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Globalization and Poverty: A comparison of China and UK

Updated on June 27, 2014

GLOBALIZATION AND POVERTY-A COMPARISON OF CHINA AND UK


Relationship between Globalization and Poverty

The Issue of poverty and human rights has been in existence for generations. These are felt both in developing and developed states. Despite the fact that many interventions have been put in place, the poverty problem has remained to be predominant in many parts of the world. Poverty is an issue regarding human rights. This is because poor people are in most cases denied access to a range of human rights. The World Bank (2013) reports that approximately 2.5 billion people in the world are extremely poor. These human beings are deprived of necessities such as foods and sufficient nutrition, sanitation, water, education, shelter and health care. He continues that around a third of the world population die from poverty related reasons: 18 million per year including 10 million children who are less than five (5).

Globalization is linked to poverty in various ways. In one spectrum, it has assisted in raising the living standards for many individuals in the world perspectives. In another spectrum, it has contributed to increased poverty for many people in different parts of the world. Small organizations, and developing countries have not been fully capable of updating their technology the same way as large corporations, and developed nations. Further, globalization may affect a country’s GDP or GNI either positively or negatively.

While globalization is significant for the success of the global market, it also has a darker side which may not be visible for many. It has come to be of benefit to most developed nations, some developing nations as well as large organizations. As I have said above, globalization has an impact on the economy of a nation. Its contribution to the economy may be either positive or negative, and this subsequently influences the economic status of citizens. Simply stated, globalization has reduced poverty in some nations while at the same time increasing it in other nations. This paper compares this impact on two developed nations China and UK in terms of their GDP, Consumer price index, and the Gross national Income Per Capita.

The Impact of Globalization on China and UK

China

Since ancient times, China has been having an open policy where considerable trade relationship have been established in Asia, Africa, Europe and many parts of the world. The economic reforms and new policies that have facilitated an opening to the outside world have resulted into a number of measurable outcomes in terms of benefits. For instance, since embracing an open policy in 1980s, the country’s Gross Domestic Income increased by 9.5% from 1980 to 2000. In 2001, the country’s GDP was 1.2 trillion, and was rated as the seventy in the world. China’s purchasing power parity was $4.5 trillion in 2012, making it the second largest economy globally after U.S. During the same year, the GDP per capita was $3,800. (World Bank, 2013, 2).

During 1970s, a rich person in China was one who had 10,000 yuan(1,205 US dollars). Presently, people with such amount of money are common, especially in urban towns. This title is therefore, no longer considered as conspicuous. A report by the UN and World Bank issued in 2009 pointed out that the number of poverty-stricken people in many parts of the world is increasing. However, the report stated that China was an exception. The number of poor people in rural areas decreased from 280 million in 1990 to 30 million in 2010. Poverty incidences dropped from 31.7% in 1990 to about 3% in 2010. The official poverty line in rural areas was found to be low, actually Y635 (US$ 80) per capital income per year (Hsueh, 2013, 23).

At the end of 2012, fixed telephone users in China were more than 200 million, rating the country first globally in fixed telephone use. During 1990s, very few people in China had knowledge on the internet. Presently, more than 50 million in China are surfing the internet. China has continued to experience a huge decrease in poverty of its population since 1990s. For instance, people with a per capital income of less than 668 renminbi equivalent to US$80.71 have typically gone down by more than 10% according to the statistics from the state council of China on poverty reduction (Hsueh, 2013, 45).


UK

Similar to its Chinese counterpart, UK is also among the most open economies in the world. The present state is different from say, twenty years ago when there were no foreign exchanges in the country. However, unlike the positive impact which globalization has caused on Chinese citizens, the cost and benefits of globalization in UK perspective is unevenly distributed. This may be attributed to the fact that the experiences of people are shaped by their own local culture, resources, history and capacities (Hogarth et al, 2009, 56).

The financial crisis in UK has resulted into an increased number of poor people in the country. This crisis has only shore cast the speed by which changes in the international level can negatively affect work, and the general economy of some nations. In UK, the rate of unemployment significantly rose from 1.5 million in mid 2007 to more than 2.5 million by 2010. In general, the employment rate for men was adversely affected in comparison to those of men. It has also been forecasted that more worse effects in employment and poverty will be anticipated in the country for the near future (Hossain, et al . 2009, 56). It should be considered that unemployed people are economically disadvantaged since they do not have the purchasing power. In particular, globalization has also affected the cost of living for UK citizens, especially those with low incomes. The increased cost of basic commodities is linked to global forces such as the decreased global crop yield, pressure on the use of land, and other essential resources. Other factors include world exchange rates, increased energy cost among others.

My Stance

From this case, it is apparent that exploitation of the benefits of globalization by the Chinese government has led to improved economic conditions of the country’s citizens. Adoptions of policies that are aligned with the aspect of globalization have led to the reduction in the number of people living in extreme poverty. As I have already said, this has been attributed to the efficient resource use by the government and citizens. The main solution therefore for countries to solve the high rate of poverty may lie on the freer trade both domestic and international as well as open financial markets. Additionally, governments need to introduce policies and regulations that are aligned with the trend of globalization.

On the other hand, some of the developed states such as UK are found to have little interest for the general equity of its citizens. This is depicted by the high rate of unemployment, poverty, rising food prices, and the general economic inequality of its citizens. It becomes interesting that despite the increased rate of globalization, inequality, and poverty rates have been rising in developed countries such as UK. This can be attributed to their failure in formulating and implementing effective policies and strategies to counter the negative globalization forces just as China has done.

Measures of Globalization and Poverty in China and UK

a) GDP


China

Gross domestic product (GDP) is the market value of all officially recognized final goods and services produced within a specific period. China is ranked second after U.S in terms of World economy by nominal GDP and purchasing power. With regard to growth, it is the fastest with the growth rate of 10% per annum over three decades. The country with the population of over one million people is the second largest importer of goods and largest exporter in the world. Based on per capital basis, it is by nominal GDP ranked 87 and 91 by GDP in 2012(International Monetary Fund, 2012). The country is much industrialized especially in the coastal regions. The continual growth of the nation’s economy has necessitated more focus by the authorities on maintaining effective measures that enhance that growth (World Bank, 2012).

At the end of 2013, China’s GDP expanded by 1.80% over the previous quarter. From 2010 to 2013, the growth rate in GDP for China averaged 1.99, reaching a record high 2.60% in the second quarter of 2011. It reached a record low of 1.40% in the first quarter of 2012. For the past three decades, the economy of China has changed from being a centrally planned system that was mostly closed to global trade to an open market oriented that has a swiftly growing private sector. The following table shows China’s growth rate from 2011 to 2014 (World Bank, 2014, 1). Figure 1.1 indicates China’s GDP growth rate since 2011-2014 (Hsueh, 2013, 35).


Preliminary estimates point that China’s GDP reached 56,884.5 billion yuan at the end of 2013. The value added in the primary industry was 5700.7 billion yuan (10%), the secondary industry figures for the same year were 24,969.5 (44%). The rising GDP in China has boosted the country’s economy and subsequently increasing the number of employed people to 769.79 million as per 2013. This was a 2.74 million more from the figures realized in 2012. The number of employed people in urban centers was 382.50 million. This was 11.38 million more. In the year 2013, the per capital total income of urban households was 26, 955 yuan. The normal growth was 9.8% and real growth was 7.1. This is an indication that the country had employed the benefits of globalization in improving the nation’s economy as well as people’s welfare (World Bank, 2014, 2).

UK

In terms of GDP, UK is ranked 6th globally. This means that its GDP is slightly lower than that of China. In 2013, UKs GDP expanded by 0.70% over the previous quarter. Similar to its Chinese counterpart, services is the biggest sector in the country’s economy, accounting for 76% GDP.

As at February 2014, the consumer price index (CPI) in China decreased by 102 index points. From 1986 to 2014, consumer price index (CPI) in the country averaged 105.75 points, reaching a record high of 128.40 Index Points in 1989 and a record low of 97.80 index points in 1999. The CPI in China changes in terms of prices paid by users for the goods and services (Trading Economics, 2014, 1). Figure 1.3 shows the statistics in China’s consumer price index from Jul 2012 to Jan 2014.


The Consumer Price Index, which is the main measure of inflation in China rose by 4.3% in 2013. In the previous year 2012, the index was 5.5%, which was above the figure realized in 2013. The weakening was attributed to the falling food prices and the general cost of living in the country. Going by the NBS data, the rate of inflation have been consistently low for the consistent two years. The cost of living in the country has dipped to 0.2% on a monthly basis and therefore reducing poverty levels in the country (Trading Economics, 2014, 1). In general, the reading on China’s price index portrays the weakening of inflation and subsequently a reduction of poverty.



UK

Similar to China, the consumer price index in UK is also employed as a measure of inflation in the country. Additionally, the bank of England uses the consumer price index in making decisions related to interest rates.

GNI is used to measure the income, which a county receives from both its domestic and foreign sources. GNI may relate to the gross National Product, which is used in measuring the output from a country’s citizens, and businesses of a particular nation, irrespective of where they are located within the country or overseas. From table 1.2 above, it is clear that the Gross national income, Atlas method for China is higher (7,731.3), and supersedes (by almost three times) that of United Kingdom (which is 2,444.9). This is despite the fact that the population density of UK per square kilometer is higher than of China. This also translates that China is collecting more money from its local and foreign citizens in comparison to its UK counterpart. It also means that China is effectively utilizing its local and foreign revenues as its income generation.

The rise in the number of people who are perceived as earning the middle class income is a factor that shapes growth and development in the specific countries. Additionally, the rise in the per capita income results in increased demand for consumer products, financial services, and lifestyle goods. This is the same case with luxury goods. These are indicators of reduced poverty levels in a country.



Bibliography

Hossain, N. 2011, ‘The impact of the global economic downturn on communities and poverty’

U Diamond’

Hanley, T 2011, ‘Globalisation,UK poverty and communities’, Available from

http://www.abaco-project.eu/documents/poverty-community-globalisation-summary.pdf

Hsueh, R 2013. ‘China in the Age of Globalization’ Temple University, Department of Political Science, 443Comparative Political Studies January 2012 vol. 45 no. 1 32-6

Office for National Statistics (ONS), 2014, ‘United Kingdom Consumer Price

Index (CPI) Available from http://www.rateinflation.com/consumer-price-index/uk-cpi

Trading Economics, 2014,1)

‘China Economy

Outlook available from http://www.tradingeconomics.com/china/gdp-growthThe World Bank, 2014, ‘GDP growth (annual %)’ Avaiable from http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG

World Bank, 2014,

‘China Consumer Price Index (CPI)

‘‘

Available from http://www.tradingeconomics.com/china/consumer-price-index-cpi

World Bank 2013, ‘China 2030 : Building a Modern, Harmonious, and Creative High-Income

Society” Washington, DC: World Bank.


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