the economies in the region. This shows the interdependence of the world’s financial systems. The International Monetary Fund was forced to intervene though with strict conditions. The crisis was very serious because it led to joblessness, increased poverty levels, and the collapse of most government operations. The most prudent steps would have been to escalate government spending, support corporations to get back to business, and drastically reduce interest rates. Even if Asia survived the crisis, the IMF exacerbated rather than reduced the pain of the financial meltdown.
To make globalization work for all, it is important to enhance accountability and transparency at all levels. If local communities are involved in all projects, it will be easy for them to monitor and demand accountability from those managing the projects. In many developing countries, wasteful spending, endemic corruption, and poor fiscal policies stifle projects. If global organizations consult and involve the benefitting communities, it would be easy to monitor projects vis-Ă -vis the budgetary allocation. This will also level the playing ground between nations with strong institutions and those with weak institutions.
Capitalism has been suggested as the panacea to unemployment in parts of the world experiencing the challenge of joblessness. The global debate among many capitalists’ states is whether the national government should control trade or leave it to forces of demand and supply. History teaches that while free markets have their benefits, governments should intervene periodically as situations necessitate. JP Morgan, Bearsterns, and Lehman Brothers are some examples of institutions that could not withstand institutionalized competition in the USA.
The federal government had to intervene and bail them out. The discourse on whether to regulate or not dates back to the post World War 1 era when Maynard Keynes made a strong argument for government intervention in the employment crisis facing the nation. His theory of employment lessened the impact of the Great Depression. It is through reforms that capitalism, as an economic world order, survived. Globalization is at a similar juncture, and it must reform or risk collapse.
The reform in capitalism came in the form of free-market capitalism during President Clinton’s era. The reforms put more jobs into the economy and set the stage for rapid economic growth in the USA. There was rapid technological advancement, and many American companies transformed into multinationals. With the collapse of the U.S.S.R. and subsequent fall of socialism in China, free-market capitalism established itself as the world’s economic order. Globalization came into force in the same period. American corporations played a leading role in negotiating trade agreements. This was the first challenge to inclusiveness. Being the only economic and military superpower, America formulated rules that are grossly unfair to develop nations. Subsequent efforts at reform are at peril because of strong stakes by major players in global trade and policies.
Global interaction, if effectively managed, has the potential to transform the living standards of all global citizens. However, there must be sustained efforts to reform structures and institutions through which globalization is manifested in ordinary people’s lives. To enhance inclusivity, there must be a global minimum wage for all people in the world. Laborers in Africa must enjoy the same working conditions and remuneration as their exact counterparts in Europe and the USA. Additionally, the world must avoid the path that makes nations rich by taking wealth away from its citizens. In the USA, for instance, tax reliefs are given to the rich. Scandinavian countries offer better examples of ideal globalization, in which the government offers efficient services and levels the playing ground for all stakeholders.
There are many challenges to inclusivity in globalization. The first one is the preference for economic globalization and decreasing attention to underlying politics and change of mentality. In spite of the realities of an interdependent world, there are no frameworks for democratic deliberations and decision-making. Developing nations occupy the periphery in global discourses. It is important that poor nations step up and take their rightful position. Additionally, there needs to be a change in mindset so that people understand how to make globalization work for everyone. It is only then that the integration process can redeem its legitimacy, especially in developing countries.
In conclusion, there is reason to believe that globalization can work for everyone. IMF and World Bank have initiated a raft of reforms aimed at enhancing openness and participation of all stakeholders. The two financial institutions are now working on plans to support projects that work directly towards poverty eradication. The two institutions are working on a formula that will put concerted and focused efforts towards reducing inequality in the world.
The International Monetary Fund is reforming its financial systems and fiscal policy to reflect inclusivity. The latest of these reforms is the introduction of the Poverty Reduction and Growth Facility. The facility’s sole objective is to reduce poverty and put communities on the path to rapid economic takeoff. To lessen the debt burdens, the international financial organization has launched the Heavily Indebted Poor Countries Initiative. In spite of the progress, there is more to be done to reduce inequalities.