Assignment On Globalization and Poverty in Bangladesh

Submitted to:
Mr. Manishankar Sarkar Lecturer, Faculty of Arts and Social science
Bangladesh University of Business & Technology (BUBT)

Submitted by: Md. Kaysaruzzaman Sarmin Sultana A.K.M. Mahmud Hossain Zubayer Azgor Chowdhury A.G.M. Aminul Islam Program: BBA Intake: 18th Section: 3 Submission Date: 29-04-2010 102 105 134 128 130

Abstract:
Recent debates on the merits and shortcomings of globalization have focused on the implications stemming from increased capital and trade flows. The motivation for this paper is that international migration has received relatively little attention in the present debate on globalization. This paper attempts toward filling that gap. It explores whether the movement of people across borders affect poverty scenario in developing countries through a case study of Bangladesh. In particular, the paper focuses on the role played by migrants remittances to their families in Bangladesh. The paper analyzes the case of Bangladesh, a country that has not only experienced a fast integration to the global economy through trade and capital flows compared to its other poor neighbors, but through migration flows as well. Bangladesh received around US$ 27 billion remittances from its migrant population between 1976 and 2003 and remittances to Bangladesh in 2003 were around US$ 3 billion. The direct links of remittances to low-income migrant households make remittances a potentially important tool for alleviating poverty and raising living standards in Bangladesh. The data for this research comes from fieldwork conducted in Bangladesh for the period of six months in 2004.

Introduction:
Globalization is not new, though. For thousands of years, peopleand, later, corporationshave been buying from and selling to each other in lands at great distances, such as through the famed Silk Road across Central Asia that connected China and Europe during the Middle Ages. Likewise, for centuries, people and corporations have invested in enterprises in other countries. In fact, many of the features of the current wave of globalization are similar to those prevailing before the outbreak of the First World War in 1914. Looking specifically at economic globalization demonstrates that it can be measured in different ways. Globalization has eaten away at its competitive edge in industry and agriculture, lowering the quality of life in locations that have not adapted to the change. The head of the International Food Policy Research Institute stated in 2008 that the gradual change in diet among newly prosperous populations is the most important factor underpinning the rise in global food prices.

One of the key points made by critics of recent economic globalization is that income inequality, both between and within nations, is increasing as a result of these processes. Globalization is a tool that should benefit all sections of mankind. One cannot ignore its negative effects. These must be addressed for the worlds peace and prosperity. The World Bank's World Development Indicators puts Bangladesh in 170th place (out of 207 countries) in the global ranking of gross national income per capita. Despite considerable international assistance, Bangladesh has been unable to eliminate extreme poverty and hunger. There is a huge disparity between standards of living in urban and rural areas of the country. In the West there are also poor people but you can barely notice them. Its not only that they are protected by social security, but there is hardly any difference of appearance between rich and poor. Hence poverty is the main problem in Bangladesh, but the government of Bangladesh has tried to fix this problem and already they were fighting with this since 1971 by the help of other developed countries.

Objectives:
Meaning of Globalization. Effects of globalization by world perspective. International social Forums. Benefits of Globalization. The Impact of globalization on poverty in Bangladesh. The Nexus between growth and poverty in Bangladesh. Employment elasticity. Poverty trends 1991-2000. Bangladesh Aims to cut poverty rate.

1. 2. 3. 4. 5. 6. 7. 8. 9.

Conceptual Origin:
The process has effects on the environment, on culture, on political systems, on economic development and prosperity, and on human physical well-being in societies around the world is known as globalization. The historical origins of globalization are the subject of on-going debate. Though some scholars situate the origins of globalization in the modern era, others regard it as a phenomenon with a long history. Globalization, since World War II, is largely the result of planning by politicians to break down borders hampering trade to increase prosperity and interdependence thereby decreasing the chance of future war. As of 20052007, the Port of Shanghai holds the title as the World's busiest port. The interconnectedness of these markets, however, meant that an economic collapse in any one given country could not be contained. "Culture" is defined as patterns of human activity and the symbols that give these activities significance. Culture is what people eat, how they dress, beliefs they hold, and activities they practice. In the Midwestern United States, globalization has eaten away at its competitive edge in industry and agriculture, lowering the quality of life in locations that have not adapted to the change. The World today is so interconnected that the collapse of the subprime mortgage market in the U.S. has led to a global financial crisis and recession on a scale not seen since the Great Depression. Government deregulation and failed regulation of Wall Street's investment banks were important contributors to the subprime mortgage crisis. The first WSF in 2001 was an initiative of the administration of Porto Alegre in Brazil. The slogan of the World Social Forum was "Another World Is Possible". It was here that the WSF's Charter of Principles was adopted to provide a framework for the forums. It proved to be a vibrant player in macro level. Globalization is a tool that should benefit all sections of mankind. One cannot ignore its negative effects. These must be addressed for the worlds peace and prosperity. "We have moved from a world where the big eat the small to a world where the fast eat the slow", as observed by Klaus Schwab of the Davos World Economic Forum. All economic analysts must agree that the living standards of people have considerably improved through the market growth. Bangladesh belongs to the poorest group of countries in the world; during the last 3 decades its GDP per capita income barely increased from US$203 in 1975 to US$348 per capita in 1998. In general, the urban population, in the areas around Dhaka, Chittagong, and other large cities, has long been involved in small- and medium-sized businesses or employed in various industries. They benefited from the recent growth and have higher incomes. Meanwhile, the rural population experience chronic shortages of land and regular floods and cyclones, which often a within matter of hours sweep away the results of months of hard work. Inaugurating the 2nd ministerial meeting of the Center of Integrated Rural Development for Asia and the Pacific (CIRDAP) in Dhaka, he said Bangladesh wants CIRDAP to play a vital role for poverty alleviation and development of poorer nations. Living in a country like Bangladesh constantly forces me to redraw the lines around

my mental conception of poverty. A factory worker seems hard done by until you meet the construction worker. The construction worker earns your sympathy until you see the child collecting trash. Except for the ber rich people (who have their limos and jets) people do not show off their richness to others. They don't have maids at home, they are not more shiny in appearance than the less well-offs. Even you cannot distinguish between a day-labor and a rich lawyer in the streets as they are treated as equals. Bangladesh is preparing for the first visit by a US president since 1971, hoping it will attract more western investment to the country. During his nine-hour visit, President Bill Clinton will find out about the micro-credit system of small loans aimed at helping poor people, for example to buy a cow so they can sell milk. It is a system supported by the president and much heralded across the world by countries keen to copy the Bangladesh model.

What is globalization?
Is it the integration of economic, political, and cultural systems across the globe? Or is it Americanization and United States dominance of world affairs? Is globalization a force for economic growth, prosperity, and democratic freedom? Or is it a force for environmental devastation, exploitation of the developing world, and suppression of human rights? Globalization is a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology. This process has effects on the environment, on culture, on political systems, on economic development and prosperity, and on human physical wellbeing in societies around the world. Globalization is not new, though. For thousands of years, peopleand, later, corporations have been buying from and selling to each other in lands at great distances, such as through the famed Silk Road across Central Asia that connected China and Europe during the Middle Ages. Likewise, for centuries, people and corporations have invested in enterprises in other countries. In fact, many of the features of the current wave of globalization are similar to those prevailing before the outbreak of the First World War in 1914.

Effects of globalization
Globalization has various aspects which affect the world in several different ways such as: Industrial - emergence of worldwide production markets and broader access to a range of foreign products for consumers and companies. Particularly movement of material and goods

between and within national boundaries. International trade in manufactured goods increased more than 100 times (from $95 billion to $12 trillion) in the 50 years since 1955. China's trade with Africa rose sevenfold during 2000-07 alone. Financial - emergence of worldwide financial markets and better access to external financing for borrowers. As of 20052007, the Port of Shanghai holds the title as the World's busiest port. Economic - realization of a global common market, based on the freedom of exchange of goods and capital. The interconnectedness of these markets, however, meant that an economic collapse in any one given country could not be contained. Almost all notable worldwide IT companies are now present in India. Four Indians were among the world's top 10 richest in 2008, worth a combined $160 billion. In 2007, China had 415,000 millionaires and India 123,000. Health Policy - On the global scale, health becomes a commodity. In developing nations under the demands of Structural Adjustment Programs, health systems are fragmented and privatized. Global health policy makers have shifted during the 1990s from United Nations players to financial institutions. The result of this power transition is an increase in privatization in the health sector. This privatization fragments health policy by crowding it with many players with many private interests. Britain is a country of rich diversity. As of 2008, 40% of London's total population was from an ethnic minority group. The latest official figures show that in 2008, 590,000 people arrived to live in the UK whilst 427,000 left, meaning that net inward migration was 163,000, care for the wealthy. Britain is a country of rich diversity. As of 2008, 40% of London's total population was from an ethnic minority group. The latest official figures show that in 2008, 590,000 people arrived to live in the UK whilst 427,000 left, meaning that net inward migration was 163,000. Political - some use "globalization" to mean the creation of a world government which regulates the relationships among governments and guarantees the rights arising from social and economic globalization. Politically, the United States has enjoyed a position of power among the world powers, in part because of its strong and wealthy economy. With the influence of globalization and with the help of The United States own economy, the People's Republic of China has experienced some tremendous growth within the past decade. If China continues to grow at the rate projected by the trends, then it is very likely that in the next twenty years, there will be a major reallocation of power among the world leaders. China will have enough wealth, industry, and technology to rival the United States for the position of leading world power.

Cultural effects:
Globalization has had an impact on different cultures around the world.

Japanese McDonald's fast food as an evidence of corporate globalization and the integration of the same into different cultures. "Culture" is defined as patterns of human activity and the symbols that give these activities significance. Culture is what people eat, how they dress, beliefs they hold, and activities they practice. Globalization has joined different cultures and made it into something different. As Erla Zwingle, from the National Geographic article titled "Globalization" states, "When cultures receive outside influences, they ignore some and adopt others, and then almost immediately start to transform them." One classic culture aspect is food. Someone in America can be eating Japanese noodles for lunch while someone in Sydney, Australia is eating classic Italian meatballs. India is known for its curry and exotic spices. France is known for its cheeses. America is known for its burgers and fries. McDonald's is an American company which is now a global enterprise with 31,000 locations worldwide. This company is just one example of food causing cultural influence on the global scale. Another common practice brought about by globalization is the usage of Chinese kanji in tattoos. These tattoos are popular with today's youth despite the lack of social acceptance of tattoos in China. Also, there is a lack of comprehension in the meaning of Chinese characters that people get, making this an example of cultural appropriation.

Negative effects
Globalization has been one of the most hotly debated topics in international economics over the past few years. Globalization has also generated significant international opposition over concerns that it has increased inequality and environmental degradation. In the Midwestern United States, globalization has eaten away at its competitive edge in industry and agriculture, lowering the quality of life in locations that have not adapted to the change.

Effect on disease
Globalization, the flow of information, goods, capital and people across political and geographic boundaries, has also helped to spread some of the deadliest infectious diseases known to humans. Starting in Asia, the Black Death killed at least one-third of Europe's population in the 14th century. Modern modes of transportation allow more people and products to travel around the world at a faster pace, they also open the airways to the transcontinental movement of infectious disease vectors. One example of this occurring is AIDS/HIV. Approximately 1.1 million persons are living with HIV/AIDS in the United States, and AIDS remains the leading cause of death among African American women between ages 25 and 34. Due to immigration, approximately 500,000 people in the United States are believed to be infected with Chagas disease. In 2006, the tuberculosis (TB) rate among foreign-born persons in the United States was 9.5 times that of U.S.-born persons.

Brain drain
An opportunity in richer countries drives talent away from poorer countries, leading to brain drains. Brain drain has cost the African continent over $4.1 billion in the employment of 150,000 expatriate professionals annually. Indian students going abroad for their higher studies costs India a foreign exchange outflow of $10 billion annually.

Economic liberalization
The World today is so interconnected that the collapse of the subprime mortgage market in the U.S. has led to a global financial crisis and recession on a scale not seen since the Great Depression. Government deregulation and failed regulation of Wall Street's investment banks were important contributors to the subprime mortgage crisis. A flood of consumer goods such as televisions, radios, bicycles, and textiles into the United States, Europe, and Japan has helped fuel the economic expansion of Asian tiger economies in recent decades. However, Chinese textile and clothing exports have recently encountered criticism from Europe, the United States and some African countries. In South Africa, some 300,000 textile workers have lost their jobs due to the influx of Chinese goods. A total of 3.2 million one in six U.S. factory jobs have disappeared since the start of 2000.

Effect on Income disparity

A study by the World Institute for Development Economics Research at United Nations University reports that the richest 1% of adults alone owned 40% of global assets in the year 2000. The three richest people possess more financial assets than the poorest 10% of the world's population, combined. The combined wealth of the 10 million millionaires grew to nearly $41 trillion in 2008. In 2001, 46.4% of people in sub-Saharan Africa were living in extreme poverty. Nearly half of all Indian children are undernourished.

Effect on environmental degradation Burning forest in Brazil. The removal of forest to make way for cattle ranching was the leading cause of deforestation in the Brazilian Amazon from the mid 1960s. Recently,

soybeans have become one of the most important contributors to deforestation in the Brazilian Amazon. The World watch Institute said the booming economies of China and India are planetary powers that are shaping the global biosphere. In 2007, China overtook the United States as the world's biggest producer of CO2. At present rates, tropical rainforests in Indonesia would be logged out in 10 years, Papua New Guinea in 13 to 16 years. A major source of deforestation is the logging industry, driven spectacularly by China and Japan. Thriving economies such as China and India are quickly becoming large oil consumers. China has seen oil consumption grow by 8% yearly since 2002, doubling from 19962006. Crude oil prices in the last several years have steadily risen from about $25 a barrel in August 2003 to over $140 a barrel in July 2008. State of the World 2006 report said the two countries' high economic growth hid a reality of severe pollution. The report states: The world's ecological capacity is simply insufficient to satisfy the ambitions of China, India, Japan, Europe and the United States as well as the aspirations of the rest of the world in a sustainable way.

Food security
The head of the International Food Policy Research Institute stated in 2008 that the gradual change in diet among newly prosperous populations is the most important factor underpinning the rise in global food prices. From 1950 to 1984, as the Green Revolution transformed agriculture around the world, grain production increased by over 250%. The world population has grown by about 4 billion since the beginning of the Green Revolution and most believe that, without the Revolution, there would be greater famine and malnutrition than the UN presently documents (approximately 850 million people suffering from chronic malnutrition in 2005).

Drug and illicit goods trade The United Nations Office on Drugs and Crime (UNODC) issued a report that the global drug trade generates more than $320 billion a year in revenues. Worldwide, the UN estimates there are more than 50 million regular users of heroin, cocaine and synthetic drugs. The international trade of endangered species is second only to drug trafficking. Traditional Chinese medicine often incorporates ingredients from all parts of plants, the leaf, stem, flower, root, and also ingredients from animals and minerals. The use of parts of endangered species (such as seahorses, rhinoceros horns, saiga antelope horns, and tiger bones and claws) has created controversy and resulted in a black market of poachers who hunt restricted animals. In 2003, 29% of open sea fisheries were in a state of collapse.

Sweatshops

A maquila in Mexico It can be said that globalization is the door that opens up an otherwise resource-poor country to the international market. Where a country has little material or physical product harvested or mined from its own soil, large corporations see an opportunity to take advantage of the "export poverty" of such a nation. Where the majority of the earliest occurrences of economic globalization are recorded as being the expansion of businesses and corporate growth, in many poorer nations globalization is actually the result of the foreign businesses investing in the country to take advantage of the lower wage rate: even though investing, by increasing the Capital Stock of the country, increases their wage rate. One example used by anti-globalization protestors is the use of sweatshops by manufacturers. According to Global Exchange these "Sweat Shops" are widely used by sports shoe manufacturers and mentions one company in particular Nike. There are factories set up in the poor countries where employees agree to work for low wages. Then if labor laws alter in those countries and stricter rules govern the manufacturing process the factories are closed down and relocated to other nations with more conservative, laissez-faire economic policies.

Pro-globalization (globalism) Supporters of free trade claim that it increases economic prosperity as well as opportunity, especially among developing nations, enhances civil liberties and leads to a more efficient allocation of resources. Economic theories of comparative advantage suggest that free trade leads to a more efficient allocation of resources, with all countries involved in the trade benefiting. In general, this leads to lower prices, more employment, higher output and a higher standard of living for those in developing countries. Dr. Francesco Stipo, Director of the USA Club of Rome suggests that "the world government should reflect the political and economic balances of world nations. A world confederation would not supersede the authority of the State governments but rather complement it, as both the States and the world authority would have power within their sphere of competence". Proponents of laissez-faire capitalism, and some libertarians, say that higher degrees of political and economic freedom in the form of democracy and capitalism in the developed world are ends in themselves and also produce higher levels of material wealth. They see globalization as the beneficial spread of liberty and capitalism.

Examples of globalization

Some examples of globalization are things like: blending of cultures, companies outsourcing, and technology. These things happen because of countries competing and/or working together to get more money (thats what most people want). Most people think its a good thing, but some think its bad. I think it is good but only to an extent. Poorer or underdeveloped countries get left behind in many ways because they can't afford things like new technologies that North American's can afford. China opening to the free market had a big impact on everyone. Some good, some bad. Just look at it this way, anything thats good for you, isn't going to be good for everyone else. Someone is going to be left behind or left out along the way.

International Social Forums

The first WSF in 2001 was an initiative of the administration of Porto Alegre in Brazil. The slogan of the World Social Forum was "Another World Is Possible". It was here that the WSF's Charter of Principles was adopted to provide a framework for the forums.It proved to be a vibrant player in macro level. The WSF became a periodic meeting: in 2002 and 2003 it was held again in Porto Alegre and became a rallying point for worldwide protest against the American invasion of Iraq. In 2004 it was moved to Mumbai (formerly known as Bombay, in India), to make it more accessible to the populations of Asia and Africa. This last appointment saw the participation of 75,000 delegates. In the meantime, regional forums took place following the example of the WSF, adopting its Charter of Principles. The first European Social Forum (ESF) was held in November 2002 in Florence. The slogan was "Against the war, against racism and against neo-liberalism". It saw the participation of 60,000 delegates and ended with a huge demonstration against the war (1,000,000 people according to the organizers). The other two ESFs took place in Paris and London, in 2003 and 2004 respectively. Recently there has been some discussion behind the movement about the role of the social forums. Some see them as a "popular university", an occasion to make many people aware of the problems of globalization. Others would prefer that delegates concentrate their efforts on the coordination and organization of the movement and on the planning of new campaigns. However it has often been argued that in the dominated countries (most of the world) the WSF is little more than an 'NGO fair' driven by Northern NGOs and donors most of which are hostile to popular movements of the poor.

Crisis Jolts Globalization Process

Economic and financial globalization and the expansion of world trade have brought substantial benefits to countries around the world. But the current financial crisis has put globalization on hold, with capital flows reversing and global trade shrinking. Some analysts see the drivers of the recent globalization wave getting undermined, with protectionism on the rise. Even supporters of globalization agree that the benefits of globalization are not without riskssuch as those arising from volatile capital movements. The IMF works to help economies manage or reduce these risks, through economic analysis and policy advice and through technical assistance in areas such as macroeconomic policy, financial sector sustainability, and the exchange-rate system. This page pulls together the IMFs work on globalization and includes links to key articles, documents, and background information.

The negative effects of globalization Opponents of globalization point out to its negative effects. Some of them are listed below. Developed nations have outsourced manufacturing and white collar jobs. That means less jobs for their people. This has happened because manufacturing work is outsourced to developing nations like China where the cost of manufacturing goods and wages are lower. Programmers, editors, scientists and accountants have lost their jobs due to outsourcing to cheaper locations like India. Globalization has led to exploitation of labor. Prisoners and child workers are used to work in inhumane conditions. Safety standards are ignored to produce cheap goods.Job insecurity. Earlier people had stable, permanent jobs. Now people live in constant dread of losing their jobs to competition. Increased job competition has led to reduction in wages and consequently lower standards of living. Terrorists have access to sophisticated weapons enhancing their ability to inflict damage. Terrorists use the Internet for communicating among themselves. Companies have set up industries causing pollution in countries with poor regulation of pollution. Fast food chains like McDonalds and KFC are spreading in the developing world. People are consuming more junk food from these joints which has an adverse impact on their health. The benefit of globalization is not universal. The rich are getting richer and the poor are becoming poorer. Bad apects of foreign cultures are affecting the local cultures through TV and the Internet. Enemy nations can spread propaganda through the Internet. Deadly diseases like HIV/AIDS are being spread by travelers to the remotest corners of the globe. Local industries are being taken over by foreign multinationals. The increase in prices has reduced the governments ability to sustain social welfare schemes in developed countries. There is increase in human trafficking. Multinational Companies and corporations which were previously restricted to commercial activities are increasingly influencing political decisions.

The positive aspect of globalization

Globalization has a positive side as well. Supporters of globalization argue that it is good and beneficial. Some of their arguments are listed below. Globalization has created the concept of outsourcing. Work such as software development, customer support, marketing, accounting and insurance is outsourced to developing countries like India. So the company that outsourced the work enjoys the benefit of lower costs because the wages in developing countries is far lower than that of developed countries. The workers in the developing countries get employment. Developing countries get access to the latest technology. Increased competition forces companies to lower prices. This benefits the end consumers. Increased media coverage draws the attention of the world to human right violations. This leads to improvement in human rights.

The Future Globalization is a tool that should benefit all sections of mankind. One cannot ignore its negative effects. These must be addressed for the worlds peace and prosperity.

Benefits of globalization
"We have moved from a world where the big eat the small to a world where the fast eat the slow", as observed by Klaus Schwab of the Davos World Economic Forum. All economic analysts must agree that the living standards of people have considerably improved through the market growth. With the development in technology and their introduction in the global markets, there is not only a steady increase in the demand for commodities but has also led to greater utilization. Investment sector is witnessing high infusions by more and more people connected to the world's trade happenings with the help of computers. As per statistics, everyday more than $1.5 trillion is now swapped in the world's currency markets and around one-fifth of products and services are generated per year are bought and sold. Buyers of products and services in all nations comprise one huge group who gain from world trade for reasons encompassing opportunity charge, comparative benefit, economical to purchase than to produce, trade's guidelines, stable business and alterations in consumption and production. Compared to others, consumers are likely to profit less from globalization. Another factor which is often considered as a positive outcome of globalization is the lower inflation. This is because the market rivalry stops the businesses from increasing prices unless guaranteed by steady productivity. Technological advancement and productivity expansion are the other benefits of globalization because since 1970s growing international rivalry has triggered the industries to improvise increasingly.

Critics argue that:

Poorer countries suffering disadvantages: While it is true that globalization encourages free trade among countries, there are also negative consequences because some countries try to save their national markets. The main export of poorer countries is usually agricultural goods. Larger countries often subsidies their farmers (like the EU Common Agricultural Policy), which lowers the market price for the poor farmer's crops compared to what it would be under free trade. Exploitation of foreign impoverished workers: The deterioration of protections for weaker nations by stronger industrialized powers has resulted in the exploitation of the people in those nations to become cheap labor. Due to the lack of protections, companies from powerful industrialized nations are able to offer workers enough salary to entice them to endure extremely long hours and unsafe working conditions, though economists question if consenting workers in a competitive employers' market can be decried as "exploited". It is true that the workers are free to leave their jobs, but in many poorer countries, this would mean starvation for the worker, and possible even his/her family if their previous jobs were unavailable. The shift to outsourcing: The low cost of offshore workers have enticed corporations to buy goods and services from foreign countries. The laid off manufacturing sector workers are forced into the service sector where wages and benefits are low, but turnover is high . This has contributed to the deterioration of the middle class which is a major factor in the increasing economic inequality in the United States . Families that were once part of the middle class are forced into lower positions by massive layoffs and outsourcing to another country. This also means that people in the lower class have a much harder time climbing out of poverty because of the absence of the middle class as a stepping stone.

One of the key points made by critics of recent economic globalization is that income inequality, both between and within nations, is increasing as a result of these processes. One article from 2001 found that significantly, in 7 out of 8 metrics, income inequality has increased in the twenty years ending 2001. Also, "incomes in the lower deciles of world income distribution have probably fallen absolutely since the 1980s". Furthermore, the World Bank's figures on absolute poverty were challenged. The article was skeptical of the World Bank's claim that the number of people living on less than $1 a day has held steady at 1.2 billion from 1987 to 1998, because of biased methodology. A chart that gave the inequality a very visible and comprehensible form, the so-called 'champagne glass' effect, was contained in the 1992 United Nations Development Program Report, which showed the distribution of global income to be very uneven, with the richest 20% of the world's population controlling 82.7% of the world's income. Distribution of world GDP, 1989Quintile of Population Income Richest 20% 82.7% Second 20% 11.7% Third 20% 2.3% Fourth 20% 2.4% Poorest 20% 0.2%

Economic arguments by fair trade theorists claim that unrestricted free trade benefits those with more financial leverage (i.e. the rich) at the expense of the poor.

Some other benefits of globalization as per statistics: Commerce as a percentage of gross world product has increased in 1986 from 15% to nearly 27% in recent years. The stock of foreign direct investment resources has increased rapidly as a percentage of gross world product in the past twenty years. For the purpose of commerce and pleasure, more and more people are crossing national borders. Globally, on average nations in 1950 witnessed just one overseas visitor for every 100 citizens. By the mid-1980s it increased to six and ever since the number has doubled to 12. Worldwide telephone traffic has tripled since 1991. The number of mobile subscribers has elevated from almost zero to 1.8 billion indicating around 30% of the world population. Internet users will quickly touch 1 billion.

Benefits and costs of globalization?

The benefits and problems of globalization with example: Benefits Globalisation enables greater trade and competition between different economies, leading to lower prices, greater efficiency and higher economic growth - and it has also enabled increased levels of investment. It has made it easier for people to attract short term and long term investment (investment by multinational companies can play a big role in improving the economies of developing countries). These countries also gain from globalization as it offers access to foreign capital, global export markets, and advanced technology; while breaking the monopoly of inefficient and protected domestic producers.

While globalization may confront government officials with more challenging decisions, the result for their citizens is greater individual freedom.

There is arguably less cultural diversity

Problems However developing Countries often struggle to compete with developed Countries. One problem of globalisation is that it has increased the use of non-renewable resources, whilst also contributing to the increase in pollution and global warming. There is also less control on output as firms can outsource production to where environmental standards are less strict. Globalisation enables workers to move more freely. Therefore, some countries find it difficult to hold onto their best skilled workers, who are attracted by higher wages elsewhere.

Benefits From Globalization

Facts The things that come to many minds when globalization is mentioned are loss of United States' jobs, NAFTA, CAFTA, APEC, outsourcing, and low-wages. The perception to most people is that if outsourcing is bad, then globalization must be bad. The fact is that globalization is good for the United States of America and the market economy. It promotes prosperity for participating countries. What needs to be done is to educate people on the diversity and multiculturalism in the work place, and the sensitivity in the culture of the participating countries. Listed below are the benefits of Globalization and international trade: (1) Opportunity cost (2) Comparative advantage (3) Cheaper to buy than to produce (4) The terms of trade (5) Balance trade (6) Changes in production and consumption

THE IMPACT OF GLOBALISATION ON POVERTY IN BANGLADESH

I. Introduction The contemporary global debate on globalization and its multi-pronged impact has had a strong echo in the academic and political discussions in Bangladesh as well. After a hesitant start in the mid-1980s, Bangladesh moved decisively to embrace the wave of globalization in the 1990s. Ever since, the impact of globalization on the economy of Bangladesh and, more pointedly, on the lives of its people, has become a hotly debated issue.1 This paper attempts to take a fresh look at the impact of globalization on the evolving poverty situation in Bangladesh, and to draw some policy conclusions. For the purposes of present analysis, globalization is viewed purely in its economic dimensions defined as increasing integration of a national economy with the world economy through exchange of goods and services, capital flows, technology, information, and labour migration. Not all of these exchanges, however, figure equally prominently in the case of Bangladesh. The least advance has been made in respect of capital flow. By the year 2000, foreign direct investment amounted to just 0.4 per cent of GDP, which was low even by the standards of low-income countries (average 0.9 per cent). But significant advances have been made in some of the other spheres especially, exchange of commodities and labor. Aided by trade liberalization and export incentives of various kinds, the economy has become much more open in the last decade or so. During the 1980s, the shares of both imports and exports in GDP had remained virtually stagnant. By contrast, between 1989/90 and 1999/00, the share of imports in GDP went up from 13.5 per cent to 20.0 per cent, and the share of exports went up from 5.7 per cent to nearly 13.4 per cent. The flow of labor migration and the concomitant inflow of migrants remittances have also gathered pace. The foreign exchange earnings from remittances now amount to nearly three-fourths of net export earnings. This paper will focus specifically on the consequences of these two dimensions of globalization viz. trade openness and workers remittances. The paper is structured as follows. Section II provides an overview of growth and poverty in Bangladesh in the last two decades and presents an analysis of the growth poverty nexus i.e. the mechanisms through which growth impacted on poverty. Section III then describes the mechanisms through which the forces of globalization affected poverty through the growth-poverty nexus described in the preceding section. In this context, special attention is given to the impact of globalization on the employment opportunities for the poor. Section IV examines the question of whether globalization is undermining the ability of the government of Bangladesh to conduct pro-poor public policy by constraining its revenue-raising powers. Finally, Section V offers some brief concluding observations.

02. Bangladesh - Poverty and wealth

Bangladesh belongs to the poorest group of countries in the world; during the last 3 decades its GDP per capita income barely increased from US$203 in 1975 to US$348 per capita in 1998. The World Bank's World Development Indicators puts Bangladesh in 170th place (out of 207 countries) in the global ranking of gross national income per capita. Despite considerable international assistance, Bangladesh has been unable to eliminate extreme poverty and hunger. There is a huge disparity between standards of living in urban and rural areas of the country. The urban areas, especially the capital Dhaka, and major industrial cities such as Chittagong, Khulna, and Rajshahi, enjoy a better quality of living, with electricity, gas, and clean water supplies. Still, even in the major cities a significant proportion of Bangladeshis live in squalor in dwellings that fall apart during the monsoon season and have no regular electricity. These Bang-ladeshis have limited access to health care and to clean drinking water. The rural population, meanwhile, often lives in traditional houses in villages with no facilities associated with even the most modest standards of living. Disparities encompass 3 dimensions that define considerable differences: geographic, educational, and gender. There is still considerable inequality in the distribution of income between rural and urban populations. In general, the urban population, in the areas around Dhaka, Chittagong, and other large cities, has long been involved in small- and medium-sized businesses or employed in various industries. They benefited from the recent growth and have higher incomes. Meanwhile, the rural population experience chronic shortages of land and regular floods and cyclones, which often a within matter of hours sweep away the results of months of hard work. The 1998 flood, for example, affected two-thirds of the country, wiping out the entire winter crop and displacing millions of people. Education is another problem, as the adult literacy rate reached just 60 percent in 2000, despite the fact that primary education is universal, compulsory and free. The illiterate section of the population is generally much

GDP per Capita (US$) Country Bangladesh United States India Burma SOURCE: United Nations. Human Development Report 2000; Trends in human development and per capita income. 03. The Nexus between Growth and Poverty in Bangladesh 03.1 Trends in Growth, Distribution and Poverty: 1980-2000 Compared to the 1980s, the decade of the 1990s witnessed accelerated growth and faster reduction of poverty, but also a widening of income inequality. GDP grew at the annual average rate of 4.8 per cent in the 1990s compared to 3.7 per cent in the 1980s. At the same time, an unexpectedly early demographic transition brought population growth down from 2.4 per cent to 1.8 per cent. As a result, the growth in per capita income saw an even faster acceleration compared to overall GDP from 1.6 per cent per annum in the 1980s, it went up to 3.0 per cent in the 1990s (Table 1). For an average Bangladeshi, income had grown by about one-third over the decade as a whole. This was not nearly as spectacular a growth of income as observed in many other parts of Asia, but at least it represented a significant advance over the previous decade when per capita income grew by only one-sixth. Faster growth of income was accompanied by some widening of income inequality, in both urban and rural areas. Inequality had also widened in the earlier decade, but it did so much more sharply in the 1990s. Thus, the Gini coefficient of consumption expenditure for urban areas had gone up from 0.30 in 1983/84 to just 0.32 in 1991/92, but then rose sharply to 0.38 by 2000. Rural areas also experienced a similar trend. After remaining roughly constant around 0.25 during the 1980s, the rural Gini rose steeply to 0.30 by 2000. Despite the worsening of income distribution, however, poverty declined in the 1990s, and whats more, it declined faster than in the preceding decade. In the 1980s, the extent of poverty was virtually static from 52 per cent in 1983/84, the proportion of people in poverty fell to just 50 per cent by 1991/92. But the rate of poverty reduction accelerated in the 1990s, and by 2000 the proportion had fallen to 40 per cent. As in 1975 1980 1985 1990 1998 203 220 253 274 348

19,364 21,529 23,200 25,363 29,683 222 N/A 231 N/A 270 N/A 331 N/A 444 N/A

the case of growth, the acceleration in the pace of poverty reduction was nowhere as spectacular as in much of East and Southeast Asia, but it did mark a significant improvement over the 1980s. Not just the proportion of poor people.

03.2 The Sources of Growth Acceleration The simultaneous acceleration that was observed in the 1990s in growth and poverty reduction was not a matter of mere coincidence. In-depth probes into the sources of growth on the one hand and the sources of poverty reduction on the other reveal a distinct causal connection between the two. Poverty declined at a faster pace precisely because the nature of growth acceleration was conducive for that to happen. Analysis of the proximate sources growth shows that industry and services contributed almost equally to the incremental growth in the 1990s, each with a share of about 41 per cent, with agriculture making a relatively small contribution of 17 per cent. Within the broad group of industry, the manufacturing sub-sector contributed 28 per cent, out of which some 20 per cent came from large and medium industries, and the rest from small-scale industries. In agriculture, fisheries made an overwhelmingly large contribution, accounting for 15 out of the 17 per cent contribution that came from all of agriculture. It is important to note that at least two-thirds to three-quarters of the incremental growth in the 1990s originated from the non-tradable sectors mainly, services, construction and small-scale industry. What are the underlying causes of the increasing dominance of non-tradable sectors? In theory it is possible that they enjoyed a kind of endogenous growth arising from autonomous productivity improvement within the sector, but there is no empirical basis for supporting this view. A more likely possibility is that the sector has benefited from a strong demand stimulus arising from outside the sector. The existence of widespread underemployment in the informal sector estimated at around 43 per cent in 1991 makes the non-tradable (which reside mostly in the informal sector) especially responsive to demand stimulus. It is, therefore, reasonable to advance the hypothesis that growth acceleration of the 1990s originated from an enhanced dose of demand stimulus enjoyed by the non-tradable sectors in the 1990s. Evidence suggests that the enhanced demand stimulus came from three major sources a quantum jump in crop production that occurred in the late 1980s, rapid growth in the flow of income generated by the readymade garments industry, and accelerated flow of workers remittance from abroad The readymade garments (RMG) industry has registered phenomenal growth in recent years. Starting from a low base in the mid-1980s, it has by now become both the leading industry and the leading export item of Bangladesh. By the mid-1990s, it was contributing somewhere between 20 and 25 per cent of total value-added and employing between 40 and 50 per cent of the workforce engaged in large and medium scale manufacturing.3 Its share in total export has risen from barely 4 per cent in 1983/84 to over 75 per cent by the year 2000. The growth of RMG was especially rapid in the 1990s. The number of manufacturing units in this sector increased from fewer than 1000 in 1990/91 to nearly 3000 by the end of the decade, and the aggregate

value-added created by the sector jumped from less than Tk 10 billion in 1988/89 to over Tk 35 billion in 1997/98.4 03.3 The Growth-Poverty Nexus To see how this acceleration in growth led to faster rate of poverty reduction, it is necessary to understand how the accelerated growth of non-tradable affected employment and wages for the poor. We explore this growth-poverty nexus below specifically in the context of rural areas, since, as observed earlier, it was mainly in the rural areas that poverty declined faster in the 1990s compared to the 1980s (while urban poverty declined in a steady manner). As the enhanced stimulus of demand enabled non-farm non-tradable activities such as services, construction and small-scale industries to grow more rapidly in the 1990s compared to the preceding decade, one of the effects was reflected in growing average size of firms engaged in these sectors. These firms were still small in the national context, but they were large enough to require wage labour in addition to any family labour being used. Although there are no systematic surveys of this sector to confirm exactly how its structure has changed over time, this inference can be made by piecing together a number of different kinds of evidence, drawn from labour force surveys, household expenditure surveys, agricultural censuses, and so on. This change in the structure of non-farm enterprises has profound implications for employment and income of the rural poor. Throughout the last two decades, poor landless laborers have shifted out of agriculture to find alternative livelihood in the rural non-farm sector. But the nature, and consequences, of this shift was very different in the 1990s as compared with the 1980s, and this had a lot to do with the changing structure of non-farm enterprises. The 1980s were characterized by a rapid shift of labor force into rural non-farm activities, but the predominant nature of the shift was absorption into self-employment at the lower end of the productivity scale. By contrast, the 1990s witnessed a less rapid shift of labour force into the rural non-farm sector, but one that was characterized by faster growth of relatively larger-scale enterprises that were more productive and employed more wage labour. The poor rural workers thus found an increasing opportunity to secure wage employment in the 1990s instead of overcrowding into petty small-employed activities. This transformation in the dynamics of rural labour force has important implications for the dynamics of poverty in rural Bangladesh. Analysis of the Household Expenditure Survey of 2000 shows that salaried employment in the rural non-farm sector was much more rewarding for the poor than any other mode of employment. For example, the extreme poor working in the rural non-farm sector earned on average taka 56 per day from salaried employment as compared with taka 38 from self-employed activities . 04. The Impact of Globalization on Poverty How did globalization impact on the growth-poverty nexus described above? We attempt to answer this question in two parts first, by examining the mechanisms through which globalization might have affected the growth process and, second, by identifying its impact on the employment opportunities of the poor.

04.1 The Impact of Globalization on the Growth Process The preceding section has argued that the modest growth acceleration that occurred in the 1990s was led by small and medium enterprises in the non-farm non-tradable sectors. Furthermore, as these enterprises created new opportunities for wage employment, the rural poor benefited more than before since wage employment is more rewarding for them than the petty self-employment in which they have traditionally been engaged when looking for alternative employment opportunities outside agriculture. As a result, growth acceleration translated into a faster rate of poverty reduction as well. At the first sight, globalization would seem to have little to do with this process, since globalization has to do with a countrys relationship with the external world, whereas production of non-tradable is by definition geared towards the domestic market. But this view is too simplistic. Non-tradable may be produced for the domestic market, but they are not insulated from the countrys interactions with the outside world. What is much clearer, however, is the incentive provided by trade liberalization through the input market. In fact, it is arguable that the major credit for bringing about the quantum jump in crop production in the late 1980s goes mainly to liberalization of markets for agricultural inputs, especially elimination of non-tariff barriers to the importation of cheap irrigation equipment. Because of import liberalization, which took effect in 1988, the price of shallow tube-well in particular came down drastically. Until about 1986, shallow tube-wells used to be distributed by the government at a subsidized price in order to promote more extensive use of irrigation. Liberalization provided an alternative, and from the point of view of government budget a much less expensive, method of achieving the same goal. In fact, the price of shallow tube-wells came down so much that the market price turned out to be almost 40 per below even the subsidized price of pre-liberalization era. This fall in price, combined with relaxation in sitting restrictions, resulted in an enormous expansion in the extent of irrigated area. Between 1986 and 1996 irrigated area expanded twice as fast as in the period between 1978 and 1986. From an average of 2.3 million acres in the three-year period 1984/85-1986/87, total irrigated area jumped to an average of 3.5 million in the next three years an increase of nearly 50 per cent. Who were typically large and middle farmers, but also reached the small and marginal farmers who had to buy water from others. This is so, because the operation of market forces ensured lower prices of water following expansion of its supply. According to one estimate, the average water charge in nominal terms declined by 4 per cent during 1987-1994 while the price of rice increased by 30 per cent, indicating a substantial fall in the real price of water . The result was a broad based expansion of irrigation coverage. million metric ton during 1984/85-1986/87 the use of fertilizer went up to an average of 1.7 million metric ton in the next three years representing once again nearly 50 per cent increase as in the case of irrigated area.13 This expansion in the use of fertilizer occurred in a context where there was no significant decline in its price but

its availability had much improved by the privatization of its distribution and internal market liberalization of fertilizer trade that had occurred a few years earlier. While internal market liberalization must have created an enabling condition for the expansion of fertilizer use, the stimulus to expansion must have come from the expansion of irrigated area itself boosted by liberalized import of irrigation equipment. The combined effect of much greater use of irrigation and fertilizer was reflected in the discrete jump in rice production that occurred in the late 1980s. Careful econometric investigation has confirmed the predominant role played by trade liberalization of irrigation equipment in boosting rice production in the late 1980s (Ahmed 2001).14 As expected, the major determinant of fertilizer use was found to be irrigated rice area, and by far the most important influence on irrigated area was a dummy variable representing import liberalization around 1988/89. While the expansion of fertilizer use and irrigated area boosted rice production, this was partly offset by the loss of non-irrigated rice area. The net effect, however, was still strongly positive. Ahmed (2001) has estimated that the net effect of liberalization amounted to some 38 per cent of the incremental rice production between 1988/89 and 1996/97. Another way of looking at it is that without trade liberalization annual growth rate of rice production during this period would have been 1.4 per cent instead of the 2.5 per cent rate that was actually achieved. The forces of globalization are thus seen to have played a critical role behind all three sources of demand stimulus that led to accelerated growth in the 1990s and in the process led to faster reduction of poverty. Small industries seem to have benefited from the liberalization of import of capital machinery and raw materials . They were especially helped in this regard by a structure of tariffs that favored raw materials and intermediate inputs more than final products. Thus, in 2001/02, average applied tariffs on raw materials and intermediate inputs were in the range of 11-12 per cent as against 26 per cent on final products. While most categories of industries benefited from lower tariff on inputs and higher tariff on final products, there are reasons to believe that small industries gained more than others. In a regime of import control, small firms find it difficult to compete with larger enterprises in claiming a fair share of foreign exchange to obtain the necessary inputs. They are then forced to obtain their inputs from domestic sources, where the price is higher, quality lower and supply limited. Therefore, when the import of inputs is liberalised, small firms tend to gain proportionately more. At the same time, they are spared, relatively speaking, the rigours of liberalisation-induced competition in the product market as their products happen to be only remote substitutes of imported items.

04.3 The Trend of Manufacturing Employment In addition to considering the overall employment situation, the debate on globalization in Bangladesh has also focussed on manufacturing employment in particular. This has been inspired partly by high-profile news stories about job losses in a number of large-scale import-substituting industries, especially in the public sector. Mainly, however, the debate has been fuelled by the findings of the Labour Force Surveys, which show that manufacturing employment has declined in both relative and absolute terms in the 1990s. Thus, under the

usual definition of labour force of age 10 years and above, the number of workers engaged in manufacturing seems to have declined dramatically from 7.0 million in 1989 to just 4.1 million in 1995/96. This has raised concerns that globalisation may be leading to deindustrialization in Bangladesh, with all the deleterious consequences for poverty this implies. However, careful analysis of data casts serious doubt on this pessimistic view. The first point to note is that the deindustrialisation thesis rests on data that takes either 1989 or 1990/91 as the base, but the data for both these years are highly suspect. Successive labour force surveys (LFS) provide the following figures on manufacturing employment. 1983/84 1984/85 1985/86 1989/90 1990/91 1995/96 1990/00 - 2.48 million - 2.69 million - 3.02 million - 7.00 million - 5.90 million - 4.10 million - 4.30 million

The figures for the two years 1989/90 and 1990/91 are clearly anomalous. They represent an absurdly high rate of employment growth in the latter half of the 80s, when manufacturing output was actually stagnating. By the same token, they represent an abnormally large decline in employment in the first half of the 1990s, when manufacturing output was expanding fast. After a careful re-examination of the LFS data, Salmon (2002) concludes that the apparent decline in manufacturing employment in the 1990s was probably a statistical artifact created by reclassification of a certain category of female workers namely, those involved partly in food processing and partly in agriculture. Its probable that most of these female workers were classified as unpaid family worker in manufacturing in the LFS of 1989 and 1990/91, but mainly classified as agricultural workers in the subsequent surveys.19 This would explain at least in part the unusual inflation of manufacturing employment in the LFS of those two years. There are also a couple of independent sets of evidence that strengthen the presumption that the LFS figures for 1989 and 1990/91 were unduly inflated. First, contrary to LFS data, the CMI data show increasing volume of employment in large and medium-scale manufacturing in the 1990s. Thus from 1.16 million in 1991/92, the figure went up to 1.71 million in 1995/96 and further to 2.1 million in 1997/98. There is no evidence here of any dramatic decline in the first half of the 1990s, as the LFS indicates, at least as far as the large and medium scale industries are concerned. Furthermore, since the output of the more labour-intensive small-scale sector grew faster than its larger counterpart during this period, there is no reason to suspect any decline in employment in this sector either, barring a dramatic reversal of factor intensity, for which it is hard to think of any plausible reason. Second, alternative estimates of overall manufacturing employment exist for the late 1980s, which are clearly incompatible with the LFS figures for 1989/90 and 1990/91. Thus the Economic Census of 1986/87, which covered all size categories of manufacturing enterprises, gave a figure of 3.09 million, which is perfectly consistent with the LFS figures

for the preceding years but not with the two later years. There is another set of estimates, for 1989, which combines data from the Census of Manufacturing Industries (CMI), which covers mostly large and medium sized industries, with data from Handloom Census, which covers the handloom part of the cottage industry sector, and data from the Integrated Annual Survey of Non-Farm. Economic Activities, which covers other small and cottage industries. The combined employment figure comes to 2.89 million, which is way below the LFS figures for 1989/90 and 1990/91, but not too far out of line with the estimates for the rest of the years in the late 1980s.

Employment elasticity
There is another strand of argument that focuses not so much on the absolute size of manufacturing employment as on the ability of the manufacturing sector to create employment as measured by the elasticity of employment with respect to either output or value-added. A typical conclusion drawn from such evidence is that the employment generating capacity of the manufacturing sector has declined. If true, this would be a serious indictment of the move towards globalization that gathered pace in the 1990s. In truth, however, the evidence on employment elasticity needs to be interpreted with extreme caution, for depending on the causes underlying the decline in elasticity it may or may not indicate a reduction in the capacity to generate employment. There are a number of reasons for this. First, when an industry is expanding, it may adopt new processes or innovate new products that enhance the productivity of labour. In that case, elasticity would decline, but this decline would be a necessary precondition for the industry to expand and hence to generate more employment. Second, if an expanding industry comes up against the bottleneck of a tightening labour market, it will have to pay higher wages in order to expand its scale of operation. Higher wages will, however, reduce the elasticity of employment (with a given production technology), but once again this decline would be a necessary precondition for the industry to expand and to generate more employment. In both these cases, declining elasticity would in fact indicate enhanced rather than reduced capacity of the industry to generate employment in the sense that, given the conditions stated, the only way the industry could generate more employment was by allowing the elasticity to fall. By the same token, unchanged elasticity would have indicated failure to expand and to create more employment. There is some evidence to suggest that something like this has probably happened in Bangladesh in the 1990s. If this conclusion seems counter-intuitive, the reason lies in the fact that there is a problem with the way elasticity of employment is usually measured. Strictly speaking, elasticity is a ceteris paribus concept; it is supposed to show how employment responds to output, other things remaining the same these other things include factor prices and the available menu of technology choice. If the ceteris paribus elasticity declines, then it makes sense to say that the capacity to create employment has declined, holding other things constant. But in order to derive such an elasticity, one will have to estimate a structural parameter, through some procedure that holds other things constant. However, the way elasticity is typically measured

 by taking the ratio between observed change in employment with observed change in output (or, value-added) gives one a reduced form estimate, where the effects of all sorts of things get confounded. There is no theoretical reason why such an estimate of elasticity should indicate what a structural parameter is meant to do. In the absence of a proper structural estimate of elasticity, an alternative approach is to look at the manner in which the structure of production has changed, in two respects whether the proportion of more labour-intensive activities has changed relative to less labour-intensive ones, and whether labour-intensity of the technique of production has changed within each type of activity. These would indicate the direction in which the capacity to create employment has changed. However, in order to assess how globalisation has affected this capacity, one will have to go one step further to see how much of the observed structural change can be attributed to globalisation and how much to other factors. All this requires detailed empirical investigation of a kind that is beyond the scope of this paper. However, some tentative observations can be made. First, the growth of labor-intensive activities such as readymade garments and leather products suggests that the structure of production has probably moved towards more labour-intensive activities. Furthermore, since these activities also happen to be export-oriented, globalization can be given some credit for this phenomenon. Second, careful econometric investigation has shown that the activities that have a higher proportion of either export orientation or import penetration seem to employ more labour-intensive techniques of production, holding other things (such as factor prices) constant. In other words, the activities that have been exposed to globalisation more have become more labour-intensive than the rest. These observations would seem to strengthen the presumption that manufacturings capacity to generate employment has actually increased in the period of rapid globalisation. In summary, while the data on manufacturing employment is not entirely unambiguous, the balance of evidence sifted from a close examination of alternative sources of data would suggest the following conclusions. First, manufacturing employment increased in the 1990s, not declined as has sometimes been suggested. Second, the rate of increase of manufacturing employment was considerably faster in the 1990s compared to the 1980s, which is in keeping with the observed acceleration in the growth of manufacturing output. Third, manufacturings capacity to generate employment has probably increased in the era of globalization. None of these conclusively proves that globalization had a positive impact on manufacturing employment because the effects of other possible influences have not been controlled for in the preceding analysis. But at least they cast serious doubt on the hypothesis of a negative impact that is frequently drawn on basis of the observed trend in manufacturing employment in Bangladesh. First, since the whole idea of trade liberalization is to reallocate resources from inefficient import-substituting industries towards more efficient export-oriented ones, the loss of output and employment in some activities is inevitable in fact it is an inseparable part of the process of improving efficiency through freer trade. Second, the loss of employment in textile and other inefficient industries has probably been more severe than would have been the case in the normal course of reallocation of resources following trade liberalization. This is because the public sector firms had long been burdened with excess labour more on political than on economic grounds. The resulting inefficiency would have forced these firms either to close down or shed labour in any case, sooner or later.

Globalization has hastened that process, but only a part of the loss of employment can be attributed to globalization, the other part being attributable to the history of overstaffing. Third, well-publicized cases of loss of employment in large public sector enterprises should be seen in the context of the evidence presented above, which showed that overall manufacturing employment most probably increased in the 1990s, suggesting a net positive effect of globalization. The number of job losses occurring in the large import-substituting firms in both public and private sector is actually a very small fraction of overall manufacturing employment. Fourth, while the positive net effect implies that globalization has helped reduce poverty overall through the route of manufacturing employment, the increased poverty and suffering of those who have actually lost their jobs cannot be ignored. Public policy must address their suffering as an integral part of the policy towards globalization. IV. Globalization, Fiscal Powers of the State, and Sustainability of Poverty Reduction The preceding discussion has shown that on the whole globalization has strengthened the potential for poverty reduction in Bangladesh by creating more remunerative employment opportunities both directly in the tradable sectors and indirectly, and perhaps more importantly, in the non-tradable sector as well. Whether this potential can be fully utilised depends, however, on public policy that goes beyond globalisation. After all, while globalisation may help, it cannot be the whole of propoor public policy. This raises the question of what effect globalisation might have on the governments ability to conduct pro-poor public policy. One strand of argument in the contemporary debate on globalisation suggests that it might actually compromise governments ability to conduct pro-poor policy by reducing its fiscal powers. The force of this argument needs to be examined in the context of Bangladesh. The argument that public policy needs to go beyond globalisation is certainly valid. One reason emanates from the consequences of globalisation itself namely, that. globalisation brings about wideranging structural changes within an economy, opening up new opportunities for enhancing employment and income but also closing down, or at least diminishing, many existing means of livelihood. In general, opportunities open up in those activities in which a country has comparative advantage, and diminish in those in which it has comparative disadvantage. Job losses in many importing-substituting industries in Bangladesh principally, in the traditional textile and paper industries even as employment has expanded rapidly in garments, leather products and frozen food sectors, bear testimony to this fact. Economic theory suggests that generally speaking the gains will outweigh the losses, so that a nation should gain an overall increase in welfare. The problem, however, is that gains and losses may not be distributed evenly across the population. Much depends on who happens to be engaged in the expanding activities and who in the contracting ones, and who has the skills and resources to access the new opportunities that are being opened up. This is not a problem that is unique to globalisation. Even without globalisation, structural changes do occur in any economy except in the most moribund ones. Owing to changes in technology, tastes, demographic structure, and so on, new opportunities open up in the sphere of production and old ones close down all the time. The effects of these home grown structural changes are not qualitatively dissimilar to those induced by globalisation. They too create new uncertainties and

vulnerabilities along with new opportunities, and in this case too the cost of negative effects tends to fall disproportionately more on the weaker segments of the population, and for much the same reasons. If this is not seen as a reason for avoiding structural changes in general, it should not be seen as a reason for shutting the door to globalisation either. There is, however, a very good reason for being especially concerned with the possible negative effects of globalisation and for trying do something about it. The problem with globalisation is that, unlike home grown structural changes, which typically unfold incrementally over a long haul allowing a breathing space for necessary adjustments, globalisation tends to bring about sweeping structural changes within a short period of time. The sheer pace of change can entail serious problems of adjustment. What is worse, these adjustment problems can be compounded by what can be described as the problem of shifting comparative advantage. It refers to the phenomenon that the structural changes caused by globalisation may not be an onceforall affair, because the nature of comparative advantage may itself undergo rapid change during the process of globalisation. Comparative advantage, it must be remembered, is inherently comparative in nature, i.e. it depends not just on the characteristics of a particular country but also on those of other countries that participate in a trading network. As a result, any country that has already embraced globalisation may find that its comparative advantage keeps changing as the wave of globalisation brings in new countries within the trading network. Thus, Hong Kong and Taiwan found out that the comparative advantage they had once enjoyed in labour-intensive garment industries for a number of years was eroded as countries such as Bangladesh and Vietnam entered the export market with cheaper labour. Bangladesh itself faces similar prospects today as the impending expiry of the MultiFibre Agreement threatens the viability of its garments industry in the face of competition from new entrants, chiefly in Africa. In each case, a country that loses comparative advantage in one sphere will eventually find it elsewhere. But the problem is that shifting comparative advantage of this kind can keep the structure of an economy in a constant state of flux for a prolonged period of time. The disruptive effects of globalisation may, therefore, be quite serious. Public policy must address this problem by setting up an adequate safety network, by retraining displaced workers, and so on if the potential poverty-reducing effect of globalisation is to become a reality for the majority of the poor. In addition to addressing the short run adjustment costs, there is also a longer-term concern that public policy must address. It is important to emphasise that the most globalisation can do to help reduce poverty is to strengthen the potential for reducing poverty - by expanding employment opportunities for the poor. Whether this potential will translate itself into reality depends on whether a sufficiently large number of poor people will actually be able to take advantage of these opportunities. It cannot be taken for granted, however, that the poor will be able to do, since they typically face many well-known impediments in integrating themselves into mainstream economic activities. The problem essentially is that there may be a mismatch between the structure of opportunities opened up by globalisation and the structure of capabilities possessed by the poor. Public policy will have to play a major role here to improve and remould the structure of capabilities of the poor for example, by providing them with education, healthcare, access to infrastructure and

other assets, and so on. Otherwise, the poverty reducing potential of globalisation will remain largely unrealised. In short, for globalisation to be able to reduce poverty, it must be complemented by public policy that goes beyond measures designed merely to deepen the forces of globalisation. In particular, public policy must address issues of social safety net to deal with the poverty-enhancing disruptions that are inherent in the process of globalisation and of enhancing the capabilities of the poor so that they can take full advantage of the opportunities opened up by globalisation. But public policy of this kind costs resources, which means that the size and role of public expenditure may have to rise. Yet, many have argued that globalisation actually reduces governments ability to undertake necessary public expenditure. This is because governments ability to collect taxes is supposed to be reduced in various ways for example, by the tax exemptions that are offered in order to lure foreign capital and by the tariff reductions that are made for promoting trade liberalisation. If true, this would seriously undermine globalisations ability to reduce poverty. Bangladesh does offer very lucrative tax exemptions for foreign capital. But the inflow of foreign capital still remains so minuscule that the overall revenue implication of this policy is yet to emerge as a major concern. A more important concern lies in the potential loss of revenue from trade liberalisation, especially since Bangladesh has undertaken one of the deepest and fastest move towards trade liberalisation compared to many other developing countries. The experience of Bangladesh in his regard is quite instructive. First, a great deal of tariff reforms did not lead to any effective reduction in duties, because of widespread prevalence of tariff redundancy (water in tariff). Second, any effect of reduced rates of duty was compensated partly by the ratification of quotas and partly by an upsurge in the volume of imports following trade liberalization, both of which served to expand the base of revenue collection. As a result, revenue from import duties as a proportion of GDP did not decline, and even slightly increased in years of high import growth. It is important to emphasize, however, that mere evidence of a reduction in revenues from customs duties is not sufficient to conclude that trade liberalization has adversely affected the revenue effort of the government. In theory, trade liberalization does not necessarily entail loss of revenue from imports (even leaving aside the possibility of an expanding tax base following ratification of quotas and increase in import volume). What liberalisation requires is the elimination of protective duties i.e., duties that discriminate against imports. This is perfectly consistent with the imposition of a tax that is neutral between imported and domestic goods. Such a tax would continue to raise revenue from imports as well as from domestic goods while liberalization is undertaken. Therefore, if a government is concerned about the revenue effect of trade liberalisation, it has the option of imposing such a neutral tax. Bangladesh did precisely that by introducing the value-added tax (VAT) in 1992 to be applied uniformly on domestic and imported goods. On the domestic front, it replaced the oldstyle excise duties, and on the import front it (partly) replaced customs dutiesand sales tax on imports. Another potential tax instrument for sustaining revenue effort while reducing protective tariffs is provided by the so-called Supplementary Duty. Like the VAT, it is meant

to be imposed equally on import and domestic production; and it can also be selectively imposed on relatively inessential items of consumption. As a result of these tax reforms, the overall collection of indirect taxes did not actually suffer in Bangladesh following trade liberalisation. As a proportion of GDP, total revenue from indirect taxes in fact increased from 4.6 per cent in the late 1980s to 5.6 per cent in the first half of the 1990s and further to 6.3 per cent in the second half of the decade. Increased revenue from indirect taxes has been supplemented by a move towards better collection of direct taxes that proved quite successful up to the mid-1990s (but tapered off since then). As a result, total revenue as a percentage of GDP went up from 6.3 per cent in the second half of the 1980s to 9.2 per cent in the second half of the 1990s. Correspondingly, public expenditure as a percentage of GDP also went up, albeit slightly, during the same period from 12.9 per cent to 13.6 per cent, despite a secular decline in the inflow of foreign aid. Moreover, the share of public expenditure going to sectors that benefit the poor proportionately more such as health, education, and basic infrastructure has also increased. The combined share of health and education in total budgetary expenditure has gone up from 14 per cent in the first half of the 1980s to 23 per cent in the second half of the 1990s.

Rural poverty in Bangladesh

Bangladesh is one of the worlds poorest countries, ranking third after India and China in the extent of poverty. The population is predominantly rural, with about 85 per cent of its 135 million people living in rural areas. For their livelihoods rural people depend mainly on the land, which is both fertile and extremely vulnerable. Most of the country is made up of flood plain, and while the alluvial soil provides good arable land, large areas are at risk because of frequent floods and cyclones, which take lives and destroy crops, livestock and property.

Since the 1990s the country has made good progress towards reducing the incidence of poverty, achieving a 1 per cent drop in the proportion of people living below the poverty line every year. Estimates of rural poverty rates now stand between 53 per cent and 43.6 per cent. In general the depth and severity of poverty has been reduced more successfully in rural zones than in urban areas, although rural zones still lag far behind urban areas in terms of development.

Population below poverty line: 36.3% (2008 est.)

Year Population below poverty line Rank Percent Change Date of Information 2009 2010 45 36.3 36 48 -19.33 % 2004 est. 2008 est.

Definition: National estimates of the percentage of the population falling below the poverty line are based on surveys of sub-groups, with the results weighted by the number of people in each group. Definitions of poverty vary considerably among nations. For example, rich nations generally employ more generous standards of poverty than poor nations. Source: CIA World Factbook - Unless otherwise noted, information in this page is accurate as of February 19, 2010

Poverty trends 1991-2000

World Bank/BBS estimates are based on the Cost of Basic Needs (CBN) method. The base year for the CBN poverty line was 1991-92, which was then updated for 1995-96 and 2000 for changes in the cost of living using a price index. Difference with Sen/Mujeri estimates is the use of unit record data vs grouped data and different non-food poverty line as base year.

Bangladesh: Poverty Headcount Rate Upper Poverty Line Lower Poverty Line

1991-92 National Urban Rural 58.8 44.9 61.2

199596 51.0 29.4 55.2

2000 1991-92 49.8 42.7 36.6 23.3 53.0 46.0

199596 34.4 13.7 38.5

2000 33.7 19.1 37.4

Bangladesh aims to cut poverty rate to 15% by 2021

The Bangladeshi government is working to cut poverty to 15 percent of its population by 2021, the country's local government minister Syed Ashraful Islam said Sunday. Inaugurating the 2nd ministerial meeting of the Center of Integrated Rural Development for Asia and the Pacific (CIRDAP) in Dhaka, he said Bangladesh wants CIRDAP to play a vital role for poverty alleviation and development of poorer nations. Islam called upon the delegates of 14 countries, participating in the five-day meeting of the CIRDAP in Dhaka, to extend all possible support in promotion of agriculture sector and rural development in particular. "We are struggling very hard to develop agricultural sector and eradicate poverty," he said. An estimated 45-50 percent of Bangladesh's 150 million people reportedly live below the international poverty line of 1.25 U.S. dollars a day.

Fighting poverty in Bangladesh

By BBC News Online's Kate Milner Bangladesh is preparing for the first visit by a US president since 1971, hoping it will attract more western investment to the country. During his nine-hour visit, President Bill Clinton will find out about the micro-credit system of small loans aimed at helping poor people, for example to buy a cow so they can sell milk.

It is a system supported by the president and much heralded across the world by countries keen to copy the Bangladesh model. But in his short visit, the president will not see the whole picture. The scheme has proved very popular but there are criticisms that it fails to help

Conclusion and Recommendations:

As a conclusion of the project, we would like to propose criteria for designing and implementation policy measurements and development actions which will contribute to poverty alleviation through secondary crop based agricultural diversification. Technology development for secondary crops should be strengthened. The allocation of R & D resources should be examined based on the effect of the developed technologies to the welfare of rural poor farmers. Development of cost saving technologies should be prioritized. Contract farming is an effective measurement to provide mutual benefit both to producers and consumers. The clear and fair standard of contract and monitoring system should be provided by the initiative of government. Construction of small scale irrigation, storage facilities and provision of market information should be prioritized in infrastructure development. Credit schemes should focus on resources poor farmers. Practical measurement such as grouping of credit recipient is necessary to assure repayment. Small scale processing is an effective measurement to mitigate rural poverty and should be supported by credit and appropriate technologies. Modern processing has potential to expend secondary crops demand which should be monitored carefully to use opportunities for poverty alleviation. Current price support and import trade policy for major cereals should be carefully examined if these policies deteriorate poor peoples welfare. The input use for secondary crop production is still low. Therefore, the output which will be expected by increase of input use is relatively higher than major cereals. It is useful to evaluate the benefit of input use to convince the relevancy of input subsidy schemes. There is enough possibility to formulate regional collaboration schemes which can produce mutual benefit based on the differences in socio-economic conditions. Formulation of farmers group should be supported to solve problems which small scale farmers cannot handle individually, especially to promote contract farming and technology dissemination. Legal protection of land should be secured to strengthening farmers motivation to invest their own land.

REFERENCES

1. 2. 3. 4.

Rahman, P.M.M. 1994: Poverty Issueses in Rural Bangladesh, PP. 3-70 Ravallion, M. and B. Sen 1996: When Method Matters: Monitoring Poverty in Bangladesh, weekend (the daily Independent magazine) Web sides: 1. Www.google.com.bd 2. www.wakipidia.com 3. www.amazon.com