The Poverty and Inequality Situation: Is Capitalism and Globalization to be blamed?
GEWORLD YY12
What is poverty?
Before we go into explaining the poverty and inequality situation and how capitalism and globalization affects it, we must first make sure that we are in the same page and define what poverty really is. According to Investopedia as written by Chen (2020), poverty is a state or condition in which a person or community lacks the financial resources and essentials for a minimum standard of living.
In terms of Maslow’s Hierarchy of Needs, poverty is mainly focused on targeting one’s physiological needs which are things that an individual must be able to acquire to survive. Poverty comes in various extreme forms such as hunger, malnourishment, homelessness, but the most common root stems from having lack of money. As much as there is more to life than money, having enough money to survive is very important as money allows a person to obtain his basic needs to survive in life.
What are the key trends in global poverty and inequality?
There is an endless number of trends in global poverty and inequality with the advent of data and statistics in our generation but I would like to focus on three key trends namely: unemployment, population and family planning, and financial literacy.
Unemployment
Unemployment is a key metric for global poverty and inequality as having a job ensures that an individual has income to obtain his basic needs in life. Being unemployed cuts the cash flow of a person and increases the chances of poverty as time goes on as there won’t be enough income to compensate for one’s daily needs.
The global unemployment rate from 2010 to 2020 is shown above and it can be seen that the rate is generally in a decline. This is a positive thing as year by year, there is generally less unemployed people as a percentage of the labor force. This means that more people have jobs that will at least give income to acquire basic needs. This however may change by the end of the year as unemployment rates have spiked in many countries due to the COVID-19 pandemic and is yet to reflect in the bar graph above. In the Philippine setting, the unemployment rate surged to an all-time high in April at 17.6%, but has eased to 8.7% in October (Rivas, 2020). Unemployment is a major challenge to poverty as the poor are more likely to stay unemployment especially because they do not have the skills that skilled workers have and are easily replaceable. The poor also do not have access to proper education which immediately disqualifies them for better job opportunities available in the labor market.
Population and Family Planning
Another key trend in global poverty and inequality is the population of a country. Generally, densely populated countries have a higher incidence of poverty (Ahlburg, 1996). A good example are the slums we see in Metro Manila where there is also a lack of family planning among the poor. It is very sad to see many children living in the slums or even homeless. It begs the question, “If people are already poor, why do they still have many children?” This may be because of the lack of access to contraceptives due to it being expensive and also the lack of sex education and family planning among the poor. They also lack knowledge in knowing how expensive it is to have a lot of children.
Financial Literacy
Financial literacy is a factor that the poor lack and is why poverty seems to not end. There is an argument that capitalism makes the world divide larger where the rich keep getting richer and the poor keep getting poorer. We must first ask ourselves, if the poor receive a huge sum of money, will they be able to get out of poverty? I honestly would say no. I say this because there is a good reason why the rich keep getting richer and the poor stay poor and this is financial literacy. The rich know how to use their money and let it grow using assets like what Robert Kiyosaki said in his book Rich Dad Poor Dad. The poor on the other hand do not understand how to grow their money so that they can get out of poverty. This is quite subjective as one can simply argue that the poor does not have the resources to start building assets. I however think that most of the poor definitely lack financial literacy.
The image above shows the financial literacy among adults around the world and it is quite visible that the richer countries have higher financial literacy rates compared to the rest of the world. This proves the point that financial literacy needs to be taken more seriously as this may very well prove to be a great solution to solving poverty in the long run.
Does capitalism eliminate or reinforce inequality?
I believe that capitalism does reinforce inequality, specifically income inequality. I believe that capitalism is a great thing as it fosters economic growth as government control is put at a minimum. This however has its drawbacks such as lack of wage control for minimum wage earners or even the abuse of contractualization.
Contractualization or “endo” has been one of the ways that capitalist companies in the Philippines are able to take advantage of the unskilled workers. In the Philippines, the law states that companies are mandated to regularize their employees who have worked in their company for six months (Blend.ph, 2020). What companies do to play around this is to hire workers for only five months to avoid regularizing them since it will help save labor cost. In the end, capitalism’s goal is for business owners to profit and its main goal is not to help the marginalized sector. Because of this big difference in ideology, capitalism will continue to make the rich richer and the poor poorer. This however can be regulated by the government by enforcing policies that will benefit the marginalized.
Has globalization increased, or decreased global poverty?
I believe that globalization has generally decreased global poverty, however it has also contributed to increasing poverty in certain cases. I say that globalization has decreased global poverty as it has allowed for a bigger labor market and increase in the number of businesses and jobs in the world. With a bigger labor market, there is more job opportunities open for people which may lift them out of poverty. This however may also be a concern as globalization makes the skill set needed for jobs more competitive, and the marginalized without proper education and skills may have an even harder time finding jobs and, thus increase unemployment. Another major concern is inequality caused by low-skilled workers from wealthier countries finding jobs in poorer countries and thus stealing the jobs that are supposed to be for the poorer country’s citizens (Schoder, 2018).
Conclusion
Overall, poverty and inequality will inevitably remain because of capitalism and globalization. This is true because the rich will always need the poor to work for them, since if everyone was equal, no one would want to work for the other and thus, compromise the labor market.
References
Ahlburg, D.A. (1996). Population growth and poverty. The impact of population growth on well-being in developing countries. Population Economics. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-03239-8_7
Blend.ph. (2020, March 9). What you need to learn about endo or contractualization. https://blend.ph/what-you-need-to-learn-about-endo-or-contractualization/
Chen, J. (2020, September 4). Poverty. Investopedia. https://www.investopedia.com/terms/p/poverty.asp
Howmuch.net. (n.d.). What is the financial literacy rates around the world? https://howmuch.net/articles/financial-literacy-around-the-world
Kiyosaki, R. T. (2017). Rich dad poor dad (2nd ed.). Plata Publishing.
Plecher, H. (2020, November 25). Global unemployment rate up to 2020. Statista. https://www.statista.com/statistics/279777/global-unemployment-rate/
Rivas, R. (2020, December 3). Unemployment eases to 8.7% in October 2020, but workers looking for more jobs. Rappler. https://www.rappler.com/business/unemployment-rate-philippines-october-2020
Schoder, D. (2018, June 15). Is a globalized world a less equal world? American Economic Association. https://www.aeaweb.org/research/globalization-income-inequality-trade-policy
