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Globalization, Poverty and Inequality . Sara Hsu. Parable. If you're totally illiterate and living on one dollar a day, the benefits of globalization never come to you. -- Jimmy Carter
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If you're totally illiterate and living on one dollar a day, the benefits of globalization never come to you. -- Jimmy Carter We must ensure that the global market is embedded in broadly shared values and practices that reflect global social needs, and that all the world's people share the benefits of globalization. -- Kofi Annan
Poverty Measurement The monetary dimensions of well-being are income and consumption. Non-monetary indications of poverty include health and nutrition povertyand education poverty. Poverty lines may be relative to the overall distribution of income, or absolute.
Poverty Measurement Incidence of poverty (headcount index). This is the share of the population whose income or consumption is below the poverty line. Depth of poverty (poverty gap). This provides information regarding how far off households are from the poverty line. Poverty severity (squared poverty gap). This takes into account not only the distance separating the poor from the poverty line (the poverty gap), but places a higher weight on those households further away from the poverty line.
Characteristics of the Poor Larger households than average with a high ratio of dependent members Women disproportionately represented as head of poor households Lack of ownership of productive assets Often residing in rural areas Linked with undernutrition
Poverty in Asia • With increased growth have come accelerated industrialization, deforestation and intensified farming, which present major challenges such as: • rising disparities between urban and rural areas • the spread of unemployment • degradation of the environments (both coastal and inland) and the natural resources on which poor rural people depend • Living conditions of large sections of the populations of poor people in Cambodia, Lao People’s Democratic Republic and the Philippines, in particular, still lag far behind those in neighboring countries.
Poverty in China Video http://www.youtube.com/watch?v=B7U0qaKRnbE
Gunnar Myrdal’s Nobel Speech, 1975 The Equality Issue in World Development “… Perhaps the most important effect of World War II was the rapid dissolution of that power structure ... In turn, as a subsequent effect of that political change the general public in the Western countries were suddenly forced to become aware of the huge income gap as between the poor majority of mankind and the rich minority, as well as the further fact that this income gap is continually widening, as indeed it had been doing for more than a century. An isolating wall of inattention, and an ignorance made possible by that opportunistic bent of mind, had been broken through.”
AmartyaSen and Equality Utilitarian equality: The utilitarian objective is to maximize the sum total of utility irrespective of distribution, but that requires the equality of the marginal utility of everyone. Rawlsian justice: Rawls’s “two principles of justice” characterize the need for equality in- “primary social goods.” These are “things that every rational man is presumed to want,” including “rights, liberties and opportunities, income and wealth, and the social bases of self-respect.”
AmartyaSen and Equality Basic Capability Equality: Can we not construct an adequate theory of equality on the combined grounds of Rawlsian equality and equality under the two welfaristconceptions? It is arguable that what is missing in all this framework is some notion of “basic capabilities”: a person being able to do certain basic things. The ability to move about, the ability to meet one’s nutritional requirements, the wherewithal to be clothed and sheltered, the power to participate in the social life of the community.
Measures of Inequality Gini Coefficient: The Gini coefficient measures the inequality among values of a frequency distribution (for example levels of income). A Gini coefficient of zero expresses perfect equality where all values are the same (for example, where everyone has an exactly equal income). TheilIndex: The Theil index is a statistic used to measure economic inequality. The basic Theilindex is the same as redundancy in information theory which is the maximum possible entropy of the data minus the observed entropy.
Inequality in Asia Over the past decade the sudden explosion of growth and rapid enrichment of many people has seen the rich-poor divide grow. The ADB estimates that currently in most Asian countries the wealthiest 5% of the population now account for 20% of total expenditure. Experts say governments need to expand social spending, especially in health and education, as well as work toward more transparent policy implementation.
Inequality in India Video http://www.youtube.com/watch?v=1k7ypBocrKQ&feature=related
Impact of Globalization on Poverty The growth of the world’s two most populous nations, India and China, is often cited as the largest contributor to the reduction in global poverty levels in the last fifteen years. With an average annual growth rate of 9.5 percent, China has lifted over 400 million of its 1.3 billion citizens out of poverty in the last twenty years. India’s 7.5 percent average growth has brought an estimated 100 million out of its 1.1 billion people out of poverty since 1991.
Impact of Glob. on Inequality Globalization is creating pressures that tend to increase inequality. In poor countries that are otherwise identical, the income shares of the poor will be less in countries that trade more than in countries that trade less.
Policy Soln to Poverty/ Inequality Enhance comparative advantages in unskilled labor Build institutional capacity Three institutions can help: 1) Education; 2) Non-fragmented labor markets; 3) Social safety nets
What do you think is a solution to reducing poverty and inequality? Will the current trajectory of globalization eliminate poverty and inequality? Why or why not? Questions?
