THE GLOBAL ECONOMY

THE GLOBAL ECONOMY
INTRO
This post-modern era or what we call the contemporary world is still beset with age-old problems but
this time at a more massive scale. Some of these major problems that plague almost all corners of the
world is extreme poverty and hunger.
What does it mean to be poor? Since there are different standards of living around the world, we can
expect different meanings attached to it. In the Philippines, a person is officially living in poverty if he
makes less than PhP100,534 a year which is around PhP275.00 per day. This is what we call the poverty
line or poverty threshold.
UN (2015) defines extreme poverty as a condition characterized by severe deprivation of basic human
needs including food, safe drinking water, sanitation facilities, health, shelter, education, and
information. According to the UN, extreme or absolute poverty is living on less than $1.25 a day. How
much is this in terms of our currency?
To address such problem, along with other pressing global concerns, the UN formulated the 8
Millennium Development Goals or MDGs in the 1990S. The first among these goals, of course, is the
eradication of extreme poverty and hunger. The other seven goals include achieving universal primary
education, promoting gender equality and women empowerment, reducing child mortality, improving
maternal health, combating HIV/AIDS and malaria, ensuring environmental sustainability, and having a
global partnership for development (UN, 2015). All of these had to be achieved by the year 2015.
In 2015, the UN came up with an assessment and declared that at least there had been progress in
addressing extreme poverty. On the other hand, the World Bank predicted that by 2030, the number of
people living in extreme poverty could drop to less than 400 million with the assumption that everything
else is also improving. However, climate change proved to be a difficult challenge posing a serious
threat to improvements in global poverty.
In as much as there have been improvements in the UN efforts to solve extreme poverty and hunger,
most people lifted out of this situation are still poor. And being poor comes with serious problems –
from disease to lack of water, income inequality is rampant and one in seven people still live without
electricity.
So why is extreme poverty failing?
The answer to this question is really complicated. As far as UN is concerned, the factors that can
effectively address this global concern is better access to education, humanitarian aid, and the policies
of international organizations. As claimed by development practitioners, the greatest contributor to
uplifting global poverty is economic globalization. According to these proponents, the world economies
have become more interconnected and free trade has driven the growth of many developing
economies.
What is economic globalization?
According to the UN, “Economic globalization refers to the increasing interdependence of world
economies as a result of the growing scale of cross-border trade of commodities and services, flow of
international capital, and wide and rapid spread of technologies. It reflects the continuing expansion and
mutual integration of market frontiers, and is an irreversible trend for the economic development in the
whole world at the turn of the millennium.” (Shanquan, 2000)
There are two different types of economies associated with economic globalization – protectionism and
trade liberalization.
Protectionism means “a policy of systematic government intervention in foreign trade with the objective
of encouraging domestic production.
This encouragement involves giving preferential treatment to domestic producers and discriminating
against foreign competitors” (McAleese, 2007).
What are the instruments in trade protectionism?
Common trade barriers are quotas and tariffs. Tariffs are required fees on imports or exports
Protectionism came into practice during the mercantilist era. – from 16th 17th centuries until the early
years of the industrial revolution (Chorev, 2007). The Great Depression of 1929 marked the peak of
protectionism.
Until today, protectionism still exists despite the growth of trade and liberalization. Which countries do
you think are accused of practicing protectionism?
WW II heavily influenced the shifting of the dominant economic policy from protectionism to trade
liberalization or free trade. Because of free trade agreements and technological advances in
transportation and communication, goods and services move around the world more easily than ever.
Now, does trade liberalization contribute to reducing global poverty?
According to Jeffrey Sachs, an economist, mobile phones are the “single most transformative
technology” when it comes to the developing world. What do mobile phones do?
Economists call this leapfrogging- the idea that countries can skip straight to more efficient and cost
effective technologies that were not available in the past. And international trade has also created new
opportunities for people to sell their products and labor in a global marketplace.

THE GLOBAL ECONOMY

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THE GLOBAL ECONOMY

So why is extreme poverty failing?

What is economic globalization?

What are the instruments in trade protectionism?

Now, does trade liberalization contribute to reducing global poverty?

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