Home >> Contributions >> The function of "colonial division of labor" in development project: Philip McMichael By Miha Alam

Inequalities in both Global South and Global North due to neo-liberal globalization as well as the potential/limitations of strategies like micro-finance and de-growth to alleviate these disparities. : Philip McMichael By Miha Alam

Neo-liberalism supports free trade, privatization and reduction of governmental intervention in the economy. Although neo-liberal globalization accelerates economic growth on a global scale, it increases political, economic and social inequalities between nations. Due to globalization, multinational companies hire cheaper labor from developing countries like China, India and Philippines thereby increasing the unemployment rate in the Global North. Recession and unemployment has put political pressure on governments of global north to limit "job threatening" imports.

A growing number of developing countries such as Singapore and South Korea have achieved rapid, export-led growth. This has caused trade imbalances. This has strained the relationships between some trading countries, which lead to various developed countries to implement protectionist measures. In spite of free trade agreements with US, China was exporting Solar Panels in US at a lower cost than cost of production (dumping) in 2012. This forced the US to implement anti-dumping protectionist policies. Neo-liberal globalization has lead to more inequalities in Global South. Globalization has harmed the sovereignty and culture of developing countries because these countries have adopted a western lifestyle. Globalization has also lead to the rapid growth of Multinational corporations. Access to cheap labor and control over scarce resources has made these multinational corporations the global monopolies giving them an upper hand (advantage) when competing on an international scale. This has caused economic inequality by stunting the growth of infant industries. International lenders give loans to the multinational companies operating in a country and are less likely to invest in local businesses, giving an advantage to international firms. This increases the dependence of Global South on the Global North for development aid. As a result, the disparities between the rich and the poor continue to increase as income gaps widen. Lastly, globalization has also resulted in increase in poverty, and in gender inequalities. Women are exploited through unpaid or informal labor, low-wage sweatshop settings, and/or impoverishment through loss of traditional sources of income.

Micro-finance and De-growth have been implemented by global south to combat these inequalities. Micro-finance can alleviate poverty because micro-financing banks give small-scale loans to poor people with no fixed earnings who can borrow without collaterals to make profit. Money is easily accessible and it supports a lot of small-scale businesses.

Micro-financing banks teach financial literacy and have financial consultants who educate people how to spend money effectively and wisely. It also addresses social issues such as women empowerment because women have the same access to these funds as men. Women borrow money and invest it in health, education and/or household income. This can help to break the poverty cycle/trap. 95% of the people who borrow from Grameen Bank in Bangladesh manage to return the loan back with interest.

However, micro financing has few limitations. In micro financing, cash flow is comparatively less flexible and more formal than it is in traditional methods of borrowing and lending. It isn't a permanent solution for poverty alleviation, as it doesn't solve a lot of other social conflicts such as high mortality rates. Poor people that borrow for income generating purposes, often land up in more debt. They are not able to repay because of high interest rates of micro-financing banks. Lastly, due to micro financing, the money flows out of the poor community. Normally, when a person borrows from individuals and repays back, the money circulates and flows in the same community. The out flow of money can cause other poor families in the community to suffer.

De-growth movement is a way of achieving prosperity without growth through downscaling overconsumption, maximizing happiness and promoting sustainable lifestyle. Economic growth is believed to help in the creation of money, increase employment and overall standard of living hence the economic liberalists believe that de-growth is not an effective method of improving quality of life.

De-growth opposes economic growth and may result in a recession. De-growth conserves energy by creating more units of product using fewer resources by using technological advancement. However, this can lead to creativity destruction due to replacement of laborers with machines. De-growth is not an effective way to tackle poverty alleviation especially in the developing countries because it contradicts the concept of development and economic growth.

Miha Alam
Sociology on International Development
Bryn Mawr College,
Pennsylvania,
USA