To what extent does gobalisation reduce inequalities in poor countries ?

DNL

This document is from a website named economist.com and illustrates how globalization affected the planet and more specifically developing countries. Globalization is a process of interaction and integration among the people, companies and governments of different nations and a process driven by international trades and investments. After the lecture of this article, we will study in what extent does the expand of globalization diminish inequalities in poor countries. As a first paragraph, we will study in what way globalization can reduce inequalities in some developing countries. Then, we will show how a globalized world can also increase the amount of intra-state inequalities in poor countries. Firstly, the article starts with the following affirmation: “Globalization had made planet more equal”. In fact, this process has speeded up over the last past half-century and had indeed a significant impact on the entire world by increasing global wealth and the average income. Different factors led to a more globalized world such as the General Agreement on Tariffs and Trade (known as GATT) created in 1947, which was then replaced in 1993 by the World Trade Organization (WTO). These organizations both made trades and exchanges between countries easier than ever, which then helped poor countries to develop their economy exactly like the website article describes it : “As communication gets cheaper and transport gets faster, developing countries have closed the gap with their rich-world counterparts”. Furthermore, containers definitely made transport cheaper and easier by allowing Transnational Companies (TNCs) to export massively without any problem. Thus, containerships helped to develop the economy of poor countries exactly like China for example. In fact, Shanghai’s harbor is today the largest one on the globe and allows China to exchange with the entire world and then develop its economy to have less intra-state inequalities. The article then expose the theory of “comparative advantage” linked with an example : “It says that poor countries produce goods requiring large amounts of unskilled labour. Rich countries focus on things requiring skilled workers. Thailand is a big exporter, for example, while America is the world’s largest exporter of financial services”. Therefore, “unskilled workers in poor countries are high in demand” and they “get wage boost, whereas their skilled counterparts don’t” which then reduces inequalities in poor countries.

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