The Social Impact of Globalization in the Developing Countries

Article excerpt

Since the 1980s, the world economy has become increasingly "connected" and "integrated". Decreasing transport costs and the diffusion of information and communication technologies have considerably relativized the concept of "distance", while gross trade, foreign direct investment (FDI), capital flows and technology transfers have increased significantly. In most countries, however, the current wave of "globalization" has been accompanied by increasing concern about its impact in terms of employment and income distribution.

Whatever definitions and indicators are chosen, the current debate is indeed characterized by an acrimonious dispute between advocates and critics of globalization. The dispute extends even to employment and income distribution effects within the developed world, but positions diverge even more sharply over the impact of globalization on the developing countries. For instance, the optimists stress the link between increasing trade and economic growth and, from this premise, conclude that trade is good for growth and that growth is good for the poor (in terms of both job creation and poverty alleviation). The pessimists, by contrast, show that globalization is quite uneven in its impact and gives rise to negative counter-effects on previously protected sectors, entailing also the marginalization of entire regions of the world and possible increases in income inequality within countries. Another example of this diversity of opinions is the debate about poverty indicators: supporters of globalization point out that worldwide absolute poverty has decreased over the past two decades, while critics show that this result is almost entirely due to statistical artefacts and to the fast growth of China, while absolute poverty has increased in many developing countries and relative poverty has increased in the majority of countries.

This article attempts to delve deeper into these topics and provide some theoretical and empirical answers to the question of whether globalization is good for employment, poverty alleviation and income redistribution within the developing countries. The remainder of the discussion is organized into five sections. The first presents some definitions and methodological choices. In the next three sections, recent theoretical and empirical results are critically discussed and compared in terms of the impact of globalization on employment, within-country income inequality and poverty in developing countries. The final section summarizes the study's main findings and suggests some policy implications.

Definitions and methodology

"Globalization" is currently a popular and controversial topic, though often remaining a loose and poorly defined concept. The term is used - sometimes too broadly - to encompass trade growth and liberalization policies as well as reductions in transport costs and technology transfer. As far as its impact is concerned, discussion of globalization tends to consider simultaneously its effects on economic growth, employment and income distribution - often without distinguishing between inter- and within-country inequalities - and other impacts on opportunities for poverty alleviation, human and labour rights, the environment and so on. Moreover, the debate is often confused from a methodological point of view by the interactions between history, economics, political science and other social sciences. Partly as a consequence of the lack of clear definitions and methodological choices, the current debate is characterized by a harsh divide between supporters and opponents of globalization. Both groups appear to be ideologically committed to their respective positions and tend to exploit anecdotes successfully or unsuccessfully, as the case may be - rather than sound empirical evidence to support their cause.

Since the debate appears quite confused and the issues overlapping, one of the aims of this contribution is to select some precisely defined topics and to give an account of theories and applied approaches which have really contributed to the understanding of the social impact of globalization in developing countries. …