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Global Econmic Growth and Poverty Reduction


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Global Econmic Growth and Poverty Reduction

  1. 1. MBA 674 TERM PAPER Kaosarat Animashaun (U01173077) WORLD POLITICS: GLOBAL ECONOMIC GROWTH WITH POVERTY REDUCTION 1 | Page Globalizationis the interactionand integration of people,nations – companies and governments withinand outside the continent through trading of goods and services, investments and cultural education, modern-day globalization has improved further due to advancements in technology – production, transportation and information. Humanshave interactedoverlongdistancesforthousandsof years,forexample theoverland SilkRoadthatconnected Asia,Africa,andEurope isagoodexample of thetransformativepowerof trans-local exchangethatexistedinthe "Old World".Philosophy,religion,language,the arts,and otheraspectsof culture spreadand mixedasnationsexchanged products and ideas.In both the 15th and 16th centuries,Europeansmade importantdiscoveriesintheirexploration of the oceans, including the start of transatlantic travel to the "New World" of the Americas. Global movement of people, goods, and ideas expanded significantly in the following centuries. Early on in the 19th century, the development of new forms of transportation (such as the steamship and railroads) and telecommunications that "compressed" time and space allowed for increasinglyrapid rates of global interchange In the 20th century, road vehicles, intermodal transport, and airlines made transportation even faster. Afterthe SecondWorldWar the BrettonWoodsConference heldin1944 setup the General AgreementonTariffs and Trade (GATT) nowWorldTrade Organization(WTO) tolaydownthe frameworkforinternationalmonetary policy,commerce andfinance, whichfoundedseveralinternational institutionsintendedtofacilitate economic growth,lowertrade barriers andcost throughadvancementsintechnologyresultingin the inventionof shipping containers in1956 thathelpedadvance the globalizationof commerce aswell asthe 1970’s aviationindustry technological advancementsand openskiespolicies thatcreatedlow costcarriers,while mostrecentlythe adventof electroniccommunications inthe 1990s, the growthof low-costtechnological communicationnetworks most notablyin mobile phones andthe Internethascut the cost of communicatingbetweendifferent nationsandnow more work can be done usinga computerwithoutregardtolocation andhas connectedbillionsof people innew waysacross the worldas at June 2012, more than 2.4 billionpeople—overathird of the world'shumanpopulation were connectedglobally.Generally informationtechnologyhasgivenall individualeconomicactors—consumers, investors,businesses—valuable newtools foridentifyingandpursuingeconomicopportunities,includingfasterand more informedanalysesof economictrendsaroundthe world,easytransfersof assets,andcollaborationwith partners overlongdistance on accounting,software development,andengineeringdesign,etc. Scholars show howthe worldhas growneconomicallytoreduce povertylevelthroughthe differentphasesof globalisation adopted fromthe archaicglobalization spanningfromthe earliestcivilizationsuntilroughlythe 1600s, where communitiesandstates tradedingrains,spreadideasandsocial normsat bothlocal and regional levels especiallywhen Greece badlyneededtoimportwheattofeeditscitizens andhadto engage inmaritime trade. Then to the earlymodern (proto-globalization) phasebetween1600 and 1800 were there existedan increasinglevel of trade linksandcultural exchange, andfinally the 19thcentury, modernglobalization developedas a directresultof the industrial revolution anditsassociatedeconomiesof scale were standardized massproductionof household itemswasable to meetandsustain demandof a rapidlygrowingpopulation growthforcommodities whichnegated the Malthusianstheorythatpopulationgrowthwouldexceed foodsupplyandthe highlevelsof povertythatwas expectedtofollow suit.Also,the inventionof steamships andrailroadssignificantlyreducedcoston international and inlandtransport,whichenabled more imperialistnationsengage intrade toshipcommoditiesgotten fromAfricaand Asiato theirnationsandtrade partners.
  2. 2. MBA 674 TERM PAPER Kaosarat Animashaun (U01173077) WORLD POLITICS: GLOBAL ECONOMIC GROWTH WITH POVERTY REDUCTION 2 | Page Currently,moderneconomicglobalizationisincreasingeconomicinterdependence of national economiesacrossthe world through a rapid increase in cross-border movement of goods, service, technology and capital to increase economic integration between nations to create a global marketplace or a single world market, It practically transforms economies especially due to technological change and liberalization which has promoted transnational integration in production, trade and finance globally through international trade, foreign direct investments and internationalfinance.Also itcreatesaninterconnectedglobal political order,political powerandpolitical activity that extendacrossthe boundariesof nation-statesonemergingglobal issues requiringstatestocoordinate policy-making at levels above the nation-state. While on the social and cultural level,it alters people’slives across the globe by influencingtheirculture usingmoderncommunicationtechnologies toexchange informationonmusic,books,ideas, culture norms and values, thus creating a global culture. Economicglobalisationcomprisestheglobalization of production,markets,competition,technology,andcorporations and industries which can be measured based on quantitative variables such as increased trade, foreign direct investment(FDI), portfolioinvestment,andincome aswell asqualitative variablesrelatedtopolitical,social,cultural infusion,andglobal emergingissueschangesaroundthe worldlike poverty,environmental pollution andhow these variables affect economic growth and economic development for the nations engaged in the global process. Economic globalisation has positive and negative impact on nation’s business environment, economic productivity, growthanddevelopmentaswellas oncultural andpolitical systems.If the effectsare 100 percentpositiveinthe long run, it will lead to a global increase in the standard of living and eradicate world poverty by 100 percent. Globalisationimpact dependson nation’sstrengthsandability toadapttochangingbusinessenvironmentSWOTsand effectivelycontrol the nature andspeedof globalintegrationusingitspowerful national ideologiesthathave enabled good governance to influence international business rules. These impacts are as follows: Pros of Globalisation: These showshownations,if strongplayerscangainfromglobalisation andgrow economically and get out of poverty as a result of the following: 1. Free trade allowsforgreaterhighqualitychoicesof goodsandservicesat lowerpricestocitizensof the world due to competition between local and foreign firm to maintain a large market share. 2. Free mobility of labour around the world to find better job opportunities to improve their standard living. 3. Comparative cost advantage gives nations endowed with resources and efficient in low cost resource utilisationatcheaperrate worldwidetothe opportunitytogrow theireconomybasedontheirstrengthsand forfeit their weaknesses for others efficient to provide. 4. Provides greater opportunities for firms in less industrialized countries to tap into more and larger markets around the world as well as more access to capital flows, technology, human capital, cheaper imports and larger export markets. 5. National issues become world issues and better decision are reached that benefit the whole i.e. United we stand, divided we fall. 2008 world financial crisis, nuclear proliferation, climate change, poverty etc. Thus variousorganisationsare setuptomitigate theseissuestoensureall economiesfunctionproperly. According to libertarians,globalizationwill helpthe worldtodeal withcriseslikeunemploymentandpoverty.Itwillhelp
  3. 3. MBA 674 TERM PAPER Kaosarat Animashaun (U01173077) WORLD POLITICS: GLOBAL ECONOMIC GROWTH WITH POVERTY REDUCTION 3 | Page us to raise the global economyonlywhenthe involvedpowerblockshave mutual trustand respectfor each other's opinion. 6. Mobility of people and the advanced communication technology has helped the sharing and merging of culture and ideasresultinginanearlyhomogenousglobal culture aspeople come acrossthingsthey like and over time adopt it. Cons of Globalisation: These showshow nations,if not one of the strong playerscan lose fromglobalisationand be drawn into extreme levels of poverty as a result of the following: 1. National sovereigntylosesgroundtoglobal transnationalsovereigntywhichiscontrolledbythe superpowers i.e. United Nationspermanent five and some measures adoptedmay be too harsh and worsen economy of weaker nations. 2. Free trade compelsnationstoremove protections,compete basedonacertainstandardandthese standards favour the developed than the developing nations e.g. protectionist policies in industrialized countries prevent many producers in the Third World from accessing export markets. 3. Subsidized local firm might not be able to compete favourably with foreign direct investment firms since liberalisation request subsidyreduction and removal. This reduces GDP growth rate from industries were these local firmsexitfromandresultinadecreasingoutputmultipliereffectforotherrelatedandsupporting firms that serviced exiting firms. 4. Capital flows increases the risks of global financial crisis spreading within nation-partners in international business. 5. Labour mobility draindevelopsbecause people are movingtoplacestheirservicesare highlyvaluedandthis results in a drain in workforce in nations experiencing the outward GDP from labour movement as well as transferandgrowthof viceslike drugcartel andterroristactivitiesglobally fromeasymigrationof people and resultingunemploymentinplacessaturatedbyhighinflowsof labourforce andthose thatlackthe necessary educational skills required. 6. Wideninginequalitygapdespite theworldhasgrownricher since;worldpoliticshasledto increasedexclusion and inequality in wealth between and within developed and developing nations due to powerful people or wealthier nations influencing decisions to favour their vested interest at the expense weaker ones. 7. Allows large MNE’s evade home country taxes, since host nations allows them to exclude certain activities from tax reports, thus not reflecting the real profit earn, and this results in home country sourcing more revenue from within its economy through higher taxeson citizens and domestic firms, therefore increasing the cost of living and resultant rise in poverty levels.
  4. 4. MBA 674 TERM PAPER Kaosarat Animashaun (U01173077) WORLD POLITICS: GLOBAL ECONOMIC GROWTH WITH POVERTY REDUCTION 4 | Page 8. Loss of nation’s socio- cultural values by global cultural hegemonyas well as environmental pollution from MNC’s operations in host economy especially when attracting the race to the bottom, host nations dangerouslylowerenvironmentstandard. Also,the global culture adoptedismostlywesternthananyother nations, despite some nations that do not adopt western values, like the Asian nations “Tigers of Asia” Singapore, Korea, Malaysia, Taiwan, china and Japan, and have achieved enormous economic success. These various pros and cons led to development of world politics,World Politics started in the nineteenth century, when several groups of internationalist like Marxist, human rights, peace, feminist, oppressed advocates and environmentalist extended political community beyond nation-states to include much, if not all of humanity. But today,ithas grownto covergreateraspectslike humanrights norms,humandevelopment ideology,andhownations should relate with one another (internationalism) to ensure global welfare more than their national welfare as this would benefit all rather than a few in the long run. World Politics is the globalisation of social relations to make national issue become world issues where nations, corporations, NGO’s and international agencies set standards for international business and proffer solutions collectively toresolveemergingglobalissue. GlobalisationhasbroughtWorldPoliticsgreaterimportance now thanit had in the past because of the high interconnectedness of nations that allows economic, cultural, social, political situation affecting one nation to spill over to others. This union of nations to discussand find viable solutions to the world emerging issues gave birth to the World Politics we have today that aims at protecting the environment, mergingcultures,viewingpolitical systems,andpromotingeconomicdevelopment andprosperity,toimprove human physical well-being around the world by setting policies and organisations in the following areas: 1. Peace and Political Stability 2. Proper Health Improvements 3. Promote Literacy, Cultural Education and Human Rights 4. Productivity, Prosperity and Equality 5. Poverty Eradication 6. Planet Pollution and Global Warming 7. Protect Wild Life and Vegetation 8. Propose Measures to Counter Terrorism, War, Nefarious Activities(Crime and Drugs) and Refugee Crisis Many non-governmentalorganizationsactingassupranationalinstitutionsaimedat reducingandpossiblyeradicating poverty and other world emerging issues to influence public policy across national boundaries towards humanitarian andeconomicdevelopmentweresetupbynations,suchasthe WorldBank,World Trade Organization, World Health Organization, World Food Program, United Nations (Millennium Challenge Corporation), European Union,the various Groupof nationstermedG3,G5,G8and G20. Also,Philanthropicorganizationswithglobalmissions are also coming to the forefront of humanitarian efforts; charities such as the Bill and Melinda Gates Foundation, Accion International, the Acumen Fund (now Acumen) and the Echoing Green have combined the business models with philanthropy, giving rise to business organizations such as the Global Philanthropy Group and new associations of philanthropists such as the Global Philanthropy Forum. The Hudson Institute estimates total private philanthropic flows to developing countries at US$59 billion in 2011.
  5. 5. MBA 674 TERM PAPER Kaosarat Animashaun (U01173077) WORLD POLITICS: GLOBAL ECONOMIC GROWTH WITH POVERTY REDUCTION 5 | Page Global EconomicGrowthis the increase in GDP percapita income overtime asproductivitylevel rises globally, GDP percapita isgross domesticproductdividedbymidyearpopulation.GDPisthe sum of gross value addedbyall residentproducersinthe economyplusanyproducttaxesandminusanysubsidiesnotincludedinthe value of the products.It iscalculatedwithoutmakingdeductionsfordepreciationof fabricatedassetsorfordepletionand degradationof natural resources.Dataare incurrentU.S. dollarsandcalculatedannuallyusingpercentagestoshow the rate of growth fromone periodtoanother. While Poverty iswhenpeople lackorhave inadequate basicneedslike food,clothing,shelter,health,educationand infrastructural development. Povertyheadcountratioat$1.90 a dayis the percentage of the populationlivingon lessthan$1.90 a day at 2011 international prices. Povertythreatensglobal politicalandeconomicgrowthbecause povertyanywhere inthe worldisathreatto prosperityeverywhere, since nationsare more integratedthanever before,andmostnationsnowproduce onlythose goodsandservice thattheyhave a comparative advantage above othersintermsof cost and efficiencyandpurchase fromothersthatwhichtheydonot have a comparative advantage overothers.Inthe pursuitto eradicate poverty,whichisone of the worldsemergingissues,hasresulted innationsfromdifferentcontinentscomingtogethertodecide how besttoimprove the livesof theircitizenry.Data isannually calculatedtoshowthe rate of growthfromone periodtoanother. It is important to note that three types of poverty exist, Absolute (Extreme) poverty,Global poverty and Relative poverty. Absolute poverty (or extreme poverty) measures fixed standard of living that is consistent over time and betweencountries.Global poverty measures the numberof people whoare destitute byacommon global standard. Relative Poverty measures simultaneously living standards in a particular society as it varies both over time and between nations due to changing standards of living,it is therefore related to the inequality in living standards of a particularnationat a particularpointintime. The WorldBank is the most importantinstitutionmeasuringthe extent of global poverty,the datais publishedviaPovcalNetinWorldBankDevelopmentIndicators. Thisglobal povertyline was introducedinthe WorldDevelopmentReport1990 as the dollar-a-daypovertyline.Since thenit hasbeen based on the national povertylinesof anumberof poorcountriesandwasrevisedaccordingto the national povertylines by takinginto account price changes overtime (inflation). The absolute (extreme) povertyline wasprominentlyusedin the MillenniumDevelopmentGoals(MDGs),the firstof whichwasto “halve,between1990 and2015, the proportion of people whose income is less than $1.90 a day.” In the currentmethodthe global povertyline islinkedtothe national povertylinesof poorcountries.Asitiscalledan absolute standard,thispovertyline shouldnotmove upwardsaspoor countriesgrow richeror otherwise itbecomes a relative povertymeasure. Nationalpovertylinesare infactofteninformedbythe self-assessmentof citizensof these countries. The povertydata is primarilybasedon householdsurveydata.For the global povertyestimatespublished in October 2015, the World Bank used income and consumption distribution data “from more than one thousand
  6. 6. MBA 674 TERM PAPER Kaosarat Animashaun (U01173077) WORLD POLITICS: GLOBAL ECONOMIC GROWTH WITH POVERTY REDUCTION 6 | Page surveys covering 131 developing countries.The estimates are based on survey interviews of more than 2 million households, representative of 95 percent of the population in the developing world”. Certain demographic changes in the developing world after active economic liberalization and international integrationresultedinrisingwelfare andhence,reducedinequality.Accordingto MartinWolf,inthedevelopingworld as a whole,lifeexpectancyrose byfourmonthseach yearafter 1970 and infantmortalityrate declinedfrom107 per thousandin1970 to 58 in 2000 due to improvementsin standardsof living andhealthconditions.Also,adultliteracy in developing countries rose from 53% in 1970 to 74% in 1998 and much lower illiteracy rate among the young guaranteesthatrateswill continuetofall astime passes.Furthermore,the reductioninfertilityrates inthe developing worldas a whole from4.1 birthsper woman in1980 to 2.8 in 2000 indicatesimprovededucationlevel of womenon fertility, and control of fewer children with more parental attention and investment. Consequentially, more prosperousand educatedparentswithfewerchildrenhave chosento withdraw theirchildrenfromthe labourforce to give them opportunities to be educated at school improving the issue of child labour. This is as a result of reduction in infant mortality rates as well as child malnutrition because people have better sanitation, water supply, better education, better health care services which has resulted in higher life expectancy rates as well as cognitive development as people eat healthier and become more productive adults, thus boosting economicproductivityof the nation, exampleEastAsia& Pacific,Europe & Central Asia,SouthAsiaand Sub-Saharan Africa. As of 2012, world children under five years suffering from malnutrition reduced to 15.7%, mortality rate reduced to 51% per 1000 live births, maternal mortality fell to 210 per 100,000 live births, while both primary education and youth literacy increased to 90% as well as youth labour force participation rose to 64%, This was all achievedbefore the millenniumdevelopmentgoal targetsetto reduce povertylevel byhalf in2015. On the regional level,mostrecentdatabase fromWorldBankfor 2014 shows that increase ineconomicgrowth (GDP) inSub-Saharan African has brought about the 59% life expectancy rate and education completion rates of 69% for both male and female compared to previous years, East Asia & Pacific also record 75% and 105% respectively, other regions qualitative variables growth due to GDP rise can be viewed from the table below and this shows significant improvements in all regions compared to earlier periods.
  7. 7. MBA 674 TERM PAPER Kaosarat Animashaun (U01173077) WORLD POLITICS: GLOBAL ECONOMIC GROWTH WITH POVERTY REDUCTION 7 | Page Proof of nations economicgrowthreducingpoverty canbe verifiedby lookingatthe past 200 yearswere considerable effortshave beenmade to liftthe worldoutof poverty,in 1820’s onlya small groupof people (elites) enjoyed goodandhighstandardsof living,while the vastmajorityof people livedinextremepoverty evenatthat onlya fewplacesinthe worldhad achieved verylow levels of economicgrowth.The progress inthe last200 years was achievedaseconomicgrowthbroughthigherincomestomore andmore people inthe world.The share of people livinginextreme povertyissmallerinrichercountries,butsome nations despitehavinglow incomesalsoaim to keep extreme povertylevelverylow too. Economicgrowthoverthe last200 years has completelytransformed the world,andpoverty level have continuously reducedoverthe lasttwocenturiesdespitepopulationincreased7- foldoverthe same time andthisshowsthat a worldwithouteconomicgrowth,anincrease inthe populationwould resultinlessandlessincome foreveryone,anda7-foldincrease wouldmake the worldextremelypoor. Currentdata shows poverty levelfallingmore quicklythaneverbeforeespeciallywith industrializationandrising productivity (GDP), the share of people livinginpovertystartedtodecrease and continuesto fall more andmore in nationsaroundthe world . Asa consequence of fallingpoverty,the healthof the populationimproveddramatically overthe last two centuries andpopulation grew more due toincreasedeconomicactivities.The growthin population causes the absolutenumberof poorpeople inthe worldtoincrease; despitethe impressive world economicgrowthanddevelopmentfrom1945, the global polarisationof wealthhasshownanalarmingwide gap betweenandwithincitizensof the richand poorcountries, AccordingtoWorldBank 2009 data from1960 -2002, GDP of the 20 richestgrewby 300%, while the 20 poorestgrew by 20%, thuspovertystill remainswidespread. Accordingto the WashingtonPostof October4, 2015, the World Bank withits UN MillenniumDevelopmentGoalsto eradicate extreme povertyandhunger,andimprove health,educationetc. ismovingthe worldclosertothe historic goal of endingpovertyby2030. Accordingto the 2016 mostrecentdata in the worldpopulationof all nationsin 2012 had12.7% livingator below $1.90 a day comparedto 37% in 1990 and 44% in 1981. This meansthat,in2012, 896 millionpeoplelivedonless than $1.90 a day,comparedwith1.95 billionin1990, and 1.99 billionin1981. Alsoregionsshowedreducedpoverty rates,povertyincome inequalitygapsdue toincrease inGDP from1981- 2014, basedon the 2016 WorldBank
  8. 8. MBA 674 TERM PAPER Kaosarat Animashaun (U01173077) WORLD POLITICS: GLOBAL ECONOMIC GROWTH WITH POVERTY REDUCTION 8 | Page DevelopmentIndicatordatatable below, EastAsia& Pacificsaw the mostdramatic reductioninextreme poverty, from81% in1981 to7.2% in2012. In SouthAsia,the share of the populationlivinginextremepovertyisnowthe lowestsince 1981, droppingfrom58% in1981 to 18.8% in2012. PovertyinSub-SaharanAfricastoodat 42.7% in 2012. Chinaalone accountedformostof the decline inextreme povertyoverthe pastthree decades.Between1981 and 2011, 753 millionpeople movedabove the $1.90-a-daythreshold.Duringthe same time,the developingworld as a whole sawa reductioninpovertyof 1.1 billion. In2012, justover77.8 percentof the extremelypoorlivedin SouthAsia(309 million) andSub-SaharanAfrica(388.7 million).Inaddition,147 millionlivedinEastAsiaand Pacific. Fewerthan44 millionof the extremelypoorlivedinLatinAmericaandthe Caribbean,andEasternEurope and Central Asiacombined.
  9. 9. MBA 674 TERM PAPER Kaosarat Animashaun (U01173077) WORLD POLITICS: GLOBAL ECONOMIC GROWTH WITH POVERTY REDUCTION 9 | Page Analysisof Tables and Graph: Basedon the above table,itshowsaninverse relationshipbetweeneconomicGDPgrowthand the poverty inequalitygapsaswell aspovertyrates,thisattestto Robertson’sanalysisinthe fastestbillionaire bookthatasmore and more people move intothe middle classdue to increase inincome levels,corruptionreducesandallowsfora more equitable incomedistributiontoall citizens.
  10. 10. MBA 674 TERM PAPER Kaosarat Animashaun (U01173077) WORLD POLITICS: GLOBAL ECONOMIC GROWTH WITH POVERTY REDUCTION 10 | Page The growingconcentrationof global povertyinSub-SaharanAfricaisof greatconcern.While some Africancountries have seensignificantsuccessesinreducingpoverty,the regionasawhole lagsthe restof the worldinthe pace of lesseningpoverty.Sub-Saharanpovertyfell fromanestimated56percentin1990 to a projected35 percentin2015. Rapidpopulationgrowthremainsakeyfactorbluntingprogressinmanycountries. In itsregional forecastsfor2015, the Bank saidthat povertyinEast Asiaand the Pacificwouldfall to4.1 percent of itspopulation,downfrom7.2 percentin 2012; LatinAmericaand the Caribbeanwouldfall to5.6 percent from6.2 in2012; South Asiawouldfall to13.5 percent in2015, comparedto18.8 percent in2012; Sub-SaharanAfrica declinesto35.2 per centin 2015, comparedto 42.6 per centin 2012. Reliablecurrentpovertydataisnotavailable for the Middle Eastand NorthAfricabecause of conflictandfragilityinkeycountriesinthe region. PovertyremainsconcentratedinSub-SaharanAfricaandSouthAsia andfor the lastseveral decades,the three regions,EastAsiaand Pacific,SouthAsia,andSub-SaharanAfrica,have accountedforsome 95 percentof global poverty.Yet,the compositionof povertyacrossthese three regionshas shifteddramatically.In1990, East Asia accountedforhalf of the global poor,whereassome 15 percentlived inSub-SaharanAfrica;by2015 forecasts,thisis almostexactlyreversed:Sub-SaharanAfricaaccountsforhalf of the global poor,withsome 12 percentlivinginEast Asia.Povertyisdeclininginall regionsbutitisbecomingdeeperandmore entrenchedincountriesthatare either conflictriddenoroverlydependentoncommodityexports. Thus,despite seeminglyunequal distributionof incomewithinthese developingcountries,theireconomicgrowth and developmenthave broughtaboutimprovedstandardsof livingandwelfare The worldpopulationhas experienced continuousgrowth since the endof the GreatFamine andthe BlackDeathin 1350, whenitstoodat around370 millionThe highestratesof growth – global populationincreasesabove1.8% peryear – were seen brieflyduringthe 1950s, and fora longerperiodduringthe 1960s and 1970s. The growthrate peakedat2.2% in 1963, andhad declinedto1.1% by2011. Total annual birthswere highestinthe late 1980s at about 138 million,[173] andare nowexpectedtoremainessentiallyconstantattheir2011 level of 134 million,while deathsnumber56 millionperyear,andare expectedtoincrease to80 millionperyearby2040.[174] Current projectionsshowacontinuedincreaseinpopulation(butasteadydecline inthe populationgrowthrate),withthe global populationexpectedtoreachbetween7.5and10.5 billionby2050 Of all the factorsinfluencingthe level of economicgrowth inbothdevelopedanddevelopingcountries, income equality hasamore beneficial impactthantrade openness,soundpolitical institutions,andforeigninvestment. Inequalityisoftenthe consequence of unequallevelsof economicandsocial progressamongstnationsandthisis howpovertylevelsisbestcomparedamongstnations,itisimportanttonote that povertyisbestmeasuredinterms of lowproductivityandlowincome,butothermeasuresof povertycanalsoprovide verygoodmeasurements throughqualityof education,health,infrastructural developmentsandothersocial amenitieslike waterand electricity.Thesemeasuresdonotonlylookat workas a source of income butat the safetyand qualityof the work itself. While within nation’s income inequalityhasincreasedthroughoutthe globalizationperiod,globallyinequalityhas lessenedasdeveloping nationshave experiencedmuchmore rapidgrowth. Economicinequalityvariesbetween
  11. 11. MBA 674 TERM PAPER Kaosarat Animashaun (U01173077) WORLD POLITICS: GLOBAL ECONOMIC GROWTH WITH POVERTY REDUCTION 11 | Page societies,historical periods,economicstructuresorsystems(forexample, capitalismorsocialism),ongoingorpast wars,between genders,andbetweendifferencesinindividuals'abilitiestocreate wealth.There are various numerical indices formeasuringeconomicinequality.A prominentone isthe Gini coefficient,thismeasuresincome inequalitybylookingat howmuch per capitaincome distributionwithinacountry deviatesfromperfectequality,it rangesfrom0 (perfectequality) -100(perfectinequality),sothe lowerthe Gini coefficientthe lesserthe income inequality vice versa, alsoothermethods like ConsumerPrice Index (CPI),GDPdeflator, PurchasingPower Parity(PPP) are usedtomeasure income inequality. Inequalityisbecominganurgentissue of worldpoliticsatthe endof the twentiethcentury.Globalizationisnotonly exacerbatingthe gapbetweenrichandpoor inthe world,butis alsofurtherdividingthose statesandpeoplesthat have political powerandinfluence fromthose without.Whilethe powerful nationsshape more ‘global’rulesand normsabout investment,militarysecurity,andenvironmental andsocial policy,the lesspowerful nationsare becoming‘rule‐takers’,oftenof rulesornormsthat theycannotor will notenforce.The consequencesforworld politicsare profound.Economicinequalityaffects equity,equalityof outcome andsubsequent equalityof opportunity.One of the mostrobustdeterminantsof sustainedeconomicgrowthisthe level of income inequality. International inequality isinequalitybetweencountries.Income differencesbetweenrichandpoorcountriesare verylarge,althoughtheyare changingrapidly.PercapitaincomesinChinaandIndiadoubledinthe prior twenty years,a featthat required150 yearsin the US. Thiswas due to the Chinese economicreform thatopenedChinatoglobalizationinthe 1980s. Scholarsfindthat Chinahas attainedadegree of opennessthatisunprecedentedamonglarge andpopulousnations,withcompetition fromforeigngoodsinalmosteverysectorof itseconomy.Foreigninvestmenthelpedtogreatlyincrease product qualityandknowledgeandstandards,especiallyinheavyindustry.China'sexperience supportsthe assertionthat globalizationgreatlyincreaseswealthforpoorcountries. Asof 2005–2007, the Port of Shanghai heldthe title as the world'sbusiestport. AlsoInIndia, businessprocessoutsourcing hasbeendescribedasthe "primaryengine of the country's developmentoverthe nextfewdecades,contributingbroadlytoGDPgrowth,employmentgrowth, and povertyalleviation".Accordingtothe UnitedNations HumanDevelopmentReportfor2013, countriesatvarying levelsof the UN Human DevelopmentIndex the GNP percapitagrew between2004 and 2013 from24,806 to 33,391 or 35% (veryhighhumandevelopment),4,269 to 5,428 or 27% (medium)and1,184 to 1,633 or 38% (low) PPP respectively. There are twomain schoolsof thoughtthat guide the policiessettoproffersolutionsonbestwaytoaddresspoverty these are the Orthodox and Alternative approach.Orthodox analysisbasedlivingbelowworldpovertyline of adollar a day to meetonly basicmaterial needs,while the alternative analysesisbasedon material and non-material needs majoreconomicactivitycombinedwithtechnologyandinfrastructure development,whichrespectivelyrelate Jeffrey Sachs and Andrew Warner 1995 research thesis proffered that economic liberalisation in trade, finance and investment results in economic growth as well as Jim O’Neil’s growth map book were he also indicated that demographic dividend and productivity through improved education, infrastructural development as well as
  12. 12. MBA 674 TERM PAPER Kaosarat Animashaun (U01173077) WORLD POLITICS: GLOBAL ECONOMIC GROWTH WITH POVERTY REDUCTION 12 | Page Robertson’s economic transformation of developing economies expanding now at the fourth stage of advanced information technology would help move nations out of poverty. Basedonall these scholarlywrite-ups,international organisationshave adoptedthealternative approachlikeIMFnow offers debt forgiveness to HIPC to reduce economic hardship resulting from debt repayment to boost growth and development. Also, United Nations with the aid of the Bush administration established Millennium Challenge Corporation(MCC) withdevelopmentgoal tohelpreducepovertybyhalfin2015withworldeconomicgrowththrough vibrantdemocraciesincontrastto World Bank programsof the past whichemphasizedlarge infrastructure structure projects controlled by governments. The hallmark of the MCC is the use of detailed criteria to specifically measure democraticprocessesandthe businessclimate whereentrepreneurscaneasilystartandexpandtheircompanieswith projectsdeveloped atthe grassrootslevel bylow-incomecountries,ratherthanhave projectsdecidedby consultants from rich countries. JimYong Kim,World Bank Group President,saidthat “the continuedmajorreductionsinpovertywere due tostrong growthratesindevelopingcountriesinrecentyears,investmentsinpeople’seducation,health,andsocial safetynets that helped keep people from falling back into poverty. He cautioned, however, that with slowing global economic growth, volatile financial markets, conflicts, high youth unemployment, and the growing impact of climate change, and withmanyof the world’sremainingpoorpeoplelivinginfragileandconflict-affectedstates,andthe considerable depthandbreadthof remaining inpoverty,the goal toendextreme povertyremainedahighlyambitioustarget. Itwill be extraordinarilyhard, butitremainswithingrasp,aslongas highaspirationsare matchedbycountry-ledplansthat helpthe still millionsof people livinginextreme poverty.” World Bank endorsedtwogoals:to endextreme poverty by 2030, and to boost shared prosperity by raising the incomes of the bottom 40 percent of populations. Future for nations in Poverty: The State of the World 2006 reportsaidthat India'sand China'shigheconomicgrowthwasnotsustainable.The reportstates, the world'secological capacityissimplyinsufficienttosatisfythe ambitionsof China,India,Japan, Europe and the UnitedStatesas well asthe aspirationsof the restof the worldina sustainable way. Ina2006 news story, BBC reported,"...if ChinaandIndiawere toconsume asmuch resourcespercapitaas UnitedStatesor Japanin 2030 togethertheywouldrequireafull planetEarthto meettheirneeds. Inthe long-term, theseeffectscanleadto increasedconflictoverdwindlingresourcesandinthe worstcase a Malthusiancatastrophe.International foreign
  13. 13. MBA 674 TERM PAPER Kaosarat Animashaun (U01173077) WORLD POLITICS: GLOBAL ECONOMIC GROWTH WITH POVERTY REDUCTION 13 | Page investmentindevelopingcountriescouldleadtoa"race to the bottom"as countrieslowertheirenvironmentaland resource protectionlawstoattract foreigncapital. The reverse of thistheoryistrue,however,whendeveloped countriesmaintainpositiveenvironmentalpractices,impartingthemtocountriestheyare investinginandcreatinga "race to the top" phenomenon. Thissituationwasalsoidentifiedbythe WorldBankChief EconomistKaushikBasu,aformerChief EconomicAdviser to the IndianGovernment. “Developmenthasbeenrobustoverthe lasttwodecadesbutthe protractedglobal slowdownsince the financial crisisof 2008, isbeginningtocastits shadow onemergingeconomies, there is some turbulence ahead. The economicgrowthoutlookislessimpressive foremergingeconomiesinthe nearfuture,which will create newchallengesinthe fighttoendpovertyandattendtothe needsof the vulnerable,especiallythose livingatthe bottom40 percentof theirsocieties. The workisfarfromover,and a numberof challengesremain.Itis becomingevenmore difficulttoreachthose remaininginextreme poverty,whooftenlive infragile contextsand remote areas.Accessto goodschools,healthcare,electricity,safewaterandothercritical servicesremainselusive for manypeople,oftendeterminedbysocioeconomicstatus,gender,ethnicity,andgeography.Moreover,forthose whohave beenable tomove out of poverty,progressisoftentemporary:economicshocks,foodinsecurityand climate change threatentorob themof theirhard-wongainsandforce themback intopoverty.Itwill be critical to findwaysto tackle these issuesaswe make progresstoward2030.” Accordingto formerUK chief governmentscientistJohnBeddington,growingpopulations,fallingenergysourcesand food shortages will create a "perfect storm" by 2030 because food reserves is at a 50-year low and the world would require 50%more energy,foodandwaterby2030, alsothe situationinthe Sahel regionsouthof the Sahara,interms of ongoing deforestation and soil erosion, is very serious. Also according United Nations' Food and Agriculture Organization (FAO)The worldwillhave toproduce 60% more foodby2050 to feedaprojectedextra2.3 billionpeople and as incomes rise. But the goodnewsaccording to the Nobel Prize–winningeconomistMichael Spence writes,"The massive changesin the global economy since World War II have had overwhelmingly positive effects. Hundreds of millions of people in the developingworldhave escapedpoverty,andmore will inthe future.The global economywill continue togrow – probablyatleastthreefoldoverthe next30years.One person'sgainisnotnecessarilyanother'sloss;global growthis not even close to a zero-sum game. But globalization hurts some subgroups within some countries, including the advanced economies. Demographic changes in the developing world after active economic liberalization and international integration resulted in rising general welfare (infant mortality and life expectancy) and reducing inequality due to adult literacy and lowerilliteracyrate amongthe youngespeciallyfemalesguaranteesthatrateswillcontinue tofall astime passes. Thus, despite seeminglyunequal distributionof income withinthe developingnationsdue toincome inequalitywith developednations,war,corruptionandmismanagementof funds,economicgrowthanddevelopmenthave brought about improved standards of living and welfare for the population as a whole, but according to Jim O’Neil growth book, demographic dividendin some developing nations that provide good education to its citizens would enable nations get out of poverty, when educated youths apply what they have learnt at their various places of work efficientlyandthusboosteconomicproductivity,especiallywiththe advantage of beingatthe laststage of economic transformation “ Information Age” as indicated by Robertson in his fastest billionaire book. If the BRIC and N-11 countries - growth markets (Mexico, Indonesia, South Korea, and Turkey) and emerging markets (Bangladesh,
  14. 14. MBA 674 TERM PAPER Kaosarat Animashaun (U01173077) WORLD POLITICS: GLOBAL ECONOMIC GROWTH WITH POVERTY REDUCTION 14 | Page Pakistan, Vietnam, the Philippines, Egypt, Iran and Nigeria) tap into these tremendous opportunities then the 21st Century economic growth will be in the developing countries of the G-25 and Africa in particular due to great demographic and productivity potential. The future of furthereconomicgrowthand reductioninpovertylevelsforall nationsmajorlyrestonthe howwell sovereigngovernments withpressuresfrominternational organizations trytobridge the income inequalitygap between itscitizensby: 1. Improvingqualityof education. 2. Eliminatinggenderinequalityineducationandworkplace. 3. Promotinglocal entrepreneurship usingnation’s economicresources. 4. Degree of opennessof organizationsthroughliberalisationtoreduce level of protectionismontrade,investment and finance flows Furthermore,itiscrucial that national governmentsand internationalpolicymakers plandevelopmentprograms and policies thatwill continually improve lives, andbringthe poorestintheircountryoutof destitution. Also Revengahas saidthe World BankGroup wouldcontinue toworkwithitscountryclientsandpartnersto improve howit measuresandtracks poverty,tobuildcountrystatistical capacityandfill persistentdatagaps,andto integrate soliddataand analysisintoitsdevelopmentworktobetterreachpeople andtheirfamilieswholiveinentrenched poverty. I believethat, if all these necessarypreventive andpromotingmeasuresare committedlyputinplace,povertymight reallybecome historyby2030. REFERENCES AND BIBLIOGRAPHY World Bank Data on Economic Growth and Poverty for Regions and World (2016) World Development Indicator (WDI) April 11- 15, 2016 PovcalNet (2016) World Politics Wikipedia, the free encyclopaedia (2016) Globalisation 101 (2016) WorldPovertybyMax Roser (2016) Levin Institute “Globalisation 101 a State University New York (Global Workforce Project)” (2015)
  15. 15. MBA 674 TERM PAPER Kaosarat Animashaun (U01173077) WORLD POLITICS: GLOBAL ECONOMIC GROWTH WITH POVERTY REDUCTION 15 | Page World Politics Wikipedia, the free encyclopaedia (2015) Globalization Pros and Cons List OCCUPY THEORY (2014) Pros and Cons of Globalization: Controversy and Discussion by NICK GIBSON MARCH 26, 2014 FAO Agricultural Economics Division “World Agriculture towards 2030/2050” (2012 Revision) Inequality, Globalization, and World Politics by Andrew Hurrell and Ngaire Woods (1999) Globalisation of World Politics (An Introduction to International Relations) by John Baylis, Steve Smith and Patricia Owens, sixth edition (2014) AmericanInternational AidanditsuniquepotentialforNationBuildingemphasizingEconomicGrowth byVibrantCivil Society Processes by Professor Larry Bridwell (Pace University) 2008