FREE ESSAY ON GLOBALIZATION AND ITS EFFECT ON POVERTY

GLOBALIZATION AND ITS EFFECT ON POVERTY

Globalization and Its Effect on Poverty
Globalization has helped raise the standard of living for many people worldwide. It has
also, however, driven many deeper into poverty. Small businesses and third world
countries are not capable of updating their technology as often as their larger,
wealthier counterparts. Unable to compete with multinational firms and wealthy nations,
small businesses and third world countries and forced to do business locally, never
growing and reaching their full potential.
Technological advances are made daily throughout the world. However, it is expensive to
rapidly make and transport these advances globally. This high production cost causes the
consumer's price to be unnecessarily high. Today, there are many countries in the world
that cannot afford to pay such a high price for the latest technology, and by the time
they can afford to pay, newer, more advanced technology exists. The democratization of
technology benefits mainly the wealthier countries.
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Technological advances not only benefit wealthy countries, but also wealthier companies.
Technological advancements allow countries and their companies worldwide publicity when
they are successful. Because investors are able to easily invest on the Internet, on the
telephone, and through facsimile machines, the profits of companies have increased
greatly. Currency traders all over the world have also been able to update exchange rates
and notify the public of the updates more rapidly. This has led to more desire to
finalize deals because companies are able to be sure that they are receiving competitive
exchange rates. Swissair, an airline based in Switzerland, even moved its entire
accounting division from Switzerland to India simply because the accountants in India are
among the best in the world. They were able to do this because all of the information
from their new office halfway around the world was transmitted through the use of
technologically advanced devices. Because labor is cheaper and the workers are more
skilled in India, the company benefited in two ways. For the same reasons as in India,
Thailand has moved from being primarily a rice-producing nation, to the world's second
largest producer of pickup 
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trucks and fourth largest producer of motorcycles (In Class Handouts).
As far back as the invention of the telephone, the countries with the best economies were
the most technologically advanced. The invention of the telephone by Alexander Graham
Bell in 1876 allowed information to be sent around the world considerably more rapidly
than ever before. Before the invention of the telephone, it might have taken days, weeks,
or even months to courier documents around the world. Today, however, Selectronic, a
company in Delhi, India takes doctors dictation from a toll-free number in the United
States, transcribes the recordings, and sends the text back to a U.S. HMO (In Class
Handouts). With the invention of the telephone and its spread to the world's wealthier
countries also came increased growth in the wealthier countries' economies. 
The global marketplace is based on a winner take all system. The wealthy, "winning"
companies and countries are able to sell their goods and services to a global market,
while the "losing", poorer countries and businesses are limited to their local markets.
Massive global markets also create huge incentives for businesses and nations to market
products internationally. The National Basketball 
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Association, for example, in 1998 sold more than five hundred million dollars in licensed
merchandise worldwide. The NBA owes this huge source of income to advances in technology.
Basketball organizations in other countries that cannot afford to market their
organizations globally, however, are forced to sell licensed merchandise only in their
countries, substantially lowering potential profits. In the past fifty years, global
capitalism has raised the living standards of more people higher and faster than the
previous five hundred years. Increasing the number of "haves" in the world has also
dramatically increased the number of "have-nots". It has also driven the poor further
into poverty making it more and more unlikely that they will ever recover. Globalization
creates tensions, especially within nations and companies, between those who have the
skills and resources to compete in the global market and those who do not.
When the Internet was first introduced to the public, the wealthier countries in the
world were able to incorporate it into their economies before the poorer countries. The
wealthier countries had already established a strong hold on the Internet by the time the
poorer countries were able to buy computers and pay for Internet 
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access. According to one prediction, "by 2001, two hundred sixty-eight million computers
will be connected to one another" (In Class Handouts). However, the great majority will
be purchased and connected to the Internet by people in wealthy countries. The wealthy
countries control most world-renowned businesses and services on the Internet. They also
control the registration of domain names on the Internet, forcing the poor countries to
pay the wealthy countries for the rights to names to create e-companies. The Internet
"instantly link[ed] retailers to suppliers" (Technology). Through digitization, voices,
sounds, pictures, and documents can by turned into computer bits transferable on the
Internet. Federal Reserve Chairman Alan Greenspan even "linked . . . upturn[s] in
productivity to massive investments . . . in computers and other technology (Workers). By
the time the poorer countries were able to benefit from the use of the Internet, the
wealthy countries had only increased their wealth.
Technological advances in the transportation industries have also benefited wealthy
countries more than poor countries. As the use of automobiles and airplanes spread
throughout the world, the poorer countries were forced to use standard horses and buggies
and ships because 
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the price of automobiles and airplanes were too high. This gave the wealthier countries
an enormous advantage because a product that previously required months to ship by sea
would take a matter of days to reach its destination by air and automobile. Businesses in
the wealthier countries were also able to send their executives around the world to meet
with executives from other countries and close their deals, while the executives of
businesses from poorer countries were still on their boats travelling. If a country does
not update its transportation industries, international companies will not want to build
warehouses and distribution centers within that country. This, in turn, creates high
unemployment rates, driving the people further and further into poverty.
According to Moore's law, computing power doubles every eighteen to twenty-four months.
This means that only countries that can afford to pay millions every year and a half will
have the newest technology. The newest technology that many countries can afford is
sometimes outdated by years, driving their economies further into poverty because they
are unable to compete with wealthy countries. For the wealthier countries, however, an
increase in computing speed leads to faster transfer of 
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documents. It also speeds up production because faster machines that are capable of
handling more data are used in factories in wealthier countries. Compression technology
has also allowed for lower costs in wealthier countries because disks are able to hold
more information. The amount of data that can be stored on a square inch of disk has
increased by sixty percent every year since 1991. Along with compression technology,
comes miniaturization. Because the size of the chips has decreased, so has the size and
weight of computers and phones. Since there is less material used to make the product,
the cost is lower allowing for more profit. Advances in computer technology have greatly
benefited wealthy countries and greatly hindered the economies of poor countries.
Many foreign companies and countries are using the poverty of other countries to their
own advantage. Most foreign firms pay their workers more than the national average of the
country, although many times what the workers are paid is considerably lower than the
average wage for the companies home country. Foreign companies are also creating jobs
faster than their domestic counterparts, leading to higher poverty levels in the country
because the profits of the company are not invested back into the 
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country where the company is located, but rather sent back to the home country. Most
foreign businesses also spend heavily on research and development in the country where
they are located; however, the benefits of the new, more advanced products are reaped in
the home country. Foreign firms also export more than domestic ones, taking with the
products, profit and future investment in the country (Foreign). Many countries'
economies are growing and expanding at the expense of smaller, poorer countries.
Effective countries and businesses are not merely the most technologically advanced. They
are also the ones who are constantly seeking to upgrade and improve their existing
technology. The world's poorer countries cannot afford, however, to upgrade their
technology as often. Nevertheless, countries and businesses must always work to increase
the speed of transactions, investment, production, and government. They must also learn
to operate their existing software and networks at full potential before it is updated so
that the efficiency is maximized.
Low productivity within a country or a company leads to a low standard of living and
higher levels of poverty. Low productivity within a nation or a company also causes it to
be less competitive in the global marketplace. If a 
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company or a nation cannot afford to constantly update their goods and technologies, then
they will not be able to compete globally. Foreign competitors set the standard for
quality and production schedules of goods. Again, if a company is unable to update its
factories, it will not be competitive and have more poverty.
The democratization of finance has helped globalization flourish. The wealthy countries,
however, are reaping the majority of the benefits. While there is more money available
for companies to get started, the majority of the profits of the new companies are being
invested in wealthy countries. Investments in the United States have gone from one
hundred million to nearly three trillion dollars. While the economy of the United States
has developed into one of the strongest, most stable in the world, many third world
countries were forced deeper into poverty as a result.
A contributing factor to the success of globalization has been the creation of alliances
and economic integration. The countries that benefit the most from these alliances,
however, are traditionally wealthier countries. Free trade, customs unions, common
markets, and economic unions are essential to the spread of 
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globalization; however, they impede the growth of third world countries not included in
the group. 
Globalization, while essential to the success of the global marketplace, has a darker,
less visible side. It benefits some third world countries, most wealthy countries, as
well as large, well-known multinational companies. It, however, causes the economies of
many countries and smaller companies to collapse. In an effort to promote competition
worldwide, globalization has actually rendered it impossible for some companies that were
successful locally to transfer their success to the global stage. It has also blocked
investments and growth of some poorer, third world countries. Globalization decreases
poverty in some countries while simultaneously increasing it in others.