World Economics and Poverty, Research Paper Example

Introduction

Newly Industrialized Countries (NIC) have a competitive advantage to overcome poverty compared with Developing or Less Developed Countries (LDC).

Thesis: Newly Industrialized Countries are able to show a more rapid growth, and – due to the impact of globalization – create workforce that is highly competitive in the international arena. While newly industrialized countries’ talent often leaves their native land to study or work abroad, they are likely to return home and re-invest into the country’s economy, while less developed countries’ population is less mobile, and would stay hoping that they would have a chance to succeed at home.  Therefore, it is likely that less developed countries can follow the example of Newly Industrialized Countries; invest into education, and create talent for the global market that would re-invest into the country’s economy.

The below essay will examine the approach of different countries towards dealing with poverty and making sure that all citizens benefit from technological advancements and infrastructure development projects.

Literature Review

According to the Industrial Development Report, developing countries are today facing several challenges. Some of these challenges identified by the Industrial Development Report 2009 (viii) are: “continued high levels of poverty, volatile commodity and food prices”. However, before the current economic challenges of the two groups of countries can be analyzed, it is important to clearly define their categories.

According to the United Nations’ classification, countries that are in the Less Developed Countries are countries in Latin America, except for Cuba, all countries in the Middle East, and most countries in Africa. While China is considered to be in the LDC category, the country is usually examined as a special case.

The Newly Industrialized Nations include smaller Asian countries, such as Taiwan and Hong Kong, South Korea, and Indonesia (Jomo and Rock). South American countries, South Africa also belong to this category. Some of the European countries that used to belong to the Eastern Bloc, such as Lituania and Hungary also belong to this group, as they recently entered capitalist markets, and are now developing their market-based economies.

Lee and Vivarelli (5), the abundance of workforce in less developed countries promotes local employment. However, some authors (Haddad and Harrison) state that increased trade does not mean that the number of jobs increases. While countries in the group, such as Latin America have a large number of well trained and qualified, as well as skilled workers, for many decades, governments have not been able to create enough jobs for talent, hence the migration to North America. While residents of newly industrialized countries, such as Taiwan and Hungary also have to face high unemployment levels, the workforce is more mobile and takes advantage of globalization, but returns to their home country. A recent study, completed in the United Kingdom (Equality and Human Rights Commission Policy Report 18) categorizes migrants from former Eastern Bloc countries based on how long they stay. One of the most mobile groups is defined as “Storks”, short term seasonal workers. The next group is also extremely mobile, and Eade, Drinkwater and Garapich call them “Hamsters”. This group stays longer, builds up investment and capital, and then returns home.

Newly industrialized countries are also more successful (in general) in attracting investment than less developed countries. This way, they can take advantage of the globalization better. Newly industrialized countries develop talent that returns with investment saved up abroad, while they can create policies that attract international organizations. The two trends work towards reducing poverty through education and employment.

Discussion

The main reason for the development of newly industrialized countries is based on their high economic growth rate, the rapid development in technologies and the manufacturing industry, export figures increase, and rising standards of living. Export sales and foreign investment into NIC-s is responsible for rapid growth. Investment into education is another important feature. Combining cheap labor with imported technologies also increases the economic growth. High economic growth is responsible for falling unemployment rates, higher standards of living, and decreased poverty. Newly industrialized countries also have one advantage over less developed countries: declining rates of population growth. This indicates that poverty caused by over-population can be slowly eliminated. The reduced agricultural activity and increased manufacturing activity results in higher profit margins and greater export opportunities (Jomo and Rock 5).

The Least Developed Countries Report of 2011 (United Nations Conference on Trade and Development 31) shows that these countries have an increasing share of the world’s total GDP and total exports.

The new international division of labor (Fröbel et al.) makes it possible that – through the deindustrialization of previously industrialized countries and globalization call for lower cost, local and international productions. Workers who temporarily migrate to developed countries take advantage of these opportunities, and those staying home can find employment within multinational organizations. Employment rate grows, and poverty is reduced long term.

Kniivilä (297) however, warns that “as growth may be associated with increased income inequality, it does not automatically address the whole poverty problem”. This impact, however, affects less developed countries with high population growth more than newly-industrialized ones. The author (299) also confirms that in Taiwan, for example, as one of the newly industrialized countries, research shows that income inequality did not increase. India is also working towards reducing poverty rates, however, due to the high growth rate, low income is still a major problem in rural areas, and – according to  Kniivilä – states that the country faces several challenges in reducing disparities.

Findings

The above review of two groups of countries’ methods to reduce unemployment and poverty has revealed that NIC-s have some competitive advantage over LDC-s. While LDC-s have the highest population growth rate in the world, the population of NIC-s is declining. By combining imported technologies with low cost labor, national and international companies can increase economic production, and this is the reason why economic growth in these countries has been rapid in the past few decades.

Conclusion

As  Lee and Vivarelli conclude, globalization can be both beneficial and dangerous for developing countries: “while trade liberalization is generally found to increase economic opportunities and potentialities for DCs, it is absurd to think that globalization never pushes anyone into poverty” (Lee and Vivarelli 14).  Taking advantage of the economic growth and ensuring that people benefit from the increased production and export income is individual governments’ responsibility. While losing talent over industrialized and developed countries might seem like a good trade-off for China (most of the immigrants stay in their new country), it reduces the country’s overall competitiveness. Countries that can benefit from both increased domestic production and export and highly skilled workers’ investment who returned to the country after saving money abroad can continue to follow the path of rapid development and work towards reducing poverty (United Nations Industrial Development Organization). National policies and regulations, trade agreements do also influence the success of poverty reduction projects.

Works Cited

Eade J, Drinkwater S and Garapich M.  “Class and Ethnicity: Polish Migrants in London”. Economic and Social Research Council. 2006. Print.

Equality and Human Rights Commission. “The UK’s new Europeans. Progress and challenges five years after accession”. 2009. Web.

Fröbel, F., et al.  “The new international division of labour: structural unemployment in industrialised countries and industrialisation in developing countries”. 1980. Print.

Kniivilä, M. “Industrial development and economic growth: Implications for poverty reduction and income inequality” In: Industrial Development for the 21st Century. 2007. Print.

Lee, E. and Vivarelli, M. “The Social Impact of Globalization in the Developing Countries” 2006. Web.

The World Bank “Least developed countries: UN classification” 2013. Web.

Jomo K. S. and Michael Rock “Economic Diversification and Primary Commodity Processing In The Second-Tier South-East Asian Newly Industrializing Countries” 1998. Web.

United Nations Industrial Development Organization “Industrial Development Report 2009 Breaking In and Moving Up: New Industrial Challenges for the Bottom Billion and the Middle-Income Countries” 2009. Web.

United Nations Conference on Trade and Development. “The Least Developed Countries Report 2011” 2011. Web.