Globalization and Trade and Poverty: Crash Course Economics #16

Summary

In this Crash Course Economics episode, Adriene Hill and Jacob Clifford explore the complexities of poverty and extreme poverty, discussing the UN's Millennium Development Goals and their progress by 2015. They highlight globalization and trade as key factors in reducing poverty, with mobile phones and microcredit playing significant roles in economic participation. However, they also address the downsides of globalization, such as exploitation and environmental concerns, emphasizing the need for sustainable solutions to combat poverty without harming the planet.

Takeaways

• 📈 The United Nations set Millennium Development Goals in the 1990s with a target to eradicate extreme poverty and hunger by 2015.
• 🌐 Extreme poverty is defined by the U.N. as living on less than $1.25 a day, characterized by severe deprivation of basic human needs.
• 📉 Despite progress, as of 2015, 836 million people still live in extreme poverty, though it's a significant reduction from 1.9 billion.
• ⏫ The World Bank predicts a continued decrease in extreme poverty, potentially dropping below 400 million by 2030.
• 🌡 Climate change poses a threat to the ongoing improvements in global poverty reduction.
• 🤝 Factors contributing to the decline in extreme poverty include education, humanitarian aid, and international policies, with globalization and trade being significant drivers.
• 📲 Mobile phones have been a transformative technology in developing economies, facilitating access to banking, education, and information.
• 🔄 Globalization has allowed developing countries to participate in the global marketplace, creating jobs and economic growth, but also causing displacement of high-wage jobs.
• 💼 The Bangladeshi apparel industry, for example, provides jobs that pay above-average wages in the local context, despite being considered sweatshops in developed countries.
• 🛡 Critics of globalization argue that it leads to exploitation, oppression, and a lack of regulation in developing countries, calling for higher wages and protections for workers.
• 🌳 The sustainability of globalization is questioned due to its environmental impact, including deforestation, pollution, and climate change.
• 💼 Microcredit, as implemented by Muhammad Yunus, has been successful in enabling people in extreme poverty to participate in the economy and improve their lives.

Q & A

What are the Millennium Development Goals created by the United Nations, and what was the deadline for these goals?

The Millennium Development Goals were a set of 8 goals established by the United Nations with a deadline of 2015. These goals included reducing child mortality, promoting gender equality, combating major diseases, and the first goal was to eradicate extreme poverty and hunger.

What is the definition of poverty according to the United States and the United Nations?

In the U.S., a person is officially living in poverty if they make less than $11,770 a year, which is around $32 a day. This is referred to as the 'poverty line' or 'poverty threshold'. The U.N. defines 'extreme poverty' as living on less than $1.25 a day and being characterized by severe deprivation of basic human needs.

What was the target set by the United Nations to reduce the number of people living in extreme poverty?

The United Nations set a goal to reduce the number of people living in extreme poverty by half.

How successful was the United Nations in achieving their goal of reducing extreme poverty by 2015?

By 2015, the U.N. reported that 836 million people still lived in extreme poverty, which was a significant reduction from 1.9 billion, indicating progress towards their goal.

What is the potential impact of climate change on the progress made in reducing global poverty?

Climate change poses a threat to the improvements in global poverty as it can affect food production, water availability, and overall living conditions, potentially reversing some of the gains made.

What are some factors contributing to the decline of extreme poverty?

Factors contributing to the decline of extreme poverty include better access to education, humanitarian aid, policies of international organizations like the U.N., and most significantly, globalization and trade.

How has globalization and trade contributed to the reduction of extreme poverty?

Globalization and trade have made the world's economies and cultures more interconnected, allowing for the growth of many developing economies. Free trade agreements and technological advances have facilitated the movement of goods, services, and ideas, contributing to economic growth and job creation.

What is the concept of 'leapfrogging' in the context of economic development?

Leapfrogging refers to the idea that countries can skip the adoption of older, less efficient technologies and move directly to more advanced, cost-effective solutions that were not available in the past. This is often seen in developing countries adopting mobile technology for banking and communication.

What are the potential downsides of globalized trade?

Downsides of globalized trade include the exploitation of low-wage workers in developing countries, hazardous working conditions, and the displacement of high-wage workers in developed countries as jobs move overseas.

What is the role of microcredit in addressing extreme poverty?

Microcredit involves giving small loans to low-income individuals, often in rural areas, to help them start small businesses or fund income-generating plans. This enables them to participate in the economy and improve their living conditions.

How does the concept of 'sustainability' relate to the challenges of globalization and poverty reduction?

Sustainability in the context of globalization and poverty reduction refers to the need to ensure that economic growth does not come at the expense of the environment. The challenge is to lift the poor while maintaining a livable planet, addressing issues like deforestation, pollution, and climate change.

Outlines

00:00

🌏 Globalization and the Fight Against Extreme Poverty

This paragraph introduces the complex issues of poverty and extreme poverty, setting the stage for a discussion on the progress made towards the United Nations' Millennium Development Goals, specifically the goal to eradicate extreme poverty and hunger. It explains the varying definitions of poverty across different countries and the U.N.'s specific definition of extreme poverty as living on less than $1.25 a day. The script highlights the progress made by the reduction of people living in extreme poverty from 1.9 billion to 836 million by 2015, with predictions for further reduction by 2030. However, it also points out the looming threat of climate change on these improvements. The paragraph emphasizes the interconnectedness of the world's economies and cultures, and how globalization and trade have been significant contributors to lifting people out of extreme poverty, with mobile phones being a key transformative technology in this process.

05:01

💼 The Impact of Globalization on Workers and the Environment

The second paragraph delves into the debate surrounding globalization, focusing on its effects on workers and the environment. It discusses the search for the cheapest production costs by corporations, leading to labor-intensive products being manufactured in countries with low wages and weak regulations. While this process benefits corporations and consumers, it raises questions about the treatment of foreign workers, some of whom face hazardous working conditions. The paragraph also addresses the criticism of globalization as a form of economic colonialism, with opponents calling for protectionist policies. On the other hand, proponents argue that globalization leads to economic growth, higher wages, and better opportunities for workers in developing countries. The paragraph concludes with the challenge of balancing the lifting of the poor out of poverty with the sustainable use of the planet's resources, highlighting the need for global awareness and action against child labor and poor working conditions.

Keywords

💡Poverty

Poverty refers to a state where individuals or families lack the financial resources to meet basic needs, such as food, clothing, and shelter. In the video, poverty is discussed in the context of varying standards across different countries, with the U.S. poverty line set at an annual income of less than $11,770. The theme of the video revolves around understanding and addressing poverty, particularly extreme poverty, which is a significant global issue.

💡Extreme Poverty

Extreme poverty is defined by the United Nations as living on less than $1.25 a day and experiencing severe deprivation of basic human needs. The video emphasizes the reduction of extreme poverty as a Millennium Development Goal and discusses the progress made by 2015, highlighting the remaining challenges and the impact of globalization on poverty alleviation.

💡Millennium Development Goals (MDGs)

The MDGs were eight international development goals established following the Millennium Summit of the United Nations in 2000, with a target date of 2015. The first goal was to eradicate extreme poverty and hunger. The video script mentions these goals to frame the discussion on the progress made in reducing poverty and the ongoing efforts required.

💡Globalization

Globalization is the process of increased interconnectedness and interdependence among countries through trade, investment, and cultural exchange. The video discusses globalization as a major factor in reducing poverty by facilitating economic growth in developing countries through free trade and the spread of technology.

💡Free Trade

Free trade refers to the exchange of goods and services across borders without tariffs, quotas, or other trade barriers. In the video, free trade is highlighted as a driving force behind globalization, allowing for the efficient movement of goods and services, and contributing to economic growth and poverty reduction.

💡Income Inequality

Income inequality is the uneven distribution of income within a population, often measured by the Gini coefficient. The video touches on income inequality as a serious problem associated with poverty, indicating that even those lifted out of extreme poverty may still face significant economic challenges.

💡Leapfrogging

Leapfrogging is the concept where countries can skip over certain developmental stages and adopt more efficient and cost-effective technologies that were not available in the past. The video uses the example of mobile phones in developing countries, which have provided access to banking, education, and information, thus contributing to poverty reduction.

💡Microcredit

Microcredit involves providing small loans to low-income individuals, often in developing countries, to help them start small businesses and generate income. The video mentions Muhammad Yunus and his Nobel Peace Prize-winning concept of microcredit, which has been instrumental in empowering people to participate in the economy and improve their living conditions.

💡Sustainability

Sustainability refers to the ability to maintain processes or conditions over the long term without depleting resources or causing environmental harm. The video raises concerns about the sustainability of globalization, discussing the environmental challenges such as deforestation, pollution, and climate change that could undermine the progress made in reducing poverty.

💡Outsourcing

Outsourcing is the practice of contracting work to external entities rather than performing it in-house. The video script discusses the controversial aspect of globalization where jobs are outsourced to countries with lower wages and weaker regulations, leading to debates about exploitation and the need for fair labor practices.

💡Economic Colonialism

Economic colonialism is a term used to describe the practice where economically powerful countries or corporations exert control over less developed countries, often to the detriment of the latter. In the video, opponents of globalization view outsourcing as a form of economic colonialism, prioritizing profits over the welfare of people in developing countries.

Highlights

Poverty and extreme poverty are difficult problems to understand and fix.

The United Nations created 8 Millennium Development Goals with a 2015 deadline, prioritizing the eradication of extreme poverty and hunger.

The U.S. poverty line is defined as making less than $11,770 a year, whereas the U.N. defines extreme poverty as living on less than $1.25 a day.

Despite progress, 836 million people still lived in extreme poverty as of 2015, down from 1.9 billion.

The World Bank predicts a potential drop in extreme poverty to less than 400 million by 2030, assuming improvements continue.

Climate change poses a threat to the progress made in reducing global poverty.

Globalization and trade have been the greatest contributors to the reduction of extreme poverty.

Mobile phones have been identified as a transformative technology for reducing poverty in the developing world.

International trade has created opportunities for people to sell products and labor in a global marketplace.

Globalization has winners and losers, with corporations and consumers benefiting, but high-wage workers losing jobs.

Low-wage foreign workers often face hazardous conditions but may also earn above-average wages for their countries.

Opponents of globalization argue that it leads to exploitation and economic colonialism, prioritizing profits over people.

Public awareness and international pressure are increasing to protect workers in developing countries.

As developing economies grow, there are more opportunities for workers, leading to higher wages.

Globalization's lack of sustainability is a concern, with environmental issues like deforestation and pollution.

Microcredit, introduced by Muhammad Yunus, provides small loans to low-income individuals, enabling them to participate in the economy.

Microcredit supports the idea that economic participation can improve lives, even if the terms are not ideal.

The challenge is to continue lifting people out of poverty while ensuring the planet remains livable.

Transcripts

Adriene: Welcome to Crash Course Economics, I'm Adriene Hill.

Jacob: And I'm Jacob Clifford, and today we're talking about poverty and extreme poverty,

which are not easy problems to talk about, and not easy problems to fix.

Adriene: But just because the problem is difficult doesn't mean we shouldn't try to understand it. So let's get into it.

[Theme Music]

Jacob: Back in the 1990's the United Nations created 8 Millennium Development Goals, with a deadline of 2015.

The goals included things like reducing child mortality, promoting gender equality, and combating major

diseases. But the first on the list was to eradicate extreme poverty and hunger. Now, poverty means

different things in different countries because there's different standards of living around the world.

In the U.S. a person is officially living in poverty if they make less than $11,770 a year, around $32 a day.

This is called the "poverty line" or "poverty threshold", but we're gonna focus on extreme poverty, which

according to the U.N. is "a condition characterized by severe deprivation of basic human needs, including

food, safe drinking water, sanitation facilities, health, shelter, education and information."

The U.N. defines "extreme" or "absolute poverty" as living on less than $1.25 a day. The goals

set by the U.N. was to reduce the number of people living in extreme poverty by half.

Well, it's 2015, the results are in, and the U.N. reports that 836 million people still live in extreme poverty.

But that's down from 1.9 billion, so success. Or at least a lot of progress. And the World

Bank predicts that by 2030 the number of people living in extreme poverty could drop to less

than 400 million. Of course, that assumes everything will keep improving as it has.

But there's an asterisk here. Climate change is a threat to these improvements in global poverty.

Adriene: So we're moving in the right direction, but we're talking about extreme poverty. Most

people who've been lifted out of extreme poverty are still poor. Really poor. And being poor

comes with serious problems, from disease to lack of water. Income inequality is rampant,

and one in seven people still live without electricity.

So why is extreme poverty falling? The answer to this is really complicated. A bunch of

factors like better access to education, humanitarian aid, and the policies of international organizations

like the U.N. have made a difference. But the greatest contributor is globalization

and trade. The world's economies and cultures have become more interconnected and free trade

has driven the growth of many developing economies.

Let's go to the Thought Bubble. World trade has been growing since the end of the World

War II. Free trade agreements and technological advances in transportation and communication

mean goods and services move around the world more easily than ever. And we're talking everything.

From shoes and bananas, to innovations and ideas.

Take mobile phones. Mobile phones are pretty much good for everything, including reducing

poverty. According to economist Jeffrey Sachs, mobile phones are the "single most transformative

technology" when it comes to the developing world. Phones give people access to banking

and payment systems. Better access to education and information. In some places mobile phones

help farmers get information and get the best price for the stuff they're producing. Installing

cell phone towers is also a lot cheaper than running thousands of kilometers of telephone lines.

Economists call this "leapfrogging". The idea that countries can skip straight to more efficient

and cost effective technologies that weren't available in the past. International trade

has also created new opportunities for people to sell their products and labor in a global

marketplace. There are some significant downsides to globalized trade. But the statistician

Hans Rosling made this point: "The one to two billion poorest in the world, who don't

have food for the day, suffer from the worst disease: globalization deficiency. The way

globalization is occurring could be much better, but the worst thing is not being part of it."

Jacob: Thanks, Thought Bubble. So globalization is the result of companies trying to outmaneuver

their competitors. While you search for the cheapest place to buy shoes, companies search

for the cheapest place to make those shoes. They find the cheapest sources of leather,

dye, rubber, and of course, labor. The end result is that labor intensive products like

shoes are often produced in countries with the lowest wages, and the weakest regulations.

This process creates winners and losers. The winners include corporations and their stockholders,

who earn more profit, but also consumers who get products at a cheaper price. The losers

are high wage workers who used to make those shoes, their jobs moved overseas. But what

about the low wage foreign workers? Are they winning or losing? Well, a lot of workers

are thrown into hazardous working conditions, but it's also true that many workers in developing

countries are at least making more money.

These jobs pay above average wages. People want these jobs and although the pay would

be unacceptable in developed countries, they're often the best alternative. And the multiplier

effect means that more money is being spent on local businesses, so these jobs create

jobs. According to the economist Paul Krugman "The Bangladeshi apparel industry is going

to consist of what we would consider sweatshops, or it wouldn't exist at all. And Bangladesh,

in particular, really really needs its apparel industry; it's pretty much the only thing keeping its economy afloat."

Adriene: But not everyone agrees. Opponents of globalization called outsourcing of jobs

"exploitation and oppression", a form of economic colonialism that put profits before people.

A few call for protectionist policies like higher tariffs and limitations on outsourcing.

But others focus on the foreign workers themselves by demanding they receive higher wages and more protections.

The root of many arguments against globalization is that companies don't have to follow the

same rules they do in developed countries. Some developing countries have no minimum

wage laws. They don't have regulations that provide safe working conditions, or protect

the environment. And although nearly every country bans child labor, those laws are not always enforced.

But in the absence of regulation, it's still possible workers won't be horribly mistreated.

First, public awareness is growing, along with pressure from the international community

to take steps to protect workers. For example, the U.S. produces an annual publication called

"The List of Goods Produced by Child Labor or Forced Labor". If a company is buying products

from that list, they're likely to get blasted by officials and the media.

So awareness is the first step to improvement. The second step comes from those that support

globalization. The pro-globalization set argued that as developing economies grow there are

more opportunities for workers, which leads to more competition for labor, and higher wages.

Jacob: Perhaps the strongest argument against globalization is its lack of sustainability.

Many experts don't think the planet can sustain a growing global economy. Deforestation, pollution,

and climate change aren't gonna fix themselves. Especially if increases in living standards

lead people to demand more consumer goods like cars, and meat, and smartphones.

Globalization has helped millions of people get out of extreme poverty, but the challenge

of the future is to lift up the poor while at the same time keeping the planet livable.

Adriene: One of the best ways to help those in extreme poverty is to enable them to participate

in the economy. This applies to developing countries in the global marketplace, but also

to individuals at the local level.

A perfect example is microcredit. In 2006 a Bangladeshi professor named Muhammad Yunus

won the Nobel Peace Prize for implementing a simple idea. He gave small loans, on average

around $100, to low-income people in rural areas. The borrowers, who are mostly female, often

used the money to fund plans that could raise their income. For example, they started small businesses.

"Microcredit was a success and has since spread to developing countries throughout the world.

Private lenders, governments, and nonprofit organizations have jumped onboard to loan

billions of dollars to the world's most disadvantaged."

By itself, microcredit isn't going to solve the problem of extreme poverty, but it supports

the idea that enabling people to participate in the economy can make their lives better.

Yunus explains "In my experience, poor people are the world's greatest entrepreneurs. Every

day, they must innovate in order to survive. They remain poor because they do not have

the opportunities to turn their creativity into sustainable income."

Microcredit, when it works, allows people to improve their lives by participating in

the economy on their own terms. But we can't forget, a lot of people who participate in

the global economy aren't doing it on their own terms. Many of the people who emerged

from extreme poverty in the last 25 years have jobs, wages, and working conditions that

would be unthinkable in the developed world.

Economists say that's okay, it's progress, but it's progress that's awfully hard to stomach.

Thanks for watching, we'll see you next week.

Jacob: Crash Course Economics was made with the help of all these nice people. You can

support Crash Course at Patreon, where you can help keep Crash Course free for everyone

forever, and get great rewards. Thanks for watching, and DFTBA.