The implications of globalisation for the urban poor

Globalisation and Social Justice

Student No: 130443540

Module: TCP8921

MSc Planning for Developing Countries

Architecture, Planning & Landscape

Newcastle University

14th January 2014

The implications of globalisation for the urban poor

MODULE: TCP8921 MSC PLANNING FOR DEVELOPING COUNTRIES STUDENT NO: 130443540

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Defining globalisation

Globalisation has always been a difficult concept to define, mainly because of its vastness and

complexity. Numerous attempts have been made to give an exhaustive definition of the term,

but being globalisation an ongoing process, its various definitions can never be definitive and are

inevitably updated and constantly improved.

Globalisation encompasses a very broad range of sectors (economy, politics, society, culture,

technology, environment, telecommunications, etc.), and that is why there is a great difficulty to

interpret the term including all its perspectives and connotations (Al-Rodhan & Stoudmann,

2006). Faced with this fact, many scholars have attempted to give their definition of globalisation,

even by focusing more on one aspect rather than on another. In this case, the predominant

element in most definitions is the economic aspect, like in the definition given by the World Bank

“the freedom and the opportunity for individuals and companies to put in place economic

transactions with residents of other countries.” In fact, most of the definitions suggest that

globalisation is primarily a phenomenon or a process in which the expansion of the market in

international terms , and then the global distribution of goods and services , regardless of

geographic, political, social or cultural (Wallerstein, 1974; Garrett, 2000). So, in economic terms,

globalisation represents the possibility to buy and sell goods worldwide and the interdependence

of the markets in which it moves goods and capital; no state can be considered independent

because the goods it produces are sold all over the world and raw material is imported from

other countries. Therefore, the prices of the products are necessarily influenced and dependent

on what is the global market economy. In addition, also related to the economic system, there is

a "globalisation of labour": the assertion of multinationals in the scenario of the global economy

and the production often deployed in the southern countries of the world.

Nevertheless, even though economy is the most common reading key, scholars have also focused

on the human and social meaning of the term, observing that globalisation also means

multiculturalism, which involves the elimination of boundaries in terms of religion and culture.

In fact, in these times there is more than ever the opportunity to confront and deal with different

cultures and ways of thinking, both locally, because of migration and increasing mobility of


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people, and nationally thanks to the relationships between countries. Moreover, globalisation

has also political and ecological features: no political issue can be pertaining to a single state,

because the policy decisions of individual states are influenced and determined by the global

society. The same argument applies to ecological problems: all states have an interest in making

the best use of resources of the planet and working together to develop in a more sustainable

way. Al-Rodhan & Stoudmann (2006) have attempted to propose a definition that seems to be

comprehensive enough to include most of the aspects of the globalisation process: “Globalisation

is a process that encompasses the causes, course, and consequences of transnational and

transcultural integration of human and non-human activities.”

The elements that caused globalisation

Globalisation is not a new phenomenon (O’Rourke & Williamson, 2000); it is rather more evident

in this era thanks to new technologies that provide an easier flux of capitals, information, ideas

and people (Perlman, 2007). With globalisation, the world has become a single social system in

which what happens in one corner of the planet can affect the livelihoods of the rest of the globe.

The factors that have started contemporary globalisation can be broadly grouped into three main

elements, as described by Paolo Figini:

1. “The scientific-cultural element” inherent to the growth of mass media and advances in

technology, which spread the development of IT and communication systems, eliminating

the distance barrier and making it easier to share information around the globe.

2. “The political element” inherent to the collapse of political (and even physical) barriers

after the fall of the socialist regimes. This has also lead to an increased mobility of labour,

with people more willing to move between different countries in search for work, and it

lead to an improved transport system that makes global travel easier and relatively faster,

enabling a greater movement of people and goods across the world;

3. “The economic element” inherent to the policies of trade liberalisation and integration of

financial markets. This also includes the growth of multinational companies with a global

presence.

(Paolo Figini)


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Theories about the possibility that globalisation could worsen inequality in the world stood

already in 1940. Today we have several examples that confirm these concerns, in fact, despite

the claim of Bhagwati (2004) that “growth is good for the poor, globalisation increases growth,

so it is likely to reduce poverty” while others also argue that globalisation is more likely to benefit

the poor if trade reforms are implemented in conjunction with labour market deregulation

(Topalova, 2004; Goldberg & Pavcnik 2005), economic growth does not always imply poverty

reduction, in fact between these factors falls inequality that depends on how governments and

populations deal with the phenomenon. (Thorbecke & Nissanke 2006). Generally, the increase in

inequality in the world is strictly due to the liberalisation of the markets, which is one of the direct

causes of globalisation. The gap between those who have benefited from globalisation and the

rest of the population (the poor), is much more evident in countries of the developing world (UN-

HABITAT, 2003).

In the era of globalisation and thus fast and easy exchange of goods and services, Nigeria, despite

its many natural resources and manpower which would make it the richest nation in Africa, has

failed to raise the living standards of the vast majority of its population and has failed to benefit

equitably from the situation. In fact, between 1987 and 1996, the percentage of the Nigerian

population living in poverty has grown from 28% to 66% and the poorest of the poor has grown

from 6% to 29% (Thomas & Canagarajah, 2002).

Of all the aspects of globalisation, the effect of free trade on development and inequality, is the

more complicated one to understand (Ghose, 2000). The free market, in fact, affects and

operates in various ways by increasing or decreasing inequality (Bussolo & Lecomte, 1999).

According to the theory of neoliberalism, free trade can only have beneficial effects, as it allows

to export and import more goods and services faster, making thereby increase the production

and hence the earnings of producers and decrease the costs for consumers. In reality, the

situation is quite different. As in any situation, from the benefit of some people, namely those

who actively takes the opportunities of globalisation, derives the disadvantage of others, that is

those who can not actively participate. Thanks to globalisation and the development of exchange

and communication technologies, it has become very easy to move capital and jobs from richer

countries to poorer ones, where production is cheaper, on the other hand this means that there


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is an increase in the concentration of the population in the areas affected by the phenomenon

of development, depriving those areas not affected by the investment of manpower and financial

resources (Nissanke & Thorbecke 2006). As for the labour market, according to the neoliberal

theory, free trade and globalisation expected to benefit the factors in excess, in other words, the

skilled labour in developed countries, and the unskilled labour in developing countries

(Samuelson-Stolper Theorem). The reality, however, shows that, in both cases those who gather

the only benefits are the skilled workers. In fact, the global economy requires skilled labour and

unskilled labour has almost no opportunity, so unskilled workers of less developing countries,

end up in the informal sector and in slums (Wood and Ridao-Cano, 1999).

One of the major problems of globalisation, is that very often the less developing countries are

not able to successfully benefit of the majority of the opportunities that a global economy can

offer. The most emblematic example of this kind of marginalisation is Africa: with globalisation

and all the factors that it involves, “by 2020 it is estimated that around 22 million jobs will be

created, but the problem is that it will not be enough to decrease unemployment below 10%. [...]

The continent has been largely unable to transcend its traditional functions in the world economy

as a supplier of raw materials and a captive market for imported manufactured goods” (UN-

HABITAT, 2003),

Globalisation and poverty

The impacts of globalisation on employment, from the free trade and FDI point of view, is

uncertain. Empirical studies have been conducted to analyse direct and indirect impacts,

especially in developing countries (Matusz and Tarr, 1999; Ghose, 2000) and the results are

various, picturing conflicting effects of globalisation on employment. In general, trade and FDI

liberalisation has a positive effect on manufacturing employment and labour, but a more careful

analysis implies that the employment impact of globalisation can not be generalised (Lee &

Vivarelli 2004) because it is country specific and sector specific.

According to the findings of Lee and Vivarelli (2004), the effects on employment in developing

countries has been generally positive in Asia, while mostly negative in Latin America.

However, if globalisation creates job opportunities on one hand, it can lead to job losses on the

other. The possibility to transfer manufacturing industries around the world, causes mixed effects


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in developed countries, where the companies themselves gain benefits in cost reduction, while

the people who were previously employed in those industries end losing their job in favour of

less-paid labours. Moreover, the spread of multinational companies worldwide, besides creating

job opportunities, cause a different kind of negative effects on local employment, both in

developed and developing countries: the rise of multinationals heavily impacts on local firms,

which struggle to be competitive in the big market scene, and therefore end to be cut off, from

which bankruptcy and job losses. For these reasons, the effect of globalisation on employment

has to be carefully considered and the outcome mainly depends on one’s point of view.

Studies conducted in different countries showed how the impact of globalisation, within a trade

reform framework, has very diverse and conflicting outcomes depending on domestic issues and

ways of reception. Case studies of Columbia and India conducted respectively by Goldberg and

Pavcnik (2005) and Topalova (2004) outlined that those who benefited the less from trade

reforms, which targeted openness upon the international market and finance, were the poor,

while the same study conducted in Poland and Mexico, respectively by Goh and Javorcik (2007)

and Hanson and Harrison (1999) had totally opposite outcomes. Even more diverse are the

outcomes of these studies with respect of inequality, in fact all case studies (India, Columbia and

Poland) presented different results upon the relationship between trade reform and inequality:

according to Topalova (2004), there has been no significant relationship between inequality

increase and globalisation, while there has been in Columbia according to Goldberg and Pavcnik

(2005), while again in Poland the outcome was opposite, with trade reform associated with a

decrease of inequality. However, it must be taken into account that “with 38% of the world’s

population, China and India shape world trends in poverty and inequality. They have grown very

fast over the past decade (India) or two (China). China’s surging inequality is now greater than

before the Communists won the civil war in 1949, and inequality between regions is probably

higher than in any other sizable country. On income distribution, several studies suggest that

world income inequality has been rising during the past two to three decades. Finally, whatever

we conclude about income inequality, absolute income gaps are widening and will continue to do

so for decades” (Wade, 2004).


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A further consequence of globalisation is the relocation of industries from developed to

developing countries. This phenomenon arises due to several factors. First, the majority of

countries in the developing world provides an advantageous environment for industrial

development for western countries in Europe and America, in terms of low labour costs, poor

policy in favour of environmental protection and the absence or scarcity of trade unions that

operate for the rights of the workers, which is why the latter find themselves dealing with long

working hours, poor conditions and low wages, often well below the minimum European or

American wage. The first country to have operated industry relocation has been the United

States, with the transfer of entire supply chains and resulting in thousands of jobs losses. General

Motors has been one of the first companies to relocate, in the '80s, and the closure of 11 factories

in Flint, Michigan, has had a disastrous impact on the town with the loss of employment for about

30,000 people. In recent years, Europe has seen a dramatically increase of this phenomenon,

with several examples within Italian companies: Calzedonia and Omsa have moved to Bulgaria

and Serbia, Benetton and Stefanel to Croatia, Dainese has fled to Tunisia, Rossignol to Romania,

Geox has split between Brazil and Vietnam, Bialetti now manufactures in China, and FIAT, one of

the biggest Italian industries, now assemble its product abroad, throughout several different

countries (Manca & Demicheli, 2014). This phenomenon leads to several advantages and

disadvantages depending on the points of view. The relocation of industries in developing

countries has the immediate benefit of creating new jobs in the latter, in fact, countries like

China, India, Brazil, etc., are experiencing a boosted industrialisation process mainly due to the

intervention of the already industrialised countries that are moving their industries and

investments in these areas (Wu, 2001). However, the increase of employment opportunities,

does not always present itself together with fair economic growth. In fact, the opportunities that

are created, are often of precarious conditions, increasing job insecurity and, moreover, the

purpose of the relocation of industries from developed countries is to drastically lower the cost

of production due to the very low wages of labour that can be found in developing countries. So,

new jobs are created, enabling more people to get employed, but employment is usually of poor


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condition, so that poverty and the poor per se do not benefit at all from this situation (Gabayet,

L. 1993).

On the other hand, the relocation of industries leads to contrasting effects even in countries from

which industries are relocating. When companies realise that they have the opportunity to

enormously break down the cost of production in developing countries, the step towards

relocation is very short, also considering the ease with which, thanks to globalisation, it is possible

to move resources and capitals (Wade, 2004). In these terms, the phenomenon of industry

relocation drains the industrialised countries of their own industries, hence leaving thousands of

people without a job and increasing the local unemployment rate plus, as a result, the poverty

rate. From this analysis it is easy to see that the only actors to truly benefit from this phenomenon

are the entrepreneurs themselves and not the employed labour.

The possibility to shift manufacturing from industrialised countries to developing countries, also

leads to increasing unregulated industries, particularly in the BRICS countries Brazil, Russia, India,

China & South Africa, which means no control over the CO2 emissions, heavy environmental

damage, biodiversity loss and worsening of living conditions. In other words, the problems that

developed countries have faced during the industrialisation era are now arising again in new

places, the developing countries.

Globalisation and urbanisation

Urbanisation is one of the most significant effects derived from globalisation. For the first time

in history, more than 50% of the world’s population lives in towns and cities.

Globalization prompted the growth of cities through foreign investment and capital flows.

Capitalism in the neoliberal form focused on high industry (communication, technology, finance,

banking, etc.), neglecting the rural hinterland and agricultural industries.

In this framework, populations from rural areas increasingly flow towards urban centres, hoping

to find better economic opportunities, are forced to find accommodation on their own, ending

to build on land that does not belong to them, paving the way for a rapid and uncontrolled

development of informal settlements. These settlements often lack the most basic services like

water, sanitation, electricity, sewerage system, and are in poor conditions. While urban


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population grows, the need for housing and land increases in parallel. In most developing

countries, which have seen the highest and most rapid urban development of recent years,

governments are unlikely to overcome this continuing and increasing demand. This creates the

“urbanisation of poverty”, an environment in which rich and poor converge into the same place,

but with diametrically opposite living conditions, portraying a scenario where luxurious

residential districts overlook on dilapidated and overcrowded slums. However, “people remain

as close as possible to the city regardless of slum conditions because job opportunities are

concentrated in urban areas”. Additionally, Van Der Ploeg (2008) states, slums are cost effective:

“after the point where formal cost of living surpasses slum cost of living, the squatter settlements

remain relatively affordable and population increases” (Van Der Ploeg & Poelhekke 2008).

At the end of 2000, both Asia and Africa were 36% urbanised, but their per capita income

developed very differently: 340% increase in Asia while only 50% in Africa (Bloom et al, 2008).

While Europe, with the Industrial Revolution, experienced urbanisation and population growth

together with industrialisation, in developing countries, the latter did not develop alongside

urbanisation, thus the economy was not able to address all the needs of the population,

generating increasing levels of poverty (UN-HABITAT 2003). Therefore, urbanisation does not

categorically need or mean economic growth.

All this happens at the very time when governments are trying to show their countries are

modernising, progressing and a good place for international investment and the place they want

to show off to the world are displaying abject poverty.

Emerging countries yearn to appear modern and appealing to attract foreign investment and

capital flows, and they focus on constructing great “Western” buildings and planning their cities

on the European or American model. However, they can not achieve this while continuing to have

the urban poor in plain sight. So, rather than meeting the needs of their growing poor population,

governments tend to marginalize them more and more towards the borders of the cities, which,

however, are constantly expanding. This leads to an increasing demand for land, and therefore


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those lands that were worthless and home to the slums, increase in value and become useful for

expansion. This situation suggests a climate in which governments want nothing more than to

get rid of the urban poor, driving them away instead of helping them, increasing their inability to

gain social growth and depriving them of the opportunity to integrate in the new increasingly

global labour world.

“The problem of slums is a problem of poverty, uneven distribution, and social exclusion.

Neoliberal capitalism, despite its best intentions, has been a contributing factor to these

problems.” (Teresa Almeida).

Conclusions

More than one billion people live in extreme poverty, which means, according to the World Bank

definition, the condition in which a person lives on less than $1 a day. According to Ravallion

(2004) there is no substantial link between globalisation and poverty, while Agénor’s (2004)

opinion is that globalisation does damage the poor at low levels, but beyond a certain threshold,

it actually seems to reduce poverty. Globalisation produced a vast quantity of different

outcomes, but yet it hasn’t directly helped to reduce poverty and inequality, so it is very difficult

to define if globalisation and all that it implies does or does not benefit the urban poor. It is such

a multifaceted phenomenon, which interact with the environment in such many different ways,

together with urban poverty that is “a dynamic condition of vulnerability or susceptibility to risks”

(World Bank), that a clear outcome can not be set. Globalisation is either good or bad for the

urban poor (and for anyone else) depending on the factors taken into consideration at a

determined time and place.


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