Transcript | 3. Lecture: Globalisation and poverty - University for modern Slovakia

Opponents of globalisation claim that it increases the poverty and the gap between rich and poor. Let's look at the facts first. According to World Bank, which is intensely devoted to the issues of poverty, absolute poverty (less than $ 1.25 per capita per day) decreased between 1981 and 2008 from 1.9 billion to 1.4 billion people. Since the world population grew in the meantime, it means even greater relative turn down. While in 1981 more than half of humanity (52%) lived in absolute poverty, in 2008 it was approximately "only" a quarter (26%). In the world today about 1 billion people live in extreme poverty (less than 1 USD per capita per day). Still it is an awful lot, of course, but statement that globalisation means an increase in poverty is not true.

Globalisation has brought to many countries, particularly in East and South Asia, economic growth and development, which meant escape from the poverty trap for hundreds of millions of people. Only in China alone the number of people in absolute poverty reduced by 600 million between 1981 and 2005.

The world has changed in recent decades also in terms of poverty and income stratification. While in the eighties was true that less than one billion people belonged to developed countries and nearly five billion to developing countries today the stratification is as follows - approximately one billion rich developed countries, four billion relatively poorer but growing and developing countries and one billion extremely poor. For us it is encouraging that Slovakia now belongs to the richest billion, while twenty years ago we were among the developing majority.

As it is therefore apparent from the above figures, the globalisation does not increase overall poverty; on the contrary, it decreases it. The problem is that the overall differences are growing, not only between the rich and the poorest, but also between the poorest and almost all others. In other words, the problem is the poorest one billion renounced by the rest of the world. Even in other words, the effects of globalisation are positive for 5 billion world population, but are not positive for the poorest billion: in particular, sub-Saharan Africa but also countries such as Haiti, Laos, Myanmar, Afghanistan. The problem, of course, is not the globalisation.

The main reason for their hopeless situation is the vicious circle of corruption, ethnic conflicts, civil wars, powerful interest groups and the like. In his excellent book on this subject, Paul Collier has defined four key poverty traps which make it impossible for these countries to escape from it. It is a trap of conflict, natural resources trap, trap of landlocked location and bad neighbours, and trap of weak government in a small country. Yes, you read it well, poverty trap is also if a country is rich in natural resources. The problem lays in the fact that in conditions of poor African country the natural resources become both a source of corruption and political manipulation on one side, on the second the income from sale reduces the need to improve governance and even increase the risk of a coup d'état to obtain access to these resources.  

The problem of the previous approach to development aid to these countries was that aid was either ineffective or even destructive. The problem with the political lefts in the donor countries was that they focused only on throwing money and refused what was effective - business, growth promotion, but also the necessary military intervention. The problem with the rights was that they assumed the situation would resolve itself through the global economic growth and development.

It has not resolved and will not resolve. Conversely, if the situation remains unchanged, it can become a threat to the whole world. There is a want to change the approach since the present one did not prove good. Pumping money, the significant part of which is stolen, or just increases the dependency trap, does not solve things; neither do the activities of the rock stars, although they are certainly well meant. Collier calls such activities of various celebrities "development buzz", which represent just a "headless heart" according to him.

Economist Dambisa Moyo, who is from Zambia, graduated from Harvard and Oxford and worked also for the World Bank, even argues that the Western development aid is one of the major obstacles to Africa's development. She argues that "African corruption punch line is not that it exists, but that the aid is one of its most important resources." And at that point Dambisa Moyo asks, "What would happen if African countries one after another received a call from donor that the taps of development assistance are about to close in five years? Would Africa die from hunger? Hardly. It would rather be given the opportunity to stop the spiral of corruption, violence and decay. "(Quoted by Rado Baťo reviews: Bono, hands away from Africa).

Note: Correct answers to the test questions are intentionally not included in the text of the lecture. The reason is to motivate students in their additional self-study and partially (as revealed from the students’ responses and requirements) to make the test questions more challenging.