Economics of Social Issues
14 September, 2017
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Economics of Social Issues

Introduction

Over the past decades, globalization has gained importance as a factor responsible for growth of Poland's economy and other economies across the globe. Poverty is the major problem facing many nations in the 21st century. Globalization has greatly influenced the poverty level, inequalities within and across nations. This paper therefore discusses how globalization has affected poverty rate in Poland and how it has influenced the inequalities across nations and in Poland (Harrison, 2007).

Poverty in Poland

In Poland globalization has greatly assisted in reducing poverty in several ways. Globalization has assisted Poland to integrate with other economies in the world. The integration of Poland economies with developed nation's economies such as the United States of America economies and United Kingdom economy has been greatly enhanced by globalization. Due to globalization, Poland has also enhanced interconnectedness with other developing nations such as Czech Republic and Slovakia. The integration has made Poland to easily trade and share with other developed and developing nations. This therefore has really assisted in reducing poverty in Poland. The integration has caused Poland economy to grow very first and thus reducing poverty in this economy (Harrison, 2007).

Globalization has resulted into increased world trade. For the past years Poland has enhanced its share of the world trade by a great margin due to economic integration. Trade particularly in Poland has improved dramatically due to increased demand for manufactured goods that has been brought about by globalization. Poland is currently concentrating in manufacturing and production of textile, chemical, machinery, steel, iron, fertilizers, petrochemicals, electrical machinery, machines tools, electronics, car manufacturing and shipbuilding. Therefore, due to globalization, the market for these products has greatly increased. The increased market has resulted into reduction of unemployment in Poland since many people are employed in industries producing these products, thus reducing poverty in the nation (Dinopoulos, 2008).

Dinopoulos (2008) argue that Trade in Poland is dominated by European Union, that is, about sixty percent of Poland's imports and eighty percent of its exports comes from or goes to member states of European Union. Germany, Poland's neighboring country, is the most important partner in trade. The trade between Germany and Poland accounts for a quarter of polish trade's value. Poland imports mostly energy and capital goods that are usually required for industrial retooling and for manufacturing inputs instead of consumption goods. Its major exports on the other hand are cars, furniture, machinery, iron and steel products. Poland is a member of world trade organization and European Union. This therefore has made it to not only trade with nations in European Union but also with other nation around the world. The integration of Poland's economies with other economies has greatly enhanced the market for trade thus reducing poverty.

Harrison (2007) argues that Globalization has resulted into huge capital inflows in Poland. The capital inflows has resulted into growth and development of the economy and in the long run, increasing investment further. This therefore enhanced incomes in Poland and thus alleviating poverty. Due to its good opportunities for trade and investment, Poland is currently attracting many investors around the globe to venture in different sectors, thus increasing the capital inflows in the country. United States and other international companies do business in Poland due to its strong economic development potential, huge domestic market, tariff-free access to European Union and political stability.

Globalization has resulted into exchange of knowledge and technology among different societies in Poland. Direct foreign investment has brought about not only an enlargement of physical capital stock, but also technical innovation. This is due to the fact that international organization in Poland has resulted into spread of ideas and opinions on methods of production, management practices, export and import markets and economic and international policies. Global warming and globalization of the media has also enhanced awareness of living within an increasingly interconnected globe. Globalization has thus made people in Poland to be aware of what is going on around the world and hopefully, encouraging Poland's citizen to take action so as to reduce poverty. The positive information brought about by globalization greatly assists in reducing poverty in Poland. Immigration and emigration brought about by globalization also assist in reducing poverty in Poland.

Globalization increased emigration from Poland to United States of America. Individuals had a feeling that they have a better chance to make a better living in foreign country than in their own country. They therefore left their nation hoping to get better employment opportunities, better education and exposure to a very different. This however, benefitted Poland in the long run. Those leaving the nation had to come back with new skills and increased wages thus reducing poverty in Poland. Globalization therefore assists in reducing poverty rate (Collins, & Graham, 2004).

Inequalities among countries

Globalization usually causes rapid transformations in trade relations, fiscal flows and labor mobility among nations in the world. The development has brought the economies of the nations close together. It has also made the economies to be strongly interrelated. This therefore has resulted into reduced inequalities among nations even if there is a huge heterogeneity in the degree of process of globalization over time and among nations and regions. Within the factor world model of factor movements, the free movement of factor of production such as labor and capital tends to minimize inequality among nations as it has different impact on inequality in rich and poor countries. In the factor world, global inequality or inequality among nations is because of different capital-labor ratios. Nations that are rich usually have more capital per worker than nations that are poor. Rates of return to capital are usually higher in poor countries than in countries that are rich. Wages therefore will be very high in countries that are rich than poor countries (Martell, 2007).

According to Martell (2007), the free movement of factor of production brought about by globalization forces capital to move from rich to poor countries, while workers will be forced to move from countries that are poor to rich nations. This therefore reduces capital to labor ratio in rich nations, while that in poor nations are increased. The flow continues until capital to labor ratios equalizes among countries, thus making factor prices to be equal. This steadily reduces income gaps among nations which intern reduces global inequality or inequality among nations. Goods mobility brought about by globalization have similar effect as factor mobility.

The abundance of capital in rich nation has resulted into exportation of capital-intensive goods, while the abundance of labor in poor countries has resulted into exportation of labor intensive goods. The increase in demand for labor and the decrease in demand for capital in poor nations raise wages and reduce capital rentals. In rich nation, the reverse can occur. In case the equilibrium is for less than full specialization, factor prices can move toward equality among nations just like in factor mobility case. Trade reduces inequality among nations since the incomes' ratio per capita is relative to ratio of wages.

Inequalities in Poland

According to Suter (2011), the process of globalization has considerably affected the labor market in Poland. The process has resulted into huge pool of unemployment and wage differential, thus failing to reduce inequalities in Poland. In Poland, there is an increased wage inequality among skilled and unskilled workers, which has been brought about by globalization. Wage inequality is still high in sectors that mostly affected by globalization such as food production, car manufacturing and office machinery. The current trade liberalization in Poland has resulted into increasing wage gaps among the educated and uneducated individuals.

The current combination of change in technology and globalization of markets in Poland has increased faster the demand for and the wage premium for skilled labor than the way the system of education is supplying trainable and skilled workers thus increasing inequality in income. Inequality has failed to reduce in Poland due to global capital markets. High inflows of capital resulted into inflationary pressure and hurt labor-intensive agriculture and manufactured exports in Poland.

During the boom the poor benefited less and lost a lot during the bust. In Poland, with capital fleeing, it was forced to charge high interest rates so as to protect its currencies, thus affecting negatively small capital-starved enterprises and their employees who earn lower wages. This resulted into reduced general employment level and thus increases inequalities. High interest surroundings also happen to favor net savers and impacts negatively on small debtors (Suter, 2011).

Conclusion

It is clear from the discussion that globalization has assisted in reducing poverty in Poland. It has also assisted in reducing inequalities among nations and has failed to reduce inequalities within nations such as Poland. Due to globalization, Poland has managed to integrate with other economies in Europe and around the globe. The integration has assisted Poland in alleviating poverty. Capital inflows in Poland have also assisted Poland in reducing the poverty level. Free movement of factor of production such as labor and capital assist in reducing inequalities among nations. Goods mobility also reduces inequalities among nations. Inequalities has failed to reduce in Poland due to the effect that globalization has on labor market and capital market.

14 September, 2017
visibility 1

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