Economic Globalisation Processes and Poverty

As you have seen in the three documents on homogenisation, fragmentation and glocalisation, the effects of globalisation are diverse and point in many different directions. Although globalisation is not only causing poverty and is not the only factor for poverty, some forms of poverty are strongly linked to and caused by globalisation, especially in its economic dimension.

Economic globalisation can contribute to poverty as well in its homogenising than fragmenting dynamics. It is mainly fragmentation that is associated with poverty as it is provoking inequalities or lowering solidarity with national or local groups. However, as you have seen in the three texts downloaded on the previous page, homogenising dynamics can produce fragmentation.

This is for instance the case with global market prices on agricultural products. Because an important share of agricultural product is internationally traded, producers are competing in many countries on a global market. This leads to a decrease of world prices because of a high supply and a levelling on the cheapest producers prices. As a consequence of the falling prices, farmers see their livelihoods threatened and get caught into poverty. An example of this spiral can be seen with the effects of falling coffee prices on Indian farmers.

Falling coffee prices: the Indian example

"Coffee Mantra", "Coffee Day" or "Starbucks" are just a few examples of coffee bars that can be found in every corner of Indian cities. The consumption of coffee belongs to the everyday life in India and consequently we could assume that coffee planter’s businesses thrive. However, decreasing international market prices of coffee led to an agrarian distress for rural farmers depending directly on coffee as a cash crops resulting in unexpected low revenues from crop sales.

There was a sharp fall in the domestic prices of coffee since the 1990s, a trend that was a reflection of a downward spiral in world market prices of coffee (see figure). The collapse of coffee prices is traumatic for Indian coffee farmers (80% of coffee produced in India is exported). India couldn't adjust the coffee production after a worldwide oversupply of coffee mainly due to increase in production in Vietnam and Brazil. The low world market prices led to high input costs and indebtedness of Indian's coffee farmers, who are mainly small holders (Neue Zürcher Zeitung 2002).

Take a look to the graphic on the right hand column that shows the decrease of world coffee prices while production is increasing:

Another effect of economic globalisation in developing countries is how it increases the gap between people who are taking advantage of the process and losers. Inequalities increase as some are getting living standards similar to those of urban areas in industrialised countries while others livelihoods are becoming threatened. This is particularly the case for countries which are currently experiencing rapid economical growth, such as China where the transition from a socialist economy in which income was relatively evenly distributed to a booming capitalist economy is making these differences all the more visible.

Nanjing is an important industrial city in the eastern region of China. Economic restructuring in Nanjing has created new urban poverty groups, which are composed of laid-off workers from the SOEs (state owned enterprises), employees in low-paid, informal, temporary or part-time jobs, and some poor rural migrants. The "new urban poor" mainly work in manufacturing industries or low-rank service sectors and thus have received most of the side effects of economic restructuring.

Economic reform and the integration of China in the world economy has greatly improved the living conditions for the majority of urban residents. However, it has also impacted unevenly on different social groups and resulted in a dramatic increase in the gap between the rich and the poor. As the relatively equal distribution of income characteristic of the socialist era disappears, the gap between the low income group and high-income group has been widened.

In the socialist era, the state did not invest in the renewal of the city centre. Housing for the workers was constructed in peripheral areas near industries. These are the areas, which have been most severely hit by the restructuring.

The map on the right hand column shows the distributions of people receiving help from the Minimum Living Standard Program. The dark areas show above average recipient of this help (Chen et al. 2006).

In many important Chinese cities such as Beijing or Shanghai the traditional centres are currently being renovated and become more and more like the urban centres of rich countries. Shopping malls, fast foods and hotels replace traditional housing. This often leads to forced eviction of poorer parts of the population who cannot afford anymore to live in these areas.

Click on the link in the right hand column to read an example about forced evictions due to urban improvement in Shanghai. By clicking on the "listen" button you can access an interview about evicted people in Shanghai.