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.
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