Resolved: On balance, economic globalization benefits worldwide poverty reduction 3
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- Globalization increases technology access
- Globalization provides lesser developed countries with capital to grow
- Globalization provides infrastructure needed for growth
- Poverty Impact
Globalization Increases GrowthMany economic benefits to globalizationAnish Bharadwaj, 2014, International Max Planck Research School for Competition and Innovation, Munich Centre for Innovation and Entrepreneurship Research, Advances in Economics and Business 2(1): 42, p. 42-57 There are, undoubtedly, significant potential benefits to globalization. Openness to foreign direct investment, for instance, can contribute to growth by stimulating domestic capital formation and improving efficiency and productivity, as a result of greater access to new technologies. At the same time, openness to capital flows may also increase opportunities for portfolio risk diversification and consumption smoothing through borrowing and lending; and producers who are able to diversify risks on world capital markets may invest in riskier (and higher-yield) projects, thereby raising the country’s rate of economic growth (Obstfeld, 1994). Increased access to the domestic financial system by foreign banks may raise the efficiency of the intermediation process between savers and borrowers, thereby lowering markup rates in banking, as well as the cost of investment, and again raising growth rates (Baldwin and Forslid, 2000). And to the extent that financial openness helps to mitigate asymmetric information problems and to reduce the fixed costs associated with small-scale lending, it can improve the opportunities for the poor to access the formal financial system. Similarly, openness to trade may generate significant gains, both static and dynamic (Agenor, 2004). Static economic gains, as emphasized by conventional trade theory, refer to the fact that under greater openness to trade, productive resources tend to be reallocated toward activities where they are used with comparatively greater efficiency and away from less efficient activities (such as import-substitution industries or rent-seeking activities). In addition, the literature on endogenous growth has emphasized the existence of various mechanisms through which trade may generate dynamic gains and thereby affect the economy’s rate of growth in the long run. In particular, it has been argued that trade openness may facilitate the acquisition of new inputs, less expensive or higher-quality intermediate goods, and improved technologies, which enhance the overall productivity of the economy. Romer (1994), for instance, has argued that in an economy subject to trade restrictions, only a narrow range of specialized intermediate goods or capital goods can be profitably produced and therefore the full range of technological possibilities, which rely on a potentially broader range of inputs, cannot be exploited effectively Globalization increases technology accessWashington Times, October 6, 2014, “Economic Globalization Boosts Asia, bogs down US Middle Class,” http://www.washingtontimes.com/news/2014/oct/6/economic-globalization-boosts-asia-bogs-down-us-mi/?page=all DOA: 1-2-14 Second, LDCs that open themselves up to international trade and investment gain access to a much higher level of technology. This confers on LDCs a “latecomer’s advantage”: rather than bearing the cost of expensive, up-front research and development, poor countries can import the technology off the shelf. They can incorporate new technology by importing capital equipment that embodies the latest advances and computers with the latest software. Subsidiaries of multinational companies also bring with them new production techniques and employee training that bolster the host nation’s stock of human capital. Globalization provides lesser developed countries with capital to growWashington Times, October 6, 2014, “Economic Globalization Boosts Asia, bogs down US Middle Class,” http://www.washingtontimes.com/news/2014/oct/6/economic-globalization-boosts-asia-bogs-down-us-mi/?page=all DOA: 1-2-14 Third, engagement in the global economy provides capital to fuel future growth. Most LDCs are people-rich and capital-poor. In a few countries in Asia, the level of domestic savings has been high enough to finance domestic investment, but typically the domestic pool of savings in an LDC is inadequate. Global capital markets can fill the gap, allowing poor nations to accelerate their pace of growth. In 1998, $ 166 billion in foreign direct investment flowed from the advanced economies to the less developed. A poor country that closes its door or fails to maintain sound domestic policies will forfeit the immense benefits this capital can bring. Globalization provides infrastructure needed for growthWashington Times, October 6, 2014, “Economic Globalization Boosts Asia, bogs down US Middle Class,” http://www.washingtontimes.com/news/2014/oct/6/economic-globalization-boosts-asia-bogs-down-us-mi/?page=all DOA: 1-2-14 Fourth, openness to the global economy can provide the infrastructure a developing economy needs for growth. Foreign capital can finance more traditional types of infrastructure, such as port facilities, power generation, and an internal transportation network, just as British capital helped to finance America’s network of canals and railroads in the nineteenth century. But just as importantly, multinational companies can provide an infrastructure of what could be called “enabling services,” such as telecommunications, insurance, accounting, and banking. As China and India have realized, a protected and inefficient service sector weighs down an entire economy, retarding the development of manufacturing and other industries. LDCs need to shed the mistaken idea that opening their economies up to international service competition is a “concession” to be made to gain access to farm and manufacturing markets in the advanced economies. In reality, liberalizing their service sectors by opening them to foreign competition is a favor LDCs can do for themselves. Poverty ImpactPoverty results in exploitationJeffrey Sachs, August 22, 2005, Scientific American, “Can Extreme Poverty Be Eliminated?: Globalization, Poverty, and Foreign Aid,” http://www.scientificamerican.com/article/can-extreme-poverty-be-el/ DOA: 1-1-15 Affluent nations have repeatedly plundered and exploited poor countries through slavery, colonial rule and unfair trade practices. Yet it is perhaps more accurate to say that exploitation is the result of poverty (which leaves impoverished countries vulnerable to abuse) rather than the cause of it. 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