Inequality Between Nations Discussion

INEQUALITY BETWEEN NATIONS The second aspect of the inequality debate is whether globalization is widening the gap in average incomes between rich and poor nations. If we compare average incomes in high-income countries with average incomes in middle- and low- income nations, we do find a widening gap. But averages conceal differences between nations.

On closer inspection, it appears the gap between rich and poor nations is not occurring everywhere: One group of poor nations is closing the gap with rich economies, while a second group of poor countries is falling further behind. For example, China is narrowing the income

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A man dismantles the carcass of a car for recycl ing in t he “Cite Soleil” slum of Port- au-Prince, Haiti. Haiti is a “traditional ” market that has not benefited as much from globalization as have other nations. The plight of people like the man shown here incites calls for a wider distribution of the benefits of economic progress. What, if anything, do you think businesses and governments can do to improve the lives of people enduring such harsh living conditions?

Source: THONY BELIZAIRE/ ewscom

 

 

22 PART 1 • GLOBAL BUSINESS ENVIRONMENT

gap between itself and the United States as measured by GDP per capita, but the gap between Africa and the United States is widening. China’s progress is no doubt a result of its integration with the world economy and annual economic growth rates of between 7 and 9 percent. Another emerging market, India, is also narrowing its income gap with the United States by embracing globalization.26

Developing countries that embrace globalization are increasing personal incomes, extend- ing life expectancies, and improving education systems. In addition, post-communist countries that welcomed world trade and investment experienced high growth rates in GDP per capita. But nations that remain closed off from the world economy have performed far worse.

GLOBAL INEQUALITY The third aspect of the inequality debate is whether globalization is increasing global inequality-widening income inequality between all people of the world, no matter where they live. A recent study paints a promising picture of declining poverty. This study found that the percentage of the world ‘s population living on less than a dollar a day (a common poverty gauge) fell from 17 percent to just 7 percent over a 30-year period, which reduced the number of people in poverty by roughly 200 million.27 Yet, a widely cited study by the World Bank finds that the percent of world population living on less than a dollar a day fell from 33 percent to 18 percent over a 20-year period, which reduced the number of people in poverty from 1.5 billion to 1.1 billion.28

For a variety of reasons, the real picture likely lies somewhere in between these two studies’ estimates. For example, whereas the World Bank study used population figures for developing countries only, the first study used global population in its analyses, which lowered poverty es- timates, all else being equal. What is important is that most experts agree that global inequality has fallen, although they disagree on the extent of the fall.

What it is like to live on less than a dollar a day in sub-Saharan Africa, South Asia, or elsewhere is too difficult for most of us to comprehend. The continent of Africa presents the most pressing problem. Home to 13 percent of the world’s population, Africa accounts for just 3 percent of world GDP. Rich nations realize they cannot sit idly by while so many of the world’s people live under such conditions.

What can be done to help the world ‘s poor? First of all, rich nations could increase the amount of foreign aid they give to poor nations-foreign aid as a share of donor country GDP is at historically low levels. Second, rich nations can accelerate the process of forgiving some of the debt burdens of the most heavily indebted poor countries (HIPCs). The HIPC initiative is committed to reducing the debt burdens of the world’s poorest countries. This initiative would enable these countries to spend money on social services and greater integration with the global economy instead of on interest payments on debt.29

Summary of the Income Inequality Debate For the debate over inequality within nations, studies suggest that developing nations can boost incomes of their poorest citizens by embracing globalization and integrating themselves into the global economy. In the debate over inequality between nations, nations open to world trade and investment appear to grow faster than rich nations do. Meanwhile, economies that remain sheltered from the global economy tend to be worse off. Finally, regarding the debate over global inequality, although experts agree inequality has fallen in recent decades, they disagree on the extent of the drop.

Globalization’s Influence on Cultures National culture is a strong shaper of a people’s values, attitudes, customs, beliefs, and com- munication. Whether globalization eradicates cultural differences between groups of people or reinforces cultural uniqueness is a hotly debated topic.

Protesters complain that globalization is homogenizing our world and destroying its rich diversity of cultures. Critics say that in some drab, new world we all will wear the same clothes bought at the same brand-name shops, eat the same foods at the same brand-name restaurants, and watch the same movies made by the same production companies.

But supporters argue that globalization allows us all to profit from our differing circum- stances and skills. Trade allows countries to specialize in producing the goods and services they can produce most efficiently. Nations can then trade with each other to obtain goods and services they desire but do not produce. In this way, France still produces many of the world’s finest wines, South Africa yields much of the world’s diamonds, and Japan continues to design some

 

 

CULTURE MATTERS The Culture Debate

T he debate over globalization’s influence on culture evokes strong opinions. Here are a few main arguments in this debate:

• Material Desire. Critics say globalizat ion fosters the “Coca- Colanization” of nations through advertising campaigns that promote material desire. They also argue that global consumer- goods companies destroy cultural diversity (especially in develop- ing nations) by putting local companies out of business.

• Artistic Influence. Evidence suggests, however, that the cultures of developing nations are thriving and that the influ- ence of t heir music, art, and literature has grown (not shrunk) throughout the past century. African cultures, for example, have influenced the works of artists including Picasso, the Beatles, and Sting.

• Western Values. International businesses reach far and w ide through the Internet, global media, increased business travel, and local marketing. Critics say local values and traditions are being replaced by U.S. companies promoting “Western” values.

CHAPTER 1 • GLOBALIZATION 23

• A Force for Good. On the positive side, globalization tends to foster two important values: tolerance and diversity. Advocates say nations should be more tolerant of opposing viewpoints and should welcome diversity among their peoples. This view inter- prets globalization as a potent force for good in the world.

• Deeper Values. Globalization can cause consumer purchases and economic ideologies to converge, but these are rather super- ficial aspects of culture. Deeper values that embody the essence of cultures may be more resistant to a global consumer culture.

• Want to Know More? Visit the globalization page of the Global Policy Forum (www.g lobalpol icy.org), Globalization 101 (www.globalization101.org), or The Globalist (www. theglobalist.com).

Source: “Economic Globalization and Culture: A Discussion with Dr. Francis Fukuyama,” Merri ll Lynch Forum website (www. ml.com); “Globalization Issues,” The Global iza- tion website (www.sociology.emory.edu/globalization); Cultural Diversity in the Era of Globalization,” UNESCO Culture Sector website (www.unesco.org/culture).

of the world ‘s fi nest-engineered automobiles. Other nations then trade their goods and services with these countries to enjoy the wines, diamonds, and automobiles that they do not, or cannot, produce. To learn more about the interplay between culture and globalization, see this chapter’s Culture Matters feature, titled, “The Culture Debate.”

Globalization and National Sovereignty National sovereignty generally involves the idea that a nation-state (1) is autonomous, (2) can freely select its government, (3) cannot intervene in the affairs of other nations, (4) can control movements across its borders, and (5) can enter into binding international agreements. Opposi- tion groups allege that globalization erodes national sovereignty and encroaches on the authority of local and state governments. Supporters di sagree, saying that globalization spreads democ- racy worldwide and that national sovereignty must be viewed from a long-term perspective.

GLOBALIZATION: MENACE TO DEMOCRACY? A main argument leveled against globalization is that it empowers supranational institutions at the expense of national governments. It is not in dispute that the WTO, the IMF, and the United Nations are led by appointed, not democratically elected, representatives. What is debatable, however, is whether these organizations unduly impose their will on the citizens of sovereign nations. Critics argue that, by undercutting the political and legal authority of national, regional, and local governments, such organizations undercut democracy and individual liberty.

Opponents of globalization also take issue with the right of national political authorities to enter into binding international agreements on behalf of citizens. Critics charge that such agree- ments violate the rights of subfederal (local and state) governments. For example, state and local governments in the United States had no role in creating the NAFTA. Yet WTO rules require the U.S. federal government to take all available actions (including enacting preemptive legislation or withdrawing funding) to force subfederal compliance with WTO terms. Protesters say that such requirements directly attack the rights and authority of subfederal governments.30

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