Globalization's impact on poverty in India and the United States

India and U.S.: Poverty and Millennium Development Goals in relation to Globalization

India is selected as the welfare state under study in this paper, with a focus on poverty, one of the key Millennium Development Goals (MDG), and highlights the question of how globalization contributes to, or ameliorates poverty in India. The conditions in India are analyzed herein, and compared with those in the United States (U.S.). This paper concentrates on ascertaining the influence of globalization on penury (extreme poverty and/or destitution) in India. For that purpose, it is essential to first define both globalization and poverty, prior to evaluating the extent that globalization has impacted such poverty, if any.

Definitions: Globalization and Poverty

The appropriate beginning here is first to define our terms: specifically, what is globalization? One definition describes it as the interchange of culture, ideas, and products such that the result is international integration. In business terms, globalization is active when an AT&T customer in the United States (U.S.) calls for service and speaks to an AT&T representative whose office is in India or the Philippines. Similarly, when Apple products and/or parts are being made in China and then sold in the U.S., or the salmon you buy in the market has a label 'farmed in Thailand', this is globalization.

3.1 India

The past four decades has seen a drop from 3.79% to 2.73% in migration from rural regions to urban areas in India, with 30% of its total population residing in urban regions. With a total population estimating 1.02 billion, India has a poverty rate of 27% (Singh, 2007).

Figure 1. Urban Population Growth

(source: http://www.nationalstrategyforurbanpoor.org/yashada/html/urban_poverty/u_p_home.htm)

As shown in Figure 1, the onset of globalization in the last decade of the 20th century corresponds with the decline in growth of the urban population in India. A slight rise in poverty in urban areas was also observed in the period between the late 1960s and late 1970s. This relates to the initial migration from rural to urban territories during that period.

Figure 2. Poverty in India from 1955 -- 2000 (source: http://www.nationalstrategyforurbanpoor.org/yashada/html/urban_poverty/u_p_home.htm).

The graph, shown above as Figure 2, depicts that although 52.4% rural and 46% urban population were below the poverty line in 1970-75, these figures decreased to 27.1% and 23.6%, respectively, by 1995-2000. What is disturbing, however, is that though the numbers of the rural destitute decreased from 261.3 million persons to 193.2 million persons in the period cited, simultaneously. The urban destitute population increased from 60 million individuals to 67 million individuals (Singh, 2007). These statistics clearly demonstrate rapid movement of the indigent from rural to urban regions. From among India's population of 1.02 billion, as many as 30%, or 307 million individuals, were registered as being migrants from their place of birth. For the state of India overall, excluding Jammu and Kashmir regions, this proportion is slightly higher than the 27.4% registered in the year 1991.

Migration of business-oriented persons and laborers to urban regions from the country's rural areas for employment was the major cause of urban poverty (Singh, 2007). This proves to be a significant part of urbanization in developing nations. According to the National Sample Survey (NSS) 1999-2000, nearly 27% of the population of India was pronounced to be 'migrant'. Migrants are defined as those who have acquired 'migrant' status of residing away from home for a period of over 60 days during the previous ten years. Using this same definition, 16.3 million males and 1.4 million females in India were calculated as being migrants (Singh, 2007). Indian States such as Delhi, Punjab, and Goa showed a poverty level below 10%, while nearly half the population of Orissa (47%) and Bihar (43%) were poor (Singh, 2013). These figures are obtained from a new committee constituted by the Indian government for poverty estimation. Poverty has declined in areas where foreign investment or exports are growing (Singh, 2013).

In India, welcoming foreign investment is associated with poverty decrease. The capital market's rapid development has proven to be an important feature of the modern globalization process (Shenggen, Chan-Kang, and Mukherjee).

3.2 United States

The Poverty rate in the U.S., or the percentage of population deemed poor as per 'official definition', was 14.5% as reported in 2013; this marks a decline of statistical significance from the 2012 estimate of 15.0% (Thomas, 2015). The poverty rate decline over the second half of the 1990's is attributed to America's strong economy in the majority of the decade. This resulted in a historic low, record-tying 11.3% poverty rate in 2000 (tied statistically with the preceding lowest poverty rate of 11.1% in 1973). A congressional statement reported that poverty was concentrated more highly in some regions compared to others. It was almost twice as much in main cities as in suburbs; within metropolitan regions, poverty was found to be considerably higher in central locations of cities than in suburbs: 19.1% vs. 11.1%, respectively, as per 2013 estimates (Thomas).

As per a Census Bureau report (as cited in Arzaghi and Rupasingha), population in-flows, during the 1990s, were more than out-flows in non-metro locations. Identifying this trend's spatial differences, the report remarks further that approximately 6.2 million individuals migrated to non-metro regions, while roughly 5.7 million migrated away from non-metros from 1995 to 2000, a number that was still considerable (Arzaghi and Anil).

Though a larger proportion of the poverty-ridden population was located in urban zones, rural areas depicted more persistent and higher poverty rates (as cited in Mosley & Miller). Urban areas showed the highest poverty, from 18.7% in 2009, to 19.8% in 2010, and 20% in 2011 and 2012. In suburban regions, poverty dropped below 11% (2012), after dropping from 11.9% to 11.3% in 2010-11. Outside metropolitan locations, poverty increased from 16.5% (2010) to 17% (2011) and 17.6% in 2012 (Austin).

Infrastructural development and Poverty

One consideration in terms of globalization is the development of a country's infrastructure. A prerequisite for any economy's development is infrastructure. Telecommunications, transport, health, water, housing, energy, and education are all an essential part of life. It is impossible to envisage the 'modern' world devoid of these facilities. They are crucial for domestic life, and also for economic activity. The role of infrastructure in promotion of economic growth is crucial; it contributes to reducing economic disparity, deprivations and poverty within the country (Srinivasu and Rao).

Broadly speaking, the infrastructural network of an economy represents the socio-economic environment created by those institutions that serve as channels of commerce, some institutions being public, others being private. In each instance, they can play a conversionary role, facilitating transformation of resources to outputs, or a diversionary role, transferring their resources to non-producers. The contribution of infrastructure to reducing natural inequalities both among and between different regions of a country is very crucial (De and Buddhadeb).

3.3 India

Much progress, in India has been gained by formulation of reform agendas to draw foreign investment, particularly in the fields of infrastructure and technology (Singh and Srinivasa). In some instances, areas showing a high infrastructural development don't always show the highest foreign investment figures. As infrastructure basically decides trade costs (Winters), and trade fundamentally increases earnings above subsistence level, individuals migrate to regions where basic infrastructure is available. This is because the positive effect of infrastructure on development and growth of an economy comes through increase in investment and employment. The increase in investment and employment then results in increased output and income, in a cumulative causation chain (Srinivasu and Rao). The significance of infrastructure, however, reaches far beyond its effect(s) on growth. Infrastructure accelerates production as well as distribution of a country's economic output, in addition to an overall better standard of living for its citizens (Srinivasu and Rao).

Figure 3. Relationship between infrastructure and poverty in India. Source: Srinivasu and Rao

The above figure shows the infrastructure indices and poverty rates for various States in India. The two states of Orissa and Bihar show both the highest poverty rates and lowest index of infrastructure, demonstrating that the two are inversely correlated.

3.4 United States

The economic strength of the U.S.A. is reinforced, at least in part, by efficient infrastructure. Trans-continental railroad and canal constructions during the nineteenth century, and national highway constructions during the twentieth century triggered both development and prosperity. In more recent times, telecommunication investments and the Internet have provided the foundation for the 21st century economy. Investments in infrastructure generally give fine returns: each investment of $1 billion in the U.S.A. has the potential to create about 18,000 jobs, which can further cause declines in poverty rate. It is estimated by the Political Economy Research Institute that the U.S. should invest per annum at least $87 billion for maintaining or improving the economy's productivity and efficiency (United States Department of State Bureau of International Information Programs).

4. Globalization and Inequality

There are various factors contributing to both poverty and inequality; some of these include income, health, and gender inequalities.

In the form of trade, globalization has been an influence for immense good with respect to aggregate income and output. However, the returns from trade depend on exploiting differences not just between nations, but within economies as well (Winters). The relationship and correlations between globalization and inequality is not well-defined. Globalization may, theoretically, unlock opportunities for certain individuals (not necessarily 'just' or only the rich), and might concomitantly result in hardships for individuals whose livelihoods have been impaired by global competition (Singh, 2007). A great deal depends upon how the political society and the public compensate and rehabilitate displaced individuals. The theory of international trade indicates the possibility of those who have gained compensating those who have lost while still retaining some profits from their trade. However, it can be seen that the realities of redistribution policies are less clear-cut, and depend on a nation's political and social institutions. Simultaneously, it should be noted that hurdles to (and personal interests against) redistribution policies are mostly domestic in their origin (especially for large nations such as India). Restricting economic practices does not lessen the influence of significant vested interests.

The theory of international trade is generally preoccupied with production costs. A large factor of export success depends upon both distribution and marketing, both of which often need managerial skills, high initial investment and network development. Global retail chains that offer the latter can demand monopoly margins that absorb a large portion of the benefits of trade liberalization.

4.1 India

Gender inequalities, i.e. individual disparities on account of gender, still exist in India (Arora). Such differences exist in workplaces, for instance, different wages for males and females, and unequal treatment of women with regards to promotions and postings. On the contrary, and simultaneously, India tends to be a very 'open society' in some respects. Many high-caste Indian women are highly educated, and are employed as physicians and scientific researchers, having both M.S., and Ph.D. Degrees. It is a commonality in the United States to see highly educated Indian women, many of whom come to the U.S. For their higher education in American graduate schools, and then return to their home communities and county wanting to 'make a difference'.

As well, however, it could be that these educated Indian women in the U.S. represent somewhat of the 'proverbial brain-drain' of the elite from the country. Globalization will lead to increased openness in trade by way of greater trade opportunities and greater output, and may result in greater number of 'middle and lower class' Indian women being included in the paid workforce (Arora).

It should be noted that inherent in this discussion of globalization and its impact, is the factor of educational level. Opportunities brought in by globalization may not generally be available to the poor, who may have less access to education and therefore less access to the new opportunities. The huge influx of computer jobs and service industry to India does not 'directly' positively impact the un-educated 'beggar', but only reaches the Indian 'middle-class' and appropriately educated individuals. Thus, one impact of globalization is that it increases the need for education, as well as simultaneously causing an educational divide.

4.2 United States

In the U.S., income inequality, calculated by the Gini index, is considerably higher than almost all other developed countries, and even a few developing nations, like India and Russia (Steven). Rise of income inequality is triggered by economic forces. Several complex factors cause income inequality. Technological changes and globalization have certainly increased competition for low-skilled workers, perhaps costing them their union memberships in some cases; on the other hand, the usefulness of union memberships is also under re-evaluation, particularly given 'forced' union membership, and exceptionally high union-demanded fees to the union itself with little or no benefit to the worker. On the other hand, a higher-skilled, well-educated workforce is given increased leverage. Whereas many supposed factors of income inequality such as technological change, globalization (Leonhardt) and increasing value of education influence other countries as well, only a few nations have recorded as sharp an increase in inequality as the U.S. (Steven).

5. Socio-economic stratification and education

5.1 India

In India, globalization in the form of investment from foreign firms has increased exports of mainly skill- and capital-intensive products (such as business services and software, auto parts, vehicles, steel, pharmaceuticals, etc.), in addition to a more competitive, dynamic corporate sector. However a majority of workers, and the economy are not a part of the business sector (Bardhan). Mostly, these industries depend on skilled labor, with the skilled workforce force being low as compared to the un-skilled workforce; income variation is largely in favor of the skilled personnel. This gives rise to a new situation wherein educated workers are in higher social strata compared to their lesser-educated counterparts (Bardhan). However, it is likely that those workers who do become educated were already within a higher social strata, in the absence of evidence for a concerted 'push' by the Indian government to enhance educational opportunities.

5.2 United States

Education is among the key determining factors of socioeconomic standing in the U.S. Those who graduate high school are categorized into one cluster (Danziger and Christopher), while those who possess college degrees make up another; those possessing advanced, and/or graduate degrees are at a still different cluster, with a person possessing a Ph.D. Being in the top 3% of the nation in terms of education. Everyone cannot equally access primary, secondary or higher education. Schools widely differ in the curriculum and subjects they teach. While some schools turn out graduates prepared to obtain higher education, others produce students whose elementary language and math skills are abysmal, qualifying them for only limited kinds of jobs. The type of education obtained contributes immensely to economic stratification, since it dictates the possible occupations open to individuals, as also their possible incomes (Strong). Simultaneously however, there has been an increasing recognition in the U.S. that the need for skilled workers is becoming problematic. Most high-schools dropped 'vocational programs' back in the 1960's or 70's, and there is a scarcity of plumbers, welders, skilled equipment operators, and many such fields, to the extent that even popular television hosts are stressing the need to encourage vocational education. Not everyone is well-suited for law or medical school, let alone interested; the U.S. needs plumbers, welders, and car-mechanics as well as computer engineers.

In the U.S., educational attainment has increasingly become associated with socioeconomic mobility. Higher education systems, especially, offer resources which provide legitimacy and power to a small class of American citizens: the upper and middle classes. These career experiences and educational credentials facilitate individuals in advancing both professionally and economically. As of 2000, those who held bachelor's degrees or higher earned twice the average pay of those who only graduated high school (Haveman & Smeeding, as cited in Strong). They could move into higher salary brackets, blend in with high-class cultures and enhance their political influence or cultural capital. Meanwhile, individuals who could not access higher education would be facing difficulties in these areas (Strong).

6. Globalization, Western Culture and its influences on Indian culture

The word 'culture' is historically derived from Latin 'cultura', meaning 'cultivation'. Culture is the road map to perceiving and interacting with the world, and constitutes the total lifestyle that typifies a society of individuals. Different classes of people possess different cultures, and cultures are passed on to succeeding generations by way of learning. Culture can be seen in the writing, clothes, religion, cooking and music of a group, as well as in their patterns of daily life (Felix, Thomas and Arockia). Thousands of different cultures can be found in the world today, each playing their part in global diversity (Felix, Thomas and Arockia).

Indian culture, simultaneously has been both resiliently itself, and also constantly affected by Western influences. This influence, welcomed initially, is gradually but definitely threatening the continued existence of some cultural traditions of India (Saumil, n.d.). This influence is considered an unwelcome change by some Indians, who term the phenomenon as 'cultural genocide'. As stated by Louis Pratt, contact zones are social spaces wherein cultures meet, grapple and clash with one another, generally in circumstances of highly unequal power relations. It is this pattern of inequality that can cause the lesser culture to be prone to extinction. Such contact zones were created during India's colonization by the British (Saumil). For nearly two centuries, this contact zone shaped and influenced India's culture. This unwelcome cultural change may possibly have been an unplanned move, but it has also impacted the society, as seen in Indian songs, movies, and language.

The film industry of India, 'Bollywood', is the world's biggest film industry and is rather western in character, as is seen from its name, modeled after 'Hollywood'. Once the pride of India's diversity and originality -- India's music- seems also now to be adopting Western characteristics, and traditional styles are being overcome by the styles and rhythms of Western music (Felix, Thomas and Arockia). As well, language diversity in India may also be dying out. While India's constitution recognizes eighteen different languages, with more than 1600 dialects and minor languages registered in the current census, some say these unique languages are being lost. Each region and community in India possesses its distinct local language; this becomes endangered if children do not speak it. These languages face even more difficulties in their preservation, given the rising importance of English as the language of the modern world. Furthermore, most Indian schools do not possess 'authority' from business, educational, and governmental bodies, to teach these local languages (Felix, Thomas and Arockia).

7. Poverty and Pay scale

A country's poverty rate rises when its people fall into penury, and falls when its people escape penury. Since some individuals drop down below poverty line even as others cross over it, a country's poverty rate simultaneously rises and falls (Krishna, and Abusaleh, 2011). The World Bank defines poverty as a situation wherein a person subsists below U.S. $1.25 per day.

7.1 India

The Poverty Head Count Ratio (PHCR - percentage below the national poverty line) in India shows a 15 percentage point-reduction from 37.2% (2004-05) to 21.9% (2011-12). A significant decline in PHCR has been seen in both urban and rural regions in this period, with the rural PHCR decreasing to 25.7% from 41.8% (16 percentage point decline) and urban PHCR decreasing to 13.7% from 25.7% (12 percentage point decline). The percentage population below poverty line already has been reduced, in 2011-12, to lesser than half its percentage in 1990 at a countrywide level, and also for urban and rural parts, ahead of 2015, the MDG target year (Social Statistics Division).

The Poverty Gap Index (deduced from per capita monthly consumption expenditure statistics based on MRP or Mixed Recall Period), from 2004-05 to 2011-12, has declined in both urban and rural regions. PG Index in rural regions reduced from 9.22 (2004-05) to 5.05 (2011-12), whereas the decline in urban regions in this period could be seen from 6.08 (2004-05) to 2.7 (2011-12) (Social Statistics Division).

The share of per capita monthly consumption expenditure of the poorest one- fifth (20%) population in the sum-total of consumption increased slightly from 9.6% (1993-94) to 9.8% (2009-10) in rural regions (according to the Uniform Reference Period or URP method). The share in overall consumption of the most destitute one- fifth population reduced from 8% (1993-94) to 7.1% (2009-10), in urban regions (Social Statistics Division). The 6th central pay commission proposed the current pay scale. The minimum pay at entry-level PB-1 pay band was set at Rs.6660 (Rs.4860 -pay in pay band and Rs.1800- grade pay) by the commission. The maximum pay at Secretary/equivalent level was fixed at Rs.80000; the minimum: maximum ratio was set at 1:12. Four different running salary bands, one each for every category of employees belonging to categories 'B' and 'C' exist (jobs in the Rs.5000-8000 scale have, because of elongation and de-layering of some scales, been positioned in Group 'B'); Group 'A' jobs have to running salary bands. All those jobs currently belonging to Group D. were, after multi-skilling and retraining of the current appointees, to be scaled up and positioned in the lowest PB-1 grade. All employees who were in Groups 'A', 'B', 'C' & 'D' were to be categorized into distinct running salary bands. All posts, except those of Cabinet Secretary/equivalent and Secretary/equivalent were to have distinct grade salaries attached to them (Government of India).

7.2 United States

The poverty level in the U.S. is 15%, a complete four percentage points greater than that in the early 70's, although the country's real per capita GDP has doubled in the last 50 years (Danziger and Christopher). This trend reflects a sharp break with past figures. Inflation-adjusted median incomes of year-round full-time male workers rose 42% from the year 1960 to 1973. Forty years later, however, in 2012, median incomes were $49,398, which is 4% lesser than the 1973 inflation-adjusted value of $51,670.6 (Danziger and Christopher).

Conclusion

Infrastructural facilities are crucial to meet development goals in an economy. The main dimensions include levels of education, economic growth, health services and nutrition, status given to women, housing quality, level of modernization, communication access and distribution of products and services (Srinivasu and Rao).

Two major ingredients of economic growth- infrastructure and trade- tend towards creation of inequalities. While at times, the poor are their beneficiaries, and their influence is equalizing, most often, benefiting from them is dependent on other abilities or endowments. Thus often their benefits go to individuals above (perhaps barely above) the base of income distribution (Winters). Infrastructure availability determines individuals' economic prosperity in places where they live, this being the case with India. The U.S.A., however, has a high infrastructural development level. Thus, the level of poverty cannot directly be associated with an absence of the requisite infrastructure.

A country's education level also plays a contributory role in the socio-economic prosperity and income levels. India possesses the potential to completely eradicate poverty, and increased globalization can help achieve this.

Globalization brings several desirable advantages to India; however, one among its somewhat undesirable outcomes is Western culture's continual influence on traditional Indian culture. This cultural influence can be observed in the form of Western style, goods, foods, dresses, language and festivals, and has brought about an on-going decline of the traditional culture of India (Felix, Thomas and Arockia). India is, understandably, advancing in all fields, and a necessity is felt of being familiar with all cultures and traditions. A point that should always be borne in mind is that the Western world looks to India for its rich heritage and honest values. Indians should be proud of their rare and rich heritage, and must carry it forward, passing it on to future generations (Felix, Thomas and Arockia).

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