Globalization and the Worlds Poor

shah110 · #1 Tuesday, March 24, 2009

Globalization and the Worlds Poor

Globalization has had detrimental effects on the worlds poor while serving the interests of first world countries. Whether or not globalization has a positive impact on the world is of much concern, especially to those unfortunate countries who are economically deprived. Going beyond the economics of the situation, it can be said that the world is slowly becoming ‘Westernized’. Mass globalization encourages mass assimilation. Some may argue that globalization gives multinational corporations too much power over the world’s economy. This can be taken one step further by asserting that it is not the companies, by their own merit, who take control over the economic situation, but the rich countries take advantage of their poorer counterparts through international networking communities. The phrase “you need money to make money” has never been truer in this context. On a less cynical note, globalization deters protectionism, opening up boarders to an easier flow of ideas and products. This has had the effect of cut backs on tariffs, causing international trade to become more efficient. The United Nations is an example of an ongoing attempt to resolve various issues through international cooperation. Globalization leads to the downfall of the worlds poor by increasing the opportunity for selfish interests to be pursued at the expense of third world countries; Westernization, multinational corporations and first world countries, guided by globalization, cheat the world’s poor.

Multinational corporations (MNC’s), with the aid of globalization, wield too much power over the world’s economy. On the list of the top hundred largest economies in the world, MNC’s take up fifty-one spaces. More than half of the worlds one hundred largest economies fall into the hands of MNC’s, a group that has one goal in mind – corporate profit. Their relentless greed is exemplified in their reckless endangerment of the third world countries they manufacture in, ‘externalizing the costs’ some call it. Where resources are cheap and laws are lax, companies are able to take advantage of the circumstance and produce cheaply. These places are often third world countries. Because the economy where production occurs is not strong, these products are sold transnationally to rich countries. Third world countries are cheated of their resources by MNC’s taking advantage of them in a global economy.

The Chinese National Petroleum Corporation (CNPC) is one MNC that has been great at manipulating war into profit. The genocide in Darfur, Sudan is tragic, but in every tragedy is opportunity to profit. The CNPC noticed an increase in revenue while violence commenced in Darfur (291 percent increase over six years), so the CNPC facilitated the continuation of genocide in the name of corporate profit. External threats of economic sanction have not bothered the Sudanese government, as “. . . there is little doubt that Sudan has been able to laugh off existing and threatened sanctions because of the huge support it receives from China, channelled above all through the Sudanese relationship with CNPC” (Weissman). This third world country has been cheated into a prolonged state of war by an MNC who saw potential for profit.

Philip Morris International (FMI) is one MNC that is great at distorting its image in third world countries. In the past, FMI has been accused of toxic and radioactive waste (extremely detrimental to the surrounding environment), and more recently, this cigarette brand has used manipulation and deceit to make their product more appealing then the one sitting next to them on the shelf of third world countries. For example, they use colour coding instead of text in some circumstances to bypass the (appropriate) negative connotations surrounding certain terms, and they use words like lights, low or mild to describe their product, again, manipulating how dangerous their product sounds to the average consumer. This works well in poor countries whose economies are far too unstable to have strict laws that may ward off potential sales taxes. The effect of this in third world countries is better understood when acknowledging the rate of death caused by tobacco in third world countries; the World Health Organization estimates that “unchecked, tobacco-related deaths will increase to more than eight million a year by 2030, and 80% of those deaths will occur in the developing world.” Globalization cheats the worlds poor by literally killing them at a much faster rate than the world’s rich.

First world countries, tied together by globalization, take advantage of their poorer counterparts through their abuse of accumulative and economic powers. The United Nations (UN) is a perfect example of abuse of accumulative power. They say one of their primary goals is to achieve “global partnership”; this goal is undermined by the very founding of the UN. The UN “. . . is working just fine for those who created it for themselves” (McEntee). There is no feasible way for many countries to have the same level of power when five countries have absolute control over what course of action is pursued or not (Britain, China, Soviet Union, United States of America and France each have veto power). Hidden under a guise of global diplomacy, these five first world countries each have power that is far greater than that of the world’s poor.

The UN is used as a means of abuse taken advantage of by rich countries. This international group was used in a way that legitimated the war in Iraq. The powerful countries saw an economical advantage to starting the war, namely crude oil extraction. This may not have been the official reasoning to commencing the war, but oil was there, and it was extracted following the beginning of the war in Iraq. American-based company Exxon-Mobil had the economic means to extract crude oil and make a profit doing it. When war emerged, this American-based company jumped on the opportunity to make money in the midst of war. This is a prime example of a first world country (America) acting (starting a war) on behalf of a company (Exxon-Mobil), in order to make itself richer and a third world country (Iraq) poorer.

The world is in a process of “Westernization,” with a majority of the negative economic effects perpetrated by the International Monetary Fund (IMF), whose goal is to aid first world country’s economies’. Democracy is seen as a positive concept in Europe and North America, and in these rich locations it may be an effective political system. The problem arises when one way of governing is forced upon every nation state. It is up to the individual states to decide which methods of governing are most effective in their particular case. According to Professor of Political Economy at Harvard, Benjamin M. Friedman:

[The IMF has] . . . ignored the implications of incomplete information, inadequate markets, and unworkable institutions - all of which are especially characteristic of newly developing countries. As a result . . . the IMF has called for policies that . . . do not make sense for the countries to which the IMF is recommending them. Stiglitz seeks to show that the consequences of these misguided policies have been disastrous . . . (2; emphasis added)

In a third world country who needs IMF aid, rich countries decide where money is going, from what social programs are to be operated to what resources money will be spent on; these “conditionalities” are part of the IMF Structural Adjustment Programs. Countries who lend money are looking for the best way to profit in the long run, with the concept of “helping the country” only a short-term front. The government in need of aid sees no alternative, so has to rule the country on IMF terms and indirectly, terms of the first world countries who contribute most to the IMF. The effect is a widened economic gap; based on Western ideals, the funding is spent ineffectively resulting in little realistic change and an additional loan that needs to be repaid. Argentina and Kenya are two countries whose economies have suffered greatly due to IMF contributions.

The IMF’s pursuit of Westernization has left Argentina economically crippled. In return for a loan of $15 billion, Argentina was contractually obligated to do things such as privatize certain national resources and increase taxes during a recession. The privatization of utilities is a means for capitalism to grow. The growth of capitalism is the goal of those countries who do well in a capitalist society. On top of that, Argentina was prohibited from printing excess money to jumpstart their economy; this is exactly what first world countries do. Inflation was not a factor. Apparently, the economic success of Argentina was not a factor when a loan was given. The only thing considered was how integrated Argentina could become to the Western world; economic success or failure is secondary to this.

Globalization cheated the poor in 2005 when the IMF became involved with Kenya. Kenya’s economy was set up in a way (prior to the IMF’s “help”) that all currency entering or leaving Kenya was strictly monitored. What the IMF required from Kenya was a more open currency, so that an exchange rate would be better applied, and foreign investment would be easier. In first world countries this works, so why not apply the same logic to Kenya? The answer was devastating. Foreign investment did not improve substantially, but the open economy did allow corrupt government officials to steal billions of Kenya’s currency via an illegal gold trade (known as the Goldenberg Scandal). While this is not directly the IMF’s fault, it goes to show that changing too much too fast will lead to a negative outcome. Kenya should have been given more freedom over decisions so fundamentally intertwined with its economy.

One positive effect globalization has on third world countries is the lack of protectionism. The flow of products and ideas is made simple. In the end, mutual benefit is achieved, or that at least is the goal. What can happen is more than ideas start flowing; people start flowing, flowing into rich countries. This is called brain drain, and what happens is, people who have specialized skills have an incentive to migrate to rich countries where there is better opportunity for personal profit. The dollar amount lost by poor countries can be extremely high, take Africa for example: “Africa has lost a third of its skilled professionals in recent decades and it is costing the continent $4 billion a year to replace them with expatriates from the West” (BBC). In a globalized world, human capital is being pulled like a magnet toward wealth, away from the world’s poor, toward the world’s rich. What these people could have contributed (paying taxes and providing their expertise) to their third world country is now lost to a first world country. Globalization has lead to the eased movement of human capital, causing a brain drain coming from third world countries to first world countries.

Globalization has widened the economic gap and even worse, caused an undue number of deaths in third world countries, while rich, post-industrial countries profit. The effects are seen through state-orientated international relations, MNC’s and expansion of the Western Ideal. Globalization has given rich institutions the ability to profit at the expense of the world’s poor. While the poor become poorer, the rich become richer; globalization has enabled this. In a globalized world, MNC’s can choose which countries to produce in and which countries to sell in, this system favours first world countries, as can be seen through the CNPC and FMI. Even international groups, such as the IMF and UN tend to favour rich western countries over the world’s poor. The effects of the IMF can be seen in two countries – Argentina and Kenya, both of which were negatively affected by rich interference.

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