Dec 20, 2018 in Economics

Economic Globalization and its Human Impacts

Do larger states mean that the income inequality between the rich and poor are wider? It can be assumed that larger and affluent governments have larger and better welfare systems for their underprivileged citizens, thereby reducing the income inequality among its residents. However, in the paper written by Andreas Bergh titled “Do liberalization and globalization increase income inequality?”, it is revealed that the chief beneficiaries of the welfare systems of large governments are the bourgeoisie or the citizens in the class category. This suggests that the income distribution is compressed (Bergh & Nilsson, 2008).

Can it be expected that the higher the globalization progress rate of a country comes with higher income inequality rate? Globalization and economic freedom are associated to economic growth but its relation to income distribution remains in need of deeper research, mainly because there are many levels of economic progress and types of economic freedom (Bergh & Nilsson, 2008). One dimension may have a different effect to income distribution, as compared to another type of liberalization.

Does better protection of property rights have an impact on income inequality? Property rights protection means that the property is legally secured. This benefits the rich because they have more property. However, this assumption is reversed and concluded that poor protection rights is actually more beneficial to the elite, thereby widening further income inequality. The stronger the legal system and property rights protection, the lower the gap of income inequality among the rich and poor (Bergh & Nilsson, 2008).

How does economic and financial globalization affect the inflation rate of one country? The economic progress and financial globalization drive industrialized countries like America to double and triple their investments with borrowed money as a way to maximize potential gains at the expense of greater losses. Financial globalization comes in at the expense of higher costs of inflation rate (Mendoza & Quadrini, 2009). This economic occurrence will is most detrimental to citizens in thee low-income category, pushing further the gap of income inequality among the upper class and the lower class.

Does inflation rate have a direct effect on income inequality? The higher the inflation rate, the costlier the commodities become including housing, food and bills. Although the increased commodity prices affects people in all classes, the impact is greater among citizens with lower, as compared to people in the upper class section (Mendoza & Quadrini, 2009). This, in turn, will widen the income distribution gap even further. The poor becomes poorer, while the rich remains rich.

Is Industrialization Affect Economic Progress?

Is the variability of industrialization of one’s country has an effect in its economic progress? Countries are usually seen as single economic entities. However, the fact those countries are subdivided into regions, which can be thriving in industrialized or agricultural means. This disparity should not be ignored because this dictates the natural flow of economic activities (Ohmae, 1996). Once this is recognized by the government, these region states may contribute to what they are known best, hence bringing economic prosperity to the country.

How can recognizing and respecting region states contribute to the overall economic progress of one’s country? As illustrated by the author Kenichi Ohmae, Italy for example is seen to have an industrialized north and an agricultural south. With the business leaders and government interference, financial support will be given in abundance to the north and less to the south, or the government will try their best to convert the south much like its northern counterpart. The south may have a different manner of contribution but this is how southern part of Italy progresses. If the government will allow the south to pursue its natural economic interest, the rural south will surely proper.

In the surge of economic growth among the developed and developing nations, who has the most gains? It can be argue that the rich people become richer because of globalization. This brings the issue of income inequality. Multinational corporations gains from propagating their respective business. If a vast area of forest is to be requested to become a real estate property, the government has to approve of such plan. Once the plan is executed, the multinational corporation once more expanded its terrain, gaining more profits. The government gains because of the taxes being paid.

Globalization brings the issue of the rich becoming even richer and the poor becoming poorer. If this is true, which party is to blame, the state or the multinational corporations? The government is the anointed protector of economic human rights, but as seen at present is no longer serving its function. It is wrong to expect that multinational corporations are interested in protecting economic human rights in the field of economic and financial globalization (Monshipouri, Welch & Kennedy, 2003). Multinational corporations are only after of profits and expansion. The blame is to be given to the government for having a weak alliance to fair income distribution and human rights protection.

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How can the government improve the worsening income inequality? The government is the charge of looking after its citizen’s welfare. By allowing the region states to thrive in its economic pursuits without interference, these rural areas will prosper accordingly, increasing their contribution to the economic growth of the country. The government should also be vigilant to the goals and plans of multinational corporations and must not be influenced by any economic politics of such. It is the people’s taxes that make the government thrive, so the focus of their efforts must be in the people, too.

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