Globalisation Has Allowed The Economies Of Poor Countries

“Globalisation has allowed the economies of some poor countries to develop, but such development has often led to increasing gaps between rich and poor in those countries”
Discuss this statement with reference to contrasting countries you have studied.

Globalisation is the increasing interconnection in the world’s economic, cultural and political systems. Philippe Legrain described globalisation as ‘the way in which peoples lives are becoming increasingly intertwined with those of distant people and places around the world in economic, cultural and political terms’
TNCs and nation states are the two main players in globalisation. In 1975 there were around 7,000 TNCs, today there are more than 60,000 all impacting the development levels
of LEDCs. The ‘Brandt line’, whereby the north accounts for 80% of Global GDP but contains only 20% of the population and the South contains 80% of the world’s population but only accounts for 20% of Global GDP, separates the world. But slowly this is changing. There is no doubt that globalisation has allowed the economies of some poor countries to develop, and move along the development continuum, For example for ‘Barbie’ in Taiwan and phase 1, 2 and 3 NICs. The emergence of free market ideas and the deregulation of world financial markets meant that the financial companies were now able to scour the world looking for the best returns on their capital. This accompanied by improved transport and communications at the end of the 19th century meant TNCs developed, expanded and moved to developing countries in search of cheaper land, cheaper workforce, more lenient environmental laws and government incentives.

There is no doubt, in countries such as India and China that globalisation has caused development, but such development has led to an increasing gap between the rich and poor. Within China, after the 1990s industry was liberalized and private companies and TNCs were encouraged to develop in some sectors of industry. Therefore the manufacturing industry grew (especially car production and textiles). One of the most significant factors in attracting foreign investment was the size of the Chinese market, in addition to appropriate policy and low labor costs. The investment of TNCs caused Chinas once subsistence farming based industry to change, resulting in increased industrialisation.
The most affluent one-fifth of China's population earns 50 percent of total income, with the bottom one-fifth taking home only 4.7 percent. Causing a huge development gap and nearly 30 million Chinese live in absolute poverty, meaning that by local standards they lack enough food and clothing. Another 60 million have incomes below 865 yuan (about $100) a year - well below the $1 a day that the World Bank takes as its standard.
In 2004 Chinas GDP per capita was 1549 US $. And despite 46% of the population working in the primary industry, only 13% of total GDP was accounted for by primary industry. There has been a growing movement towards and secondary, tertiary industry (accounting for 86.9% of total GDP but only 53.1% of employment). This creates a development gap, as the rural subsistence farmers live in poverty, whilst within affluent cities such as Shanghai and Beijing the influx of TNCs and western influence has acted like a catalyst for development, increased living standards and a larger disposable incomes. The TNCS not only provide jobs, but they also create a local market, as peoples disposable incomes rise they want the same goods that westerners desire, further creating social divisions and tensions (not only economic) between the rich and poor.

On the other hand transformation of the Indian economy has been based on service sector than on the manufacturing growth, which has occurred in countries such as Taiwan, South Korea and China.
The Service industry accounted for 50% of GDP at the beginning of the 20th century, India’s advantage was having a large English-speaking workforce (50 million), lower labour costs (for every 1000 jobs relocated to India, a British company would save $10million), and the fact that many developed countries had a significant ICT skills shortage. Although 50% of GDP is accounted for by the service industry, the primary sector still dominates the country in terms of employment, and 70% of the population is still engaged in agriculture and other primary activities, but only contributing 23% of GDP. Farming is merely at subsistence level which has led to high levels of rural poverty, and still 41 % of the population is living on less than $2 a day. The growth of the service industry due to companies such as British Airways, Lloyds TSB, Barclays, British gas locating there call centres that deal with sales and customer enquiries in India and the vast IT sector has led to a huge gap between the rich and poor. In Mumbai, for example there is a huge slum where 1million people live per square mile, 500 people share one toilet, the sewers and water share the same pipes, resulting in 4000 sicknesses a day, and deaths every day due to dirty water. In contrast to the slums a $2 billion home has been built, with 27 floors, and only one family live there. This is an example of how globalisation and the investment of TNCs in LEDCs has widened the poverty gap. Furthermore the Richer proportion of the country will be able to afford to send their children to school, therefore giving them an education which they can use to create a better life for themselves, where as the proportionately larger segment of the country which cannot afford school and instead see their children as a source of income,
do not enroll there children in such luxuries, and the percentage of Child laborers is between 10.25 % to 19.90 % of all Indian children aged 9-15.

But although globalisation has led to increasing gaps between rich and poor, it has also led to countries moving along the development continuum, such as Taiwan. Barbie dolls were first produced by Mattel (American toy company), but in the 1960s the company was moved to Taiwan to lower labour costs, within 20 years Mattel was again looking for cheaper labour and so in 1897 Mattel opened its first factory in China (wages much lower), eventually production was again moved, to Malaysia and Indonesia. But this initiated an industry for Taiwan in manufacture of electronics, therefore progressively moving the country towards development.
But on the other hand countries like Bangladesh, are examples of where development hasn’t quite taken off yet, and the country is still subsistence farming and primary industries based. Bangladesh is developing, but at an extremely slow rate and therefore still relys on aid from the UK (who spent £114 million on aid to Bangladesh in 2008/2009).

In conclusion there will always be isolated examples of where the gap between rich and poor doesn’t increase to a significant extent due to globalisation, and instead the whole country moves forwards towards development, but in every country in the world there is poverty, just in some countries it’s more prominent, and if a country is developing then there will be a proportion of the country that initially remain in the primary/ low income sector, and a proportion of the country that move forward into higher capita industry, and its inevitable that in a country that has been primary industry based, with an unskilled/ low skilled work force that it will take time to bring an entire nation up to development. As the skilled laborers will get the jobs that are higher earning, therefore increasing the gap between rich and poor, and “The potential for improving the lives of poor people by finding different ways of distributing current production is nothing compared to the apparently limitless potential of increasing production." --Robert Lucas