Does Globalisation increase or decrease inequality, or neither? 


Globalisation has changed the world dramatically. Whether this is for the good or the bad is highly contested. Mainstream sources continually remain defiant on spurring out the benefits of globalisation. Here, Anastasia Nicosia questions this status quo and asserts the possibility that globalisation is increasing inequality.

Globalisation can be best understood as a set of political-economic institutions and policies which contribute, if not generate, enhanced interdependence between countries through the creation of a free global market. This process of global integration is thought to bring benefits to all countries, as market mechanisms are advertised by some as the most efficient enablers of development and economic growth.

However, and in reality, globalisation operates in different ways amongst different countries, bringing enormous economic benefits to some and equally immense negative social and environmental consequences to others. Stigliz has stated that globalisation in itself is neither good nor bad. As long as a country enters the “free” global market at its own right and under its own terms, globalisation can bring enormous benefits.

Asia Society / Creative Commons License

Asia Society / Creative Commons License

 

Hence, in the right hands and at the right time, entering the free market can boost a country’s economic and social development. The United Kingdom opened its border in the 19th century in a time of national prosperity, a prosperity it managed to achieve thanks to its protectionist laws which shielded its own workers from foreign competition. Once it was ready to compete globally it embraced globalisation. Other European countries and the United States followed shortly after, once they felt they could catch up and compete with other market.

However, globalisation processes in the wrong hands and at the wrong time can increase inequalities both within and between countries. The current stream of rapid globalisation is led and sponsored by international financial institutions, such as the IMF (International Monetary Fund) and the World Bank, thus making contemporary globalisation more similar to the latter type than to the former one undertaken by the now developed countries. Naomi Klein reports in her bestseller “The Shock Doctrine” (2007) the many times in which neoliberal policies, such as deregulation, privatisation and liberalization, have been imposed on countries borrowing from both the IMF and the World Bank. Of the many, Chile, Argentina, South Africa, Poland and Russia are just a few cases in the long list of imposed-globalisation procedures. International financial institutions, led by the very same countries that are now developed because of a more cautious entrance into the free market, are now “inviting” less developed countries to reach prosperity in a completely different manner to their own development process.

Lars Plougmann / Creative Commons License

Lars Plougmann / Creative Commons License

 

List, in 1841, had already predicted this contemporary globalisation situation when he described that once a country obtains economic greatness, it kicks away the ladder which it used to reach such prosperity, in order to deprive others of the means to obtain it. Hence, developed countries, by prohibiting through their lending institutions various economic policies such as protectionism and restrictions on imports to developing countries, they are effectively kicking away the ladder they themselves used to become developed. They preach to developing nations the benefits of free trade when they themselves did not go through that difficult path in the first place. By introducing developing countries into the free market ahead of time, international financial institutions are increasing global inequality, since developing countries are stuck in an inferior position to their developed counterparts to which they are dependent for both technology and investments. By imposing as conditionalities deregulation and free trade, weak borrowing economies to the IMF and the World Bank will have to enter the global market, and since they are not fully developed they will not pose a threat to the developed countries.

Once inside such a dispersing global market they will not have the chance to develop in the same way the current rich countries had, therefore they will probably never pose a threat to the latter. Economically weaker countries cannot compete with the world. Indeed opening up to the free market has been followed by the disruption of hundreds of local businesses everywhere in the developing world, as for example in Jamaica. Since developed countries, through the Bretton Woods institutions, have repeatedly been kicking away the protectionist ladder they themselves used to develop, globalisation can be seen as increasing inequality, as they have turned the process into an economic, political and social domination rather than interdependence.

 

 

 


The views expressed in this article are those of the author and do not necessarily represent the views of Development in Action.

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