Essay on How Globalisation Leads to Increased Inequality, UT-113

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This essay explores the significant impact of globalization on economic inequality, examining how the rise of specialized markets and international trade has affected both developed and developing nations. The author argues that globalization, while fostering economic growth and exchange, has exacerbated income disparities, particularly for unskilled laborers in developing countries. The essay delves into the role of foreign direct investment, the exploitation of labor in certain industries, and the concentration of wealth in multinational corporations. The essay also discusses the impact of technological advancements and the decline of traditional employment sectors on low-skilled workers. It highlights the need for government intervention through education, skill development, and stricter regulations to mitigate the negative consequences of globalization and promote a more equitable distribution of wealth.
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Running head: GLOBALISATION AND INEQUALITY
ESSAY ON GLOBALISATION LEADS TO INEQUALITY
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1ESSAY ON GLOBALISATION LEADS TO INEQUALITY
Globalization has become closer over the years. The trade barriers have been dismantled
to encourage better business relation among the countries all over the world. This free exchange
has not only encouraged exchange of trade and goods but also exchange of capital and labour.
The increased globalization has affected the consumer market considerably where people are
more consumerist than ever ( Bourguignon 2017). As, most economist would suggest that
globalization has led to the wellbeing of everyone involved in the process. Globalization has also
led to the rise of specialized markets where countries are producing specific goods according to
their strengths. Leading to a very large production and while that helps to share the products
aiding profits to the parties involved, it has also led to the increase in inequality among the
developing countries. The following essay is to discuss how globalization has led to increased
inequality.
The rapid rise in globalization has led to creation of specialized markets as in a country
produces the products that it has the most raw material and the required man power in thereby
exchanging it for other products (Bourguignon 2017. Now, while countries can focus on singular
industry that they have most strength on as it will help them to maximize their profit returns. For
example, USA can mass produce their pharmaceutical companies as they have the required man
power and technology for its production, it only makes sense that a country focuses on the things
they have best. On the other hand there is Ethiopia where the coffee is the best so the
government ensures there is a mass production of the coffee crop. With globalization both the
countries are able to exchange their goods and make a profit. However there is an error to
assume that this process is flawless for it has given rise to increase in unequal economical state
among various nations. Erik Maskin has stated that globalization has led to increased economic
inequality among the developing nations (Maskin 2015). He stated that in developing countries
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2ESSAY ON GLOBALISATION LEADS TO INEQUALITY
there is a larger number of unskilled labour who are generally found in agricultural sector
meanwhile in developed countries they have more of skilled labors (Maskin 2015). Prior to
globalization the skills of the skilled and unskilled labors would come together to work by
working together in cooperation. However post globalization has led to a rise of new
combination of workers where skilled workers are grouped with other skilled workers and
unskilled workers are grouped together and more sub classes follow as a result of which the
lowest skilled worker is left behind (Maskin 2015). This has seriously affected the economic
position of the unskilled laborers in the developing nations where they are pushed back even
more (Maskin 2015). Maskin suggests that the only way these unskilled laborers can be uplifted
is if the government takes measure to improve the skill of the lowest level of workers through
training and education so they can have better chances of job opportunities. Globalization has
caused increased inequality by paying or investing more in higher-skilled work and reducing the
estimated income of individuals working in a lower-skill and lower-knowledge profession
(Kanbur 2015). One of the major motives behind Foreign Direct Investment is to splash out
resources where the unit cost of production is the least. This is the case with countries like
Bangladesh, Vietnam, Indonesia and Ethiopia where huge amounts of investments are flowing in
as the unit cost of production is low as compared to other countries (Panjaitan 2016). For
instance, this is most prominent in the fashion industry where high end fashion houses such as
Gucci, Burberry, Moschino among few make their products made in underdeveloped countries to
ensure cost cutting. The employees get paid very less than their developed country counterparts
and have to often work in precarious condition (Panjaitan 2016). Additionally this reduces the
demand for similar workers in countries with higher-income. Hence, these countries are at a
huge risk of unemployment leading to an increase in poverty in the developed countries. As a
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3ESSAY ON GLOBALISATION LEADS TO INEQUALITY
result, many have to take up short-term contract work, freelancing and other poorly paid jobs as
opposed to permanent jobs, giving rise to the Gig economy. This has created a sense of
exploitation form the developed countries to the under developed ones. Social scientist believe
that gig economy is the future, while that is it also reduces the chance of people having a stable
income source.
This following issue is not limited to the labour sector. As the markets increase so do the
volume and value of business between the countries. Globalization has led to the increase in
trade-to-GDP ratios this can potentially lead to increase in economic growth and per capita
income of the country however, this factor can also lead to unequal distribution of wealth. For
example, when a country is able to import cheaper rice from a country, it will affect the domestic
supply and the rice industry in that country. This will adversely affect the employment sector and
lead to lowering of the living standards for the lower income groups. According to reports, in US
the national income of the top 1% of the population had risen to 11% in the year 1980 and 20%
by 2014 while the rest of the population it was just 13% during the entire time (Azzimonti et al
2014). This goes to show that there is a massive socio-economic disparity among the population.
Simply said, the rich get richer and the poor get poorer (Bouguignon, F., 2016). There has been a
boom in the multinational companies all over the world, especially in the developing countries
such as India, China, Indonesia and others (Dilbone 2015). Companies like Apple, Zara, Google,
Facebook, Twitter and others. These multinationals mean more profits, equating to larger pay
checks for their employees and increased revenue for their shareholders (Dilbone 2015). There is
no denying that these multinationals add tremendously to the world’s GDP, therefore they are
most important part of the economy. Multinationals operate in several countries and often sue
malpractices to avoid taxes which also increase the return of the equity share owners (Dilbone
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4ESSAY ON GLOBALISATION LEADS TO INEQUALITY
2015). The government too plays a role, wherein they do not generate revenues to avoid
investing in various public welfare services, effecting the distribution of wealth. The unequal
distribution of wealth has deep negative impacts on the lives of the people all over the world. For
instance, reports suggests that in the year 2017 businesses in the UK avoided paying £6 billion in
tax revenues which could have helped in providing education of at least a 100 million children
and provide health care services that could have saved millions of children lives annually (Vogli
et al 2014).
The solution can be that government may have strict laws against these multinational
companies if found violating tax laws. However realistically tax laws may be complicated in
various countries which makes the outcome unsure and vague. The use of offshore accounts
helps further to launder money and avoid governance (Bouguignon 2016). In recent years, US
has introduced a new tax law where the company need to pay tax on and off shore held by US
business which has helped the government to recover tax revenue and use it for other welfare
purposes. Developing countries need to impose stricter laws so that multinationals can pay
proper tax and also pay rent for their ownership of various assets within the country. Richard
Freeman a Harvard Economist remarked that while globalization and capitalism helped in
improving the living conditions of billions it has also helped to increase the wealth amongst very
few people.
The nature of economy in most developing country is agricultural in nature. However the
growing globalization has led to massive development leading to receding farmlands and more
buildings. Receding farmland mean that most farmers are now without a means to sustain
themselves and are more vulnerable (Patnaik 2014). It must be understood that the farmers in
these developing countries such as India, Myanmar, China, Pakistan and others are the low
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5ESSAY ON GLOBALISATION LEADS TO INEQUALITY
skilled labors who do not have education and are not equipped in handling high technology.
Forced out their lands they seek cities for a means of livelihood, usually working in unsafe areas
to make a living and often underpaid. They have high chances of getting cancer, asthma, eye
issues and other diseases as well. Globalization has also led to migration of rural population into
urban setting. Young generation of farmers refuse to work in unglamorous fields and wish to
shop in luxurious places without having the means for it. The inequality in wealth and social
standards is not limited to developing countries, low skilled workers find it difficult to gain a
proper income in developed countries as they are easily replaceable. The disparity causes
disharmony within the society and has many adverse effects.
The need for multitasking, technology savvy workforce is increasing to keep pace with
the global trends. This means that the workforce that previously did not require minimum or no
technological idea are now being replaced by workforce who now possess such knowledge
(Baars et al 2016). The economist point it as the skill based technological change. In the
modernized economy the workers who possess the skills throve while others are left out, which
means that the low skilled workers are rapidly being replaced by technology. A research by
Mckinsey Global Institute shows that about 60% of the world jobs that is about one third of
occupations will be taken over by technology by the year 2030. The Future of Work in
Singapore evaluated the future trends in job opportunities all over the world and it showed a
rising concern for the low skill and income group all over the world (Willcocks et al 2016).
Technological advancement such as driverless cars as introduces by Tesla will eventually replace
the job of drivers around the globe. Milanovic states that previously the economies were bunched
together but post Industrial revolution some countries moved forward while others stayed
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6ESSAY ON GLOBALISATION LEADS TO INEQUALITY
behind. He stated that in 1820 the disparity between the richest countries Netherlands and UK as
compared to China and India was only 3 times more which has now skyrocketed.
The income inequality is not just a solitary issue, the global stratification has led to other
issues. It is observed that countries with lower income have increased case of violence, drug
related issue and other crimes (Vogli et al 2014). This also triggers political inequality as rich are
better voiced in stating their ideas and wants to the government they influence the policy making
decisions tremendously while the poor never get a chance. Thus the policies often cater to the
rich while the poor get no respite. While some economists believe that there is a greater need for
the participation of government in providing up skilling of the lower income group so that they
can be mainstreamed into better jobs (Panjaitan 2016). There are also demands for increasing the
minimum wage among the lower income group in order to provide them with some kind of
support. However, the true impact of the same is yet to be evaluated. Globalization has also led
to the destruction of the world environment. There is demand for more raw materials everyday
resulting in the loss of vegetation, bio diversity, more off shore drilling all harmful for the
environment. Other than the greenhouse gas and other pollutions that is constantly a result of
globalization it is also reducing future resources of food and drinking water. The stress on the
resources will lead to increasing the price of the products which will lead to further inequality
within the societies.
To only focus on the harmful effects of globalization is not fair as it has created jobs and
opportunities all over the globe. It has increased smoother communication among nations and
also increased cross cultural interaction. While there are still some attributes that governments all
over the world need to consider and build ensuring there is equal distribution of wealth and
opportunity. In conclusion, the policies around globalization needs to change ensuring there is
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7ESSAY ON GLOBALISATION LEADS TO INEQUALITY
more inclusivity and equality. The current attributes do not aid the lowest section of the economy
who continuously get ignored and exploited.
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8ESSAY ON GLOBALISATION LEADS TO INEQUALITY
Reference
Baars, J., Dannefer, D., Phillipson, C. and Walker, A., 2016. Aging, globalization and inequality:
The new critical gerontology. Routledge.
Vogli, R.D., Kouvonen, A., Elovainio, M. and Marmot, M., 2014. Economic globalization,
inequality and body mass index: a cross-national analysis of 127 countries. Critical Public
Health, 24(1), pp.7-21.
Patnaik, P., 2014. Capitalism, Inequality, and Globalization: Thomas Piketty’s Capital in the
Twenty-First Century. International Journal of Political Economy, 43(3), pp.55-69.
Baars, J., Dannefer, D., Phillipson, C. and Walker, A., 2016. Aging, globalization and
inequality: The new critical gerontology. Routledge.
Bourguignon, F., 2017. The globalization of inequality. Princeton University Press.
Azzimonti, M., De Francisco, E. and Quadrini, V., 2014. Financial globalization, inequality, and
the rising public debt. American Economic Review, 104(8), pp.2267-2302.
Kanbur, R., 2015. Globalization and inequality. In Handbook of income distribution (Vol. 2, pp.
1845-1881). Elsevier.
Maskin, E., 2015. Why haven't global markets reduced inequality in emerging economies?. The
world bank economic review, 29(suppl_1), pp.S48-S52.
Dilbone, C., 2015. Multinational Corporations and Intrastate Economic Inequality:
Consequences of Globalized Market Integration in Developing Countries. International Review
Spring 2015, p.32.
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9ESSAY ON GLOBALISATION LEADS TO INEQUALITY
Panjaitan, R.A., 2016. The Rise of Inequality in Indonesia: The Effects of Globalization in the
Labor Markets. Verity: Jurnal Ilmiah Hubungan Internasional (International Relations Journal),
8(16), pp.31-42.
Bouguignon, F., 2016. Inequality and globalization: How the rich get richer as the poor catch
up. Foreign Aff., 95, p.11.
Milanovic, B., 2016. Global inequality: A new approach for the age of globalization. Harvard
University Press.
Willcocks, L.P. and Lacity, M., 2016. Service automation robots and the future of work. SB
Publishing.
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