This story
was taken from Bulatlat, the Philippines's alternative weekly
newsmagazine (www.bulatlat.com, www.bulatlat.net, www.bulatlat.org).
Vol. V, No. 26, August 7-13, 2005
Has Globalization
Eased Global Poverty?
The IMF-World Bank have been
promoting neoliberal globalization as the solution to global poverty, but
critics say globalization policies have only worsened the problem
By
Joseph Yu
IBON Features
Posted by
Bulatlat
The United Nations Development Program recently
revealed in its 2003 Human Development Report (HDR) that the world is facing an
acute development crisis. According to the HDR, 21 developing countries
experienced reversals in key socio-economic indicators in the 1990s. This should
not be surprising, given the spread of economic globalization in the 1980s due
to the neoliberal policy prescriptions of the International Monetary Fund (IMF)
and the World Bank (WB), and the intensification of trade liberalization under
the World Trade Organization (WTO), which was formed in 1995.
The IMF and WB have long been promoting economic
globalization as the solution to the global poverty problem. In a 2000 report,
IMF said that “as globalization has progressed, living conditions have improved
significantly in virtually all countries, although it conceded that the
strongest gains were made by the developed nations. The World Bank in a 2001
report on Globalization, Growth and Poverty said globalization (referring
specifically to trade integration) is a very powerful force for poverty
reduction. But they also had to admit that billions of people globally are being
left out of the process.
The two institutions also stated that
globalization itself was not to blame for global poverty, but rather the failure
of many developing countries to fully integrate into the global economy. But it
is precisely the IMF and World Bank’s prescription of neoliberal globalization
policies that is the cause of worsening poverty in the developing countries.
A portrait of global poverty
Based on WB estimates of poverty, half of the
world population lives on less than $2 a day and 1.3 billion on less than $1 a
day. These measures, with $1 a day indicating extreme poverty and used to gauge
poverty in the least developed countries, have been accepted by the United
Nations (UN) and used as the basis for the Millennium Development Goals.
But critics such as Michel Chossudovsky, author
of the book The Globalization of Poverty and the New World Order,
argue that the IMF-WB use the $1 and $2 a day measures to legitimize their
neoliberal reforms by showing that global poverty is on the decline, thus
proving that globalization policies are conducive to long-term prosperity.
However, these measures fail to take into
account growing global income disparities. In 2004, some 0.13 percent of the
world’s population controlled 25 percent of global assets. Consumption was
similarly skewed as 20% of the world’s population consumed 86 percent of the
world’s goods.
The WB’s income-driven estimates also fail to
reveal the full dimensions of the poverty problem. For example, poverty also
means lack of access to vital services. The WB itself acknowledged that 1.3
billion of the world’s people have no access to clean water, 3 billion have no
access to sanitation, and 2 billion have no access to electricity.
Structural Adjustment Programs
The IMF and WB impose globalization policies on
developing countries through their “macro-economic stabilization” and structural
adjustment programs (SAPs). These “reform” programs include policies such as
trade liberalization, openness to foreign direct investment, privatization of
state enterprises, and deregulation or abolition of regulations that impede
entry or restrict competition.
These policy prescriptions have worsened poverty
in developing countries by lessening the access of the poor to vital social
services. Under SAPs, these countries have effectively privatized social
services by reducing state participation in their financing, administration and
delivery.
For example in Argentina, Decree 578/93 required
public hospitals to obtain contracts with the social security and private
sectors, and collect user fees from people without social security or private
coverage. Other decrees deregulated social security agencies, decreased health
care services that participants received through salary contributions while
increasing out-of-pocket costs.
In addition, the WB’s support for large-scale
infrastructure projects such as hydroelectric dams and agro-industrial projects
has also intensified environmental degradation, deforestation and the
displacement of millions of people from their lands and livelihoods.
Meanwhile, intensified trade liberalization
under the WTO has eased the entry of cheap, subsidized agricultural goods into
developing countries, forcing farmers off their lands or driving them into
exploitative contract growing arrangements of cash crops for export, which sink
them into poverty.
A February 2003 report of the Institute for
Agriculture and Trade Policy (IATP) found that the cost of production for a
bushel of wheat in the US in 2000 was $6.24 while its export price was only
$3.50. In 2001, US exporters dumped corn at 33% of production cost, soybeans at
29 percent, cotton at 57 percent and rice at 22 percent.
These restructuring policies have been done at
the behest of the rich countries of the G8 and the Paris Club, who are the
primary stockholders of the IMF-WB and other international financial
institutions (IFIs), and their corporations. Their agenda is to transform
developing countries into open economic territories for their manufactured
products and excess capital, and to create “reserves” of cheap labor and natural
resources.
Thus, industrialized countries’ corporations
outsource much of their manufacturing production and services to developing
countries where labor costs are low, in order to increase profits by lowering
production costs. Rich countries also undertake extractive activities such as
mining and oil exploration in developing countries, and export the mined
resources back home for use in their industries.
In short, globalization worsens global poverty,
as developed countries pit developing countries against each other in a “race to
the bottom.” Wages are forcibly lowered and basic human needs decline to justify
low real earnings. The migration of Third World workers to First World countries
to work low-wage jobs is also a consequence of globalization.
The application of SAPs also directly benefits
local elites and traders in underdeveloped countries who collaborate with
transnationals. This results in consolidation of resources among a relative few
as these elites accumulate superprofits through trade liberalization and
privatization. This is why income disparities in developing countries has
remained high.
True poverty alleviation
Under pressure from organized anti-globalization
groups, the IMF and World Bank have undertaken poverty alleviation programs. But
these programs, such as the Highly-Indebted Poor Countries (HIPC) initiative and
the Poverty Reduction and Growth Facility (PRGF) are still mired in the
neoliberal framework.
Thus, developing countries are required to draft
Poverty Reduction Strategy Papers (PRSPs) before they could qualify for
assistance under the HIPC facility or get concessional loans from the PRGF. But
these PRSPs were seen as thinly-disguised SAPs. PRSPs continued to emphasize
economic growth without addressing how such growth would be redistributed to the
poor.
True poverty alleviation can not be achieved
under the neoliberal framework promoted by IFIs and the industrialized nations.
Poverty reduction strategies can only succeed if they address the issue of
inequitable distribution of resources through programs such as genuine land
reform.
Poverty reduction strategies should recognize
and respect people’s basic human rights. In addition, these strategies should
have empowerment of the poor as a basic element. This means that the poor should
be actively involved in the drafting of these strategies, as well as their
implementation.
But most fundamentally, poverty reduction
strategies must ultimately seek basic structural changes in society to eliminate
inequitable power relations. It is these unfair social relations that are the
ultimate root cause of poverty. Unless these are addressed, true poverty
reduction can never really be achieved. IBON Features / Posted by Bulatlat
IBON Features is a media service of IBON
Foundation, an independent economic policy and research institution. When
reprinting this feature, please credit IBON Features and give the byline when
applicable. © 2004 Bulatlat
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