Globalization and its Effect on World Poverty and Inequality

James D. Wolfensohn who is the former World Bank President stated that poverty amid plenty is the world’s greatest challenge until now. In 1996, United Nation General Assembly came to terms that eradicating poverty is an ethical, political, social and economic imperative of humankind. International development, trade organizations, and financial, as well as practitioners and academics in this field confirmed to this statement (World Bank, 2001) In a world of 7 billion people, 80 percent live on less than $10 per day and 3 billion people, about half of the world, live on less than $2.50 a day. About 5 percent of global income was generated by the poorest 40 percent of the world’s population, while the wealthiest 20 percent of the population generates 75 percent of world income (Shah, 2013). The United Nations Children’s Fund (UNICEF, 2011) estimates that poverty is the cause of daily mortality for 22,000 children ages five and younger in 2009. Thus, in a calendar year, more than eight million children do not progress past the age of five years. Poverty literally has two central meanings. The first refers to an absolute standard of living which is reflected in satisfying the minimum basic needs required for survival. The second is relative poverty reflected in the income gap between the rich and the poor, which often is measured by economists in the form of artificial currency called “purchasing power disparity dollars’. In the world of globalization and without boundaries, one would wonder how in certain parts of the world, poverty is still a major issue. Why is the standard of living in certain countries far better than the others and why is a large part of the world poor? Typically defined as the process by which different countries become more closely integrated through international technology transfers, trade liberalization, and greater mobility of information and capital, whether globalization helps or hurts the world’s poverty level is a constant debate.