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 consumers 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. - 2 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
worlds second largest producer of pickup - 3 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 worlds
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 - 4 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 - 5 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 - 6 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 Moores 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 - 7 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 - 8 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 worlds 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 - 9 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 - 10
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.
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