Introduction

Definition of Globalization
As a term globalization is defined as the merging of the economies and societies all over the
world. Out of the few hundred definitions we are going to see some of the definition concerned
with the global economy and business perspective.
It can be defined as "is the closer integration of the countries and peoples of the world ...brought
about by the enormous reduction of costs of transportation and communication, and the breaking
down of artificial barriers to the flows of goods, services, capital, knowledge, and people across
borders (Stiglitz, 2003, pg :22).
Expanding, developing, and speeding up of global interconnectedness is meant as globalization
(Held, 1999).
Globalization is a fashionable word to describe trends perceived to be dramatically and
relentlessly increasing connections and communications among people regardless of nationality
and geography (Tobin, 1999).
Is Globalization a Good Thing?
There is a heated debate about the true effects of globalization and if it really is such a good
thing. Good or bad, though, there isn't much argument as to whether or not it is happening. This
paper will go in detail to the different aspects of globalization.
Positive impact of Globalization
Globalization has sea of positive aspects in the development and the improvement of the
countrys GDP growth, employment rate and the world market. The paper is going to discuss
about the positive factors of globalization.
The global economic resources are circulated all over the world which increases the economic
linkage. The commodity, services, capital and human resources has a free flow between the
national boundaries. The free trade between countries are increased. Due to this there is an
increase in demand which in turn increases the production sectors. Since there is always a
competition in the world market the possibly of inflation is reasonably less and the innovative
ideas will increase to meet the competition. The communication among the countries is increases

this develops the understanding between nations and we have a cultural interchanges among
countries (Burande 2006). There is a greater access to foreign culture in the form of movies,
music, food, clothing, and more due to this the global village dream becomes more realistic. We
dont have a single power ruling the world after the increase in globalization so the focus is
segregated among all the countries in the world. The standard of living in the developing
countries will increase due to the increase in the flow of money. The developing countries are
able use the current technologies without problems associated with the development of the
technology. The war between the developed countries is decreases due to equality in power. The
developed countries can increase the investment on the developing countries due to increase in
the liquidity of capital (Poux 2007). The environmental conditions in developed countries are
increased. The countries tend to move towards democratic policies. International trade and
tourism increases due to increase in globalization. Due to free circulation of people from
different countries is increased this in turn leads to social benefits. Global environmental
problems like cross-boundary pollution, over fishing in oceans, climate changes are solved by
discussions. International criminal courts and International justice movements are launched to
control the crime. The standards applied globally like the patents, copyright laws and the world
trade agreements are increased and standardised. The local consumer products are exported in
the global market which in turn increases the GDP growth of the countries. The subsidies for the
local businesses are decreased. Free trade zones are formed which has less or no tariff rates.
Advantages in Developed Countries:
Diversification: The get diversified into the hi-tech industries due to the Globalization and
improvement in the global market.
Production: The productivity improves due to more demand all over the world in the world
market. The need for the product increases which in turn increases the productivity.
Benefits: They become very beneficial since most of their needs are met by the foreign markets
which might cost more in the local market.
Disadvantages in Developed Countries:
Losing of Jobs: The jobs are transferred to the poorer countries so that the companies need not
pay high wages for the jobs done. This in turn reduces the jobs opportunities in developed
countries.
Reduction in taxes: The taxes paid on their products are reduced due to increase the sales in the
world market which decreases their welfare benefits.

 Difference in rich and poor: The rich becomes higher in their standard of living and the poor
remains the same or they might even get down in their standard of living.
Impact on developing countries
Advantages in Developing Countries:
GDP Increase: If the statistics are any indication, GDP of the developing countries have
increased twice as much as before.
Per capita Income Increase: The wealth has had a trickling effect on the poor. The average
income has increased to thrice as much.
Unemployment is Reduced: This fact is quite evident when you look at countries like India and
China.
Education has Increased: Globalization has been a catalyst to the jobs that require higher skill
set. This demand allowed people to gain higher education.
Competition on Even Platform: The companies all around the world are competing on a single
global platform. This allows better options to consumers.
Disadvantages in Developing Countries:
Uneven Distribution of Wealth: Wealth is still concentrated in the hands of a few individuals
and a common man in a developing country is yet to see any major benefits of Globalization.
Income Gap between Developed and Developing Countries: Wealth of developed countries
continues to grow twice as much as the developing world.
Different Wage Standards for Developing Countries: A technology worker may get more value
for his work in a developed country than a worker in a developing country.
Reversal of Globalization: In future, factors such as war may demand the reversal of the
Globalization (as evident in inter world war years), current process of Globalization may just be
impossible to reverse.

Income Inequality and Poverty

INCOME INEQUALITY AND POVERTY
It is no question that there is a disparity between the haves and the have-nots. There is a gap
between the rich and the poor. The adjectives used to describe those people are upper,
middle, and lower class people. We know that a persons earnings depend on supply and
demand for that persons labor. Of the Ten Principles of Economics, two of them come into play
here. The first is that governments can sometimes improve market outcomes. The other being,
people face trade-offs. This paper will examine income distribution by taking a closer look at
how much inequality there is in our society. I will also delve into how many people live in
poverty, what problems arise in measuring inequality, and how often people move among income
classes?
One way of measuring the distribution of income is by looking at the poverty rate. The poverty
rate is the percentage of population whose family income falls below an absolute level called the
poverty line. In 2008, the median income in the United States was $50,303, while that same year
the poverty line was set at $21,200. The following charts show a couple of different things.
The first chart (next page) shows how only 34% of U.S. households make more than $65,000 per
year. You see how that percentage falls as the amount of income rises. Only 17.8% of U.S.
households make more than $100,000. The second chart takes a a closer look at how far
$100,000 goes for a household in the state of California. If the budget is strictly adhered to, this
family (2 adults, 1 child) is in the hole for $1,000 at the end of the month. This is because of the
many costs that typical families have. Now you can debate the merits of where they are spending
money but the point is this; if the budget is tight for 17.8% of Americans, imagine the trade-offs
that are faced for the median income family.
Poverty affects all groups within the population albeit not equally. Poverty is directly related with
race, age, education, and family composition. Blacks and Hispanics are about three times more
likely to live in poverty than whites. Children are more likely than average to be members of
poor families, and the elderly are less likely than average to be poor. Astoundingly, families

headed by a female adult, without a spouse present are about five times as likely to live in
poverty as a family headed by a married couple.
The 2008 American Community Survey (used by the Census Bureau) data show that an
estimated 13.2 percent of the U.S. population had income below the poverty threshold in the past
12 months. This is 0.2 percentage points higher than the 13.0 percent poverty rate estimated for
2007. The estimated number of people in poverty increased from 38 million in 2007 to 39.1
million in 2008. Ohio is now home to 1.5 million people; 13.7 percent of its population is living
below the federal poverty level. For a family of four, that's a household income of $22,050 or
less a year.
Nearly a third of Ohioans, 3.4 million people, had incomes below 200 percent of the poverty
level, a level widely accepted as needed to cover housing, food and other necessities. Remember,
governments can sometimes improve market outcomes. In this particular case, social programs
were created to help ease the struggles of everyday life. Welfare, Medicaid, food stamps, Earned
Income Tax Credit, and negative income taxes are all programs aimed at helping the poor and
they are all tied to family income. As a familys income rises, the family becomes ineligible for
these programs.
By trying to help the poor, some believe the government discourages those families from
working. Critics of antipoverty programs suggest that these programs alter work attitudes and
create a culture of poverty. The rich complain that so much of their tax dollars go to support
such programs. The poor become reliant on these programs. Policymakers face a trade-off
between equality and efficiency.
Although data on the income distribution and the poverty rate help give us some idea about the
degree of inequality in our society, interpreting these data is not always straightforward. For at
least three reasons, data on the income distribution and the poverty rate give an incomplete
picture of inequality in living standards:
1. In-kind transfers to the poor are given in the form of goods and services rather than cash
making it difficult to measure.

2. The economic life cycle shows the regular pattern of income variation over a persons life. The
life cycle pattern causes inequality in the distribution of annual income, but it does not
necessarily represent true inequality in living standards.
3. Transitory income refers to temporary increases or decreases in income. Permanent income
refers to a persons normal income or average income. Measuring transitory and permanent
income is difficult enough. It is even more difficult trying to estimate individuals consumption.
The gap between rich and poor shrinks a bit if taxes are taken into account. Because the tax
system is progressive, the top group pays a higher percentage off its income in taxes than does
the bottom group. The gap shrinks more substantially if one looks at consumption rather than
income. It shrinks even more so if one corrects for differences in the number of people in the
household. Larger families are more likely to have at least two earners and find themselves near
the top of the income distribution. Nevertheless, they also have more mouths to feed.
Consumption per person in the richest fifth of households is only 2.1 times as much as
consumption per person in the poorest fifth. Inequality in standards of living is much smaller
than inequality in annual income.
Political philosophers differ in their views about the role of government in altering the
distribution of income. Utility is defined as a measure of happiness or satisfaction. According to
utilitarians, this is the ultimate objective of all public and private actions. They would choose the
distribution of income to maximize the sum of utility of everyone in society. Liberals believe in
designing public policies that aim to raise the welfare of the worst-off person in society and
justifies public policies aimed at equalizing the distribution of income. Libertarians as well as
conservatives, argue that redistribution of legitimately obtained income cannot ever be just.
There is substantial movement throughout income classes. The idea the the rich and the poor
are the same people year after year is simply not true. Many of those below the poverty line are
there temporarily. Poverty is a long-term problem for relatively a few families. In a 10-year
period, 20 percent of all families fall below the poverty line. However, less than 3 percent of
families are poor for eight or more years. Economists have found that an above average income
carries over from parents to children. If a father earns 20 percent above his generations average
income, his son will most likely, earn 8 percent above his generations average income. Four of

five millionaires made their money on their own working their way up through income classes.
Only one in five millionaires inherited their fortunes.
People have long reflected on the distribution of income in society. Greek philosopher, Plato,
concluded that in an ideal society the income of the richest person would be no more than four
times the income of the poorest person. Although the measurement of inequality is difficult, it is
clear that our society has much more inequality than Plato recommended, not just here in the
U.S., but around the world as well. The gap between the haves and the have-nots is great. I think
that there should be some form of government assistance to the poor. However, I also believe in
working for what you get. Because time spent below the poverty level is temporary for most, I
think that assistance should be temporary as well. I believe sometimes people get used to
government support and lose their incentive to get back to work. Temporary assistance aids those
who need it but also does not permanently support families. The goal for everyone should be to
strive toward self-sufficiency. Being self-sufficient allows for a certain level of happiness that is
based on a familys consumption, lifestyle and standard-of-living; and not just a familys income
level.
Conclusion
Globalization has both positive and negative impact on all the countries in the world market.
Globalization has lots of positive impact on developing countries like the increase in the GDP
growth, increase in employment rate, diversification of products and services and lots more. On
developed countries also it has positive impact like the increase in standard of living, purchase of
foreign goods at cheaper rates compare to local market and many more. Even though it has lots
of positive impact on each and every economy it has a greater amount of negative impact on the
economies. The individualistic cultural and behavioural aspects of the economy are badly getting
affected. The best goods produced in a country are exported, for making the maximum profit
which in turn gives the local market the next grade or the lower grade products. The employment
rates in the developed countries decreases due to outsourcing of the jobs. Even though
globalization is very important and a necessary factor in everyday life the negative impact of it
affects certain parts of our own nation. The benefits of it are not equally spread all over the world
and within the nations. When it is researched more the challenges caused due to globalization is

more than the benefits of it. But at the same time globalization is necessary for every nation. So
Globalization is even more effective and more beneficial if all the sectors of the world are
considered as one. So this paper is concluded by saying that globalization has to overcome all its
challenges to make it beneficial and best for the world.

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