Saumya Sudhir December 22, 2015 ECON 347- Political Economy of the G-20 Instructor: Jens Christiansen

Globalization: a double-edged sword

ABSTRACT

The acceleration in globalization in China and India in the twentieth century did more harm

than good for these countries. Although it may have boosted exports and productivity, and led

to the opening and integration of global markets, the negative consequences unleashed in the

process have had lasting impacts on the economy and society of the two nations. Some ill

effects discussed in this paper include inequality and regional disparities, labor exploitation,

and environmental degradation. Inequality has increased in both countries due to shifts in the

nature of production and the concentration of wealth and profits. In many cases, income

inequalities are accompanied by regional disparities, which result in dismally low rural

incomes, gaps in rural education and health care, rural-urban migration, and in the worst

cases, farmer suicides. Groups who are already vulnerable due to poverty and regional

disparities become especially prone to exploitation by employers. However, ameliorative

measures have been suggested, including increasing government involvement, particularly in

addressing inequalities and environmental degradation, and encouraging linkages between

foreign investors and indigenous industry.

INTRODUCTION

Nabila, a high-school student in Dhaka, switches off her Taiwanese computer, changes into

a dress made in Thailand, slips on her Italian leather shoes, picks up her Chinese-

manufactured smartphone, and heads out to meet a friend at a McDonalds nearby. Defined by

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the World Bank as the “growing interdependence of countries resulting from the increasing

integration of trade, finance, people, and ideas in one global marketplace,” it is evident that

globalization has left almost no nation untouched. Developed nations now outsource a

plethora of services to developing nations, and developing nations import state-of-the-art

foreign technology and technical expertise from abroad. Globalization has undoubtedly

resulted in an explosion of opportunities for consumers such as Nabila, producers, and

workers worldwide. However, the underlying question that has emerged in the process is: is

globalization necessarily good?

Globalization has taken on a new meaning in the past 35 years, as reflected by the upsurge

of international trade, outsourcing, and foreign investment. The process of globalization

accelerated in the 1980s and 1990s partially due to the liberalization of trade and capital

markets, which promoted the competitiveness of exports through the reduction of tariffs,

quotas, infant industry protection, and other trade restrictions. Technological advances also

played a role, by making made cross-border trade and the fragmentation of production

processes more cost-efficient and practical. Furthermore, institutional supports for economic

cooperation and integration – the World Bank, International Monetary Fund (IMF), General

Agreement on Tariffs and Trade (GATT), and later, the World Trade Organization (WTO) –

contributed to the process of globalization (“Globalization and International Trade Policies”).

China and India have a lot in common. They are both growing at phenomenal rates and

have the second- and fourth-highest Gross Domestic Products (GDP) in Purchasing Power

Parity (PPP) terms, respectively (CIA World Factbook 2015). Both came into existence as

nation states around the same time: the People’s Republic of China was established in 1949,

and India gained independence from British colonial rule in 1947. In initial decades, both had

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relatively insulated economies, with a strong emphasis on planning and the development of

industrial capacity. Most importantly, both nations opened up their economies to international

trade in the final decades of the 20th century.

In China, Deng Xiaoping took control of the government in 1978, two years after Chairman

Mao Zedong’s death. His vision of a “New China” emphasized the opening up of the

economy to the global market. His reform agenda entailed changes in trade, industry, and

agriculture. China joined the GATT, and complied with its stipulations regarding domestic

reforms and the reduction of tariffs and trade restrictions. With respect to industry, the

government gave local officials greater responsibility and autonomy and permitted small

industries to enter the arenas of services and light manufacturing. In agriculture, there was a

switch to a household system of responsibility, wherein households could contract land and

machinery from collective organizations. The government also established four Special

Economic Zones (SEZs) – with particular incentive policies for Foreign Direct Investment

(FDI) – across China (Srinivasan 2013). Today, China’s main exports are electromechanical

and labor-intensive products.

In India, overprotection of domestic industry resulted in a decline in trade, growth, and

foreign reserves, and the accumulation of a massive fiscal deficit by 1991. Prime Minister

Narasimha Rao and then-Finance Minister Manmohan Singh implemented a series of New

Economic Policies (NEPs) founded on the pillars of liberalization, privatization, and

globalization (LPG). These principles followed from the Neoliberal ideas that had emerged in

the 1980s, particularly under Margaret Thatcher and Ronald Reagan. According to them,

government intervention weakened the economy, and it was essential to push back the domain

of the state. As a result, India began a series of reforms intended to make the economy more

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market-based, including reducing tariffs and taxes, lowering interest rates, and privatizing

government monopolies, in an effort to deregulate markets and provide incentives for foreign

investment. To encourage trade with external partners, India signed the GATT and became

part of the WTO (Guru 2015). India presently dominates the market for Information

Technology (IT) services, and pharmaceuticals, and among its biggest foreign investors are

General Electric, Intel, Cisco, IBM, and Dell (Harris 2005).

Globalization has, undoubtedly, brought gains to China and India. China’s GDP has risen

from under $150 billion in 1978 to $10 trillion in 2014, growing on average by 10 percent

annually since 1978 (See Appendix 1). The growth in China’s per capita GDP is even more

impressive: it rose from $155 in 1978 to $7,600 in 2014. Moreover, poverty rates fell from 31

percent to 3 percent between 1978 and 2000, and over 500 million people have been brought

out of poverty since 1978 (World Bank Development Indicators). It is important to keep in

mind that globalization has not been correlated with a reduction in poverty universally, as the

experiences of several Latin American countries indicate (See Appendix 2). China’s average

life expectancy increased concomitantly with its reduction in poverty since 1978 (from 66 to

75 years) (Huwart and Verdier 2013). China’s share in world merchandise exports increased

from 1 percent in 1982 to 12 percent in 2014 (“World Trade Organization – Trade Profiles”).

It is currently the largest exporter of high-tech goods and labor-intensive products (such as

garments, shoes, clocks, and bikes). China is the most important trade partner of Brazil, India,

and South Africa, and the largest trade power in the world (Gao 2003).

India has also seen immense growth. The GDP (in current US$) grew from $275 billion in

1991 to $2 trillion in 2014, while per capita GDP grew from $309 to almost $1,600 in the

same period (“How the Indian Economy Changed in 1991-2011”; World Bank Development

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Indicators). FDI increased from $0.13 billion to $27 billion, between 1991 and 2014, as there

has also been a surge in outsourcing to India, IT services, multilateral trade agreements, and

foreign investment in pharmaceutical, petroleum, and manufacturing industries (“Factsheet on

Foreign Direct Investment”; Chatterjee 2014).

However, the rosy picture painted by these figures should not lead us astray; globalization

has far-reaching negative consequences that need to be addressed.

NEGATIVE EFFECTS OF GLOBALIZATION

Globalization has had negative impacts in China and India. Both have suffered similarly in

the areas of inequality and regional disparities, labor exploitation, and environmental

degradation.

INEQUALITY AND REGIONAL DISPARITIES

Global poverty levels and the poverty rate in China and India have declined since 1978 and

1991 respectively, but inequality has increased in both nations. China’s Gini index between

1980 and 2012 increased from 30 to 55 (See Appendix 3). Before the opening up of the

economy, the richest 10 percent earned less than 20 percent of the income, but by 2005, they

earned almost 50 percent. These figures are especially shocking when compared to the share

of the bottom 10 percent, who earned just 1.4 percent of total income (Wen 2005;

“Globalization and Inequality”). This indicates that despite new, labor-intensive production

technologies in China – which ideally would have increased incomes – overall, inequality has

worsened.

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It has also been said that China’s path to WTO accession contributed to growing inequality,

because its stipulations required China to engage in stringent reforms that interfered with the

government’s autonomy in setting standards for labor and the environment. These included

eliminating import quotas, reducing tariffs, and increasing imports by 2006, which hurt small

farmers and widened the gaps between the income of the lowest and highest earners.

According to Dale Wen,

“When China joined WTO in 2001, cheap, highly subsidized agricultural commodities from industrial nations flooded into the country, posing a further challenge to the already ailing rural sector. As a result of decollectivization and participation in the global trade arena, millions from rural regions migrated to cities and manufacturing centers.” (Wen 2005)

Sugarcane farmers in particular faced competition from cheap imported sugarcane, and

gained much lower profits on their produce than before: a difference as drastic as earning 190

Yuan per ton in 2003, down from 250 Yuan per ton in 2002 (Wen 2005). There was an overall

decline in rural incomes, and this engendered small farmers more vulnerable to price

fluctuations.

The percentage of foreign ownership in telecom and insurance industries (previously

constrained by the government) increased to 50 percent. To aggravate the situation, China

now had to comply with a ‘national treatment’ clause, which stipulates that foreign investors

be treated as equal to domestic investors – this often puts the economy under undue pressure

from foreign investors.

Income inequalities in India have also skyrocketed since the reform period. It witnessed

unemployment levels during the 1990s and 2000s that were disproportionately high given its

prevailing level of economic growth (Pal and Ghosh, 2007). In 1993, India’s Gini coefficient

was close to that of developed countries, but at last count, this figure had risen to 38 (See

Appendix 4). The earnings of the top 10 percent of wage earners are currently twelve times

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higher than the earnings of the bottom 10 percent, whereas in the early 1990s, they were only

six times higher (“India's income inequality has doubled in 20 years”).

Discriminatory global trade practices are largely to blame for inequality in India. Under

WTO guidelines, developing nations are required to free up restrictions on trade. However,

developed nations such as the US can afford to give their farmers $18 million in agricultural

subsidies, unlike in India, where agricultural subsidies have been shrinking (Sengupta 2006).

This reduces the effective cost of agricultural production in developed countries, pushes

developing country produce out of international markets, and reduces the prices of agricultural

produce within developing countries.

Imports of genetically modified seeds produced by American pharmaceuticals such as

Novartis, Cargill, and Pioneer Seed, are also implicated in the increase in inequality in India.

These chemical technologies are expensive, and so even farmers who can afford the collateral

required for loans to finance such purchases often find themselves caught in a treacherous

debt trap. Broader reasons for the growing inequality seen in China and India include

externalities such as pollution, which drive people away from their place of residence, lead to

crop failure, and make it difficult for the poorest to maintain a decent standard of living.

Inequality in China and India has been reflected not just in terms of income but also in

regional disparities. For one, China’s rural education has deteriorated since the reform period.

While 70 percent of rural youth finished high school in 1976, less than 10 percent did so in the

late 1990s (Wen 2005). This alarming decline in educational attainment may point to a

deepening urban bias in China, as resources have been unduly concentrated in urban areas and

denied to rural areas. It may also be the case that the financial difficulties faced by small

farmers forces them to bring their children out of school and put them to work on farms.

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Also linked to the urban bias is the vast disparity between incomes of rural and urban

populations in China. In 2012, the annual average per capita disposable income in rural China

was less than a third of the average per capita disposable income in urban areas – a difference

that did not exist in 1978 (See Appendix 5a). Additionally, the wages of rural workers in

China have not increased concomitantly with the skyrocketing prices of rice, pork, and other

food items, and consequently, they spend a higher proportion of their income on food than

their urban counterparts (See Appendix 5b) (Tobin 2011).

This gaping hole in rural health facilities is best exemplified by the lack of rural health

monitoring. As explained by Dale Wen,

“The [total number of hospital beds] has fallen in rural areas and stayed the same or decreased on a per capita basis in seven poor provinces (Guizhou, Tibet, Qinghai, Hubei, Hunan, Jiangxi, and Xinjiang). Between 1993 and 2000, government total healthcare spending on rural health care fell from 34.9 percent to 22.5 percent. Consequently, rural public health infrastructure has deteriorated considerably.” (Wen 2005)

Moreover, in the past four decades, the number of rural doctors and nurses in China has fallen

dramatically (from 1.5 million to one million, and from 3.28 million to only 270,000

respectively) and health insurance covers only 10 percent of the rural population, (whereas it

covers 50 percent of the urban population) (“China’s Public Services Privatization and

Poverty Reduction”). Not surprisingly, malnutrition among rural Chinese children under the

age of five increased between the 1980s and 1990s (Khan and Riskin 2005).

In India, despite the fact that almost 70 percent of the population lives in rural areas, there

is a distinct urban bias in economic growth (World Bank 2015). Since India’s independence in

1947, policymakers have largely ignored agriculture and instead favored industry, with as

little as 23.3 percent of the government budget devoted to agriculture in the 1960s, in spite of

the fact that agriculture contributed to over 60 percent of India’s GDP at the time (Cypher

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2014). The economic reforms of the 1990s only intensified this bias, and the percentage of

budgetary outlays devoted to the rural economy has declined over the years, currently resting

at 18.5 percent (Jha and Acharya 2015). The NEPs exposed small farmers to global scale

production prices, and immediately made them more vulnerable and less competitive.

Although the NEPs have resulted in greater access to new technologies and markets, most

rural populations cannot afford the former and are consequently distanced from the latter.

Small farmers have yet to see an increase in agricultural prices, credit facilities, irrigation,

insurance against unfavorable climates and pests, and of course, more affordable technologies

(Sengupta 2006). The positives of economies of scale that emerged in urban areas from

liberalization-led industrial growth have not reached rural areas in terms of improved medical

facilities, housing, road and transport infrastructure, or systemic support to the smaller scale

rural business model.

Tarun Khanna, in Billions of Entrepreneurs: How China and India are Reshaping their

Futures and Yours, sums up the plight of rural India:

“Policymakers have neglected Indian villages in the decades since the nation’s independence: 89 percent of rural households do not own telephones; 52 percent do not have any domestic power connection. The average brownout in India is three hours per day during non-monsoon months, 17 hours daily during the monsoon. The average village is 2 kilometers away from an all-weather road, and 20 percent of rural habitations have partial or no access to a safe drinking-water supply.” (Khanna 2008)

Thus, ineffective governance and corruption has clearly impeded rural populations’ access to

necessities like electricity, education, sanitation, drinking water, and infrastructure.

Not surprisingly, there are vast discrepancies in the growth rates of different Indian states -

some have seen substantial success since the reforms, whereas others have lagged far behind.

According to Maps of India, “States like Assam, Uttar Pradesh, Madhya Pradesh and Bihar

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saw a growth rate less than 5 percent in [the] pre and post reform period. Andhra Pradesh,

Tamil Nadu, Gujarat, Karnataka, [and] Haryana saw a growth rate less than 5 percent during

1980-93, which improved considerably during 1993-2006” (“Globalization, Income

Inequalities and Regional Disparities in India”).

One effect of the urban bias is the mass migration of rural Indian workers into the cities.

Lacking education and funds, they are often forced to live in slums, joining the 400 million

strong informal sector working as laborers, domestic workers, hawkers, street vendors, etc.

(Cypher 2014).

There is another consequence of the neglect of India’s rural communities that is much more

disastrous. More than 200,000 farmer suicides have occurred in India since the late 1990s. As

discussed previously, discriminatory trade practices result in the lack of an economic buffer

for poor farmers, because when crop prices fall, their incomes decline, and they are forced to

take loans, trapping them in a vicious cycle and debt trap. The adoption of new agricultural

technologies as a result of trade liberalization entails an immense financial investment,

thereby leading many farmers to ruin. According to Jagdish Bhagwati:

“There are states in India where cotton seeds have been absorbed and which are really prosperous. So you have to ask, why is it that [farmer suicides] are breaking out?” he asked. “What's happening is very much like the subprime mortgages in the United States, where a whole bunch of salesmen went out and sold mortgages to people who couldn't afford them.” (Lerner 2010)

A case study on farmer suicides by Srijit Mishra brings several issues to the fore. It was

found that more than 50 percent of farmers who commit suicide own less than five acres of

land, 86.5 percent are indebted, and 40 percent have suffered at least one crop failure. These

data suggest that the desperation faced by farmers can be attributed to a combination of

poverty (induced by high competition and high costs of production), indebtedness (due to

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loans taken for investment in seeds, capital and machinery, and the high interest rates charged

by moneylenders in the informal sector), and the lack of financial and institutional support

(because of the lack of insurance for crops, and physical infrastructure) (Sengupta 2006).

Thus, since opening up to the world economy, China and India have been plagued by

systemic inequalities emerging from WTO stipulations, unfair trade practices, and expensive

imports. These inequalities have been magnified in regional disparities stemming from the

urban bias and from the ineffectual actions of corrupt political systems, and have resulted in

devastating circumstances for individual farmers and the agricultural sector as a whole.

LABOR EXPLOITATION

As we have seen, people who live in remote locations and/or on meager incomes face

seemingly insurmountable obstacles in accessing basic necessities, knowledge, and public

services. Additionally, their lower bargaining power makes them most vulnerable to being

exploited through unsafe working conditions, low pay, and longer working hours than are

acceptable. Labor exploitation is closely tied to the race to the bottom phenomenon, in which

countries compete with each other to attract investment by reducing costs through drastic cuts

in wages and living standards for workers. Meanwhile, production is shifted to the regions

where the wages are lowest and workers have the fewest rights (Financial Times 2015).

The overwhelming surge in trade brought about by globalization in recent years has been

led by labor-intensive manufacturing, leading industry stakeholders to move towards more

flexible models of labor markets to cope with the increased demand while maintaining

competitiveness (Kabeer 2004). When China and India adopted export-oriented trade

strategies in the 1980s and 1990s, they took advantage of their enormous labor force to

increase manufacturing. The aim was to counter their declining terms of trade through

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manufactured goods exports. Because they compete with each other and other nations in the

market for low-skill labor-intensive manufactured products, they have had to suppress wages,

reduce benefits, and devalue their currencies, thus engaging in the race to the bottom (Razmi

and Blecker 2008).

The rise of labor-intensive manufacturing in China and India has also led to a shift towards

more flexible working arrangements, which are in many cases more harmful than helpful to

workers. Current labor conditions in China and India can be summarized by Guy Standing’s

notion of the ‘Precariat,’ a new labor class forced to accept exploitative labor conditions for

lack of other alternatives. In his view, “full-time employment protected by various forms of

state regulation has given way to more diverse and less protected forms of work” (Kabeer

2004). Although Standing’s idea is framed around workers in the global North, it is equally

applicable to conditions in the global South (especially in China and India).

In 2014, for example, Apple was alleged to engage in worker exploitation at the Jabil

Circuit factory in Wuxi, China. According to China Labor Watch, workers are pressured into

working 11-hour shifts daily for six to seven days per week, especially during peak periods.

They are often coerced into accumulating 100 to 158 hours of overtime each month, (up to

four times higher than the overtime limit established by Chinese labor law). If a worker

successfully manages to be approved for leave (which is nearly impossible, even in the case of

illness) their wages are deducted. In addition, workers cannot resign until they receive the

permission of the line leader, which they rarely do. As a result, the worker has to quit without

any outstanding wages (“Apple’s Supplier Jabil Circuit Exploits Workers to Meet IPhone 6

Demands”).

Dale Wen’s comments further elucidate the labor situation in China:

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“Unable to compete with advantages given to foreign-owned firms, SOEs [state-owned enterprises] shed millions of workers and decreased social benefits. These new migrant workers flooded into coastal regions and urban centers, desperate for jobs. With a surplus of workers, and no competition from diminishing SOEs, industries have tightened their grip on workers and sweatshops have become the norm. Especially in the coastal SEZs (special economic zones)—where most foreign corporations do business—Chinese workers now have lower wages in terms of purchasing power, fewer benefits, longer work hours, increasing work-related injuries, and other associated problems compared to ten years ago.” (Wen 2005) In India, the informalization of labor that accompanied globalization paved the way for

labor exploitation. Between 1990 and 1995, the Indian formal sector generated almost 20

percent of the employment in the garment export industry, and provided almost 30 percent of

the value-added. However, between 1995 and 2000, the employment generated by the formal

sector declined to under four percent, while value-added fell to two percent. On the other

hand, the employment generated by the informal sector increased from less than one percent

before the reforms to 15 percent after the reforms, while the value-added provided by the

informal sector more than doubled (from six percent to 15 percent). This informalization has

been seen particularly in the garment industry.

The Indian garment export industry started expanding considerably by the early 1980s, and

by 2014, the value of garment exports had increased to $15.7 billion, with India ranking 6th

among the world’s apparel exporters (Mezzadri 2009). The rise in exports was matched by a

rise in the number of workers who tied their livelihoods to the industry. In 1995, there were

approximately 1 million employees in the Indian garment industry, whereas in 2013, this

figure had risen to 8 million (at least for the formal sector) (Shetty 2004; Kane 2014). In the

capital, New Delhi, the boom in the garment industry has manifested itself in long shifts and

low wages (from $30 per month for the lower-skill workers, to $150 per month for master

tailors and cutters). Moreover, there are unstable short-term contracts for the hordes of

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migrant workers that cycle in and out of the city, in the hope of finding work in the garment

industry.

For more specialized tasks, child labor is widely used, as children get paid half of what

adults earn. In Bangalore, factories draw on the availability of women workers in assembly

line tasks. These factories provide even lower wages to their workers, with some paying their

most skilled employees just over $40 a month. As Alessandra Mezzadri points out, “In a

context where factory [labor] costs are the major share of the overall [labor] costs, the

availability of low factory wages is crucial for export firms” (Mezzadri 2009).

It can be seen from the above that low wages play a significant role in the competitiveness

of China and India in their quest for a stronghold in the global trade empire. Thus, the

contributions of foreign conglomerates to labor exploitation in China and India have further

exemplified the pernicious effects of globalization on the people living in these nations.

ENVIRONMENTAL DEGRADATION

Hans Rosling, prominent Swedish economist, has pointed out that in recent years, many

nations have achieved commendable economic success and have greatly improved the quality

of life for their citizens. However, there is one caveat, according to him: most of these

developments have been carried out at the expense of the environment. Rosling is not alone in

this observation. In the study entitled In search of pollution havens? Dirty industry in the

world economy: 1960 – 1995, Muthukumara Mani and David Wheeler discuss the pollution

haven hypothesis, which states that multinationals shift the production of polluting goods to

developing countries because of the lack of environment monitoring. Developing countries

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subsequently acquire a comparative advantage in those industries and “become a ‘haven’ for

the world’s polluting industries.”

The current state of the environment in China and India suggests that they are no exception

to this phenomenon. China’s national State Environmental Protection Administration has

reported that 40 percent of the arable land has become eroded, salinated, and degraded, mainly

due to the doubling of chemical fertilizer usage between 1978 and 1984. Moreover, 20 percent

of the land is contaminated by heavy metals such as cadmium, arsenic, and lead, and

extensive grazing and industrial agriculture have led to the desertification of approximately

27.9 percent of China’s total territory (“Desert Areas Grows in China”). A whopping 60

percent of river water has been stated to be unsafe for human contact, owing to the chemical

effluents and runoff from fields and the dumping of untreated industrial and municipal

wastewater into water sources (Gao 2003). China has also been named the world’s largest

greenhouse gas emitter, (producing 28 percent of global carbon dioxide emissions from fossil

fuels). Air pollution in China kills 1.6 billion people annually, (4,400 people daily) (Rohde

and Muller, 2014). What is more, China has faced enormous economic costs due to the high

PM2.5 concentration in the air (See Appendix 6a).

India is not far behind China in terms of greenhouse gas emissions, currently ranking third.

India is also home to 13 of the 20 cities with the most polluted air, so it is not surprising that

air pollution levels in India have resulted in 630,000 of all premature deaths in 2010 (“Report

2016 India”). Even though several Chinese and Indian cities have PM2.5 concentrations that

greatly exceed the World Health Organization’s (WHO) guidelines and national air standards,

far more cities in India witness this extent of pollution than do those in China (See Appendix

6b) (“Breathe Uneasy”).

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One instance of globalization damaging India’s natural resources is seen in the controversy

surrounding the Coca-Cola Company in India. Coca-Cola factories have been found to create

water shortages and contamination due to their unsustainable water-intensive technologies,

particularly in the desert state of Rajasthan. As a result, Coca-Cola has been forced to shut

down many of its plants, and it has launched water conservation programs in India and

abroad. These remedial measures, however, do not take away from the fact that the

livelihoods of the area locals, who depend on aquifers and village wells for their water needs,

are unnecessarily and sometimes irreparably harmed (Srivastava 2015).

All eyes were on China and India in the recent 21st meeting of the Conference of Parties

(COP21) in Paris. The COP21 successfully brought world leaders together to sign a legally

binding restriction for reducing average global temperatures to no more than 2 degrees above

pre-industrial levels (“COP21”). Given China and India’s status as high polluters, there was

immense pressure on them in this conference to clamp down on emissions. Policymakers from

the two nations have, however, frequently spoken of the ‘common but differentiated

responsibility (CBDR) principle derived from International Environmental Law and

formulated in the 1992 Rio Earth Summit:

“In view of the different contributions to global environmental degradation, States have common but differentiated responsibilities. The developed countries acknowledge the responsibility that they bear in the international pursuit of sustainable development in view of the pressures their societies place on the global environment and of the technologies and financial resources they command.” (“Common but Differentiated Responsibility”) In the COP21, China and India continued to emphasize the importance of CBDR. Indian

Prime Minister Narendra Modi explained in his Op-Ed in the Financial Times, “The principle

of common but differentiated responsibilities should be the bedrock of our collective

enterprise. Anything else would be morally wrong.” Chinese president Xi Jinping spoke along

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the same lines: “Addressing climate change should not deny the legitimate needs of

developing countries to reduce poverty and improve living standards.” To this, President

Barack Obama said that the US [the second-largest carbon polluter] “not only recognizes our

role in creating this problem, we embrace our responsibility to do something about it” and

“you cannot forge a climate agreement without taking into consideration the level of

development.” However, he also asserted that the Paris deal “has to reflect serious and

ambitious action by all nations to curb their carbon pollution” (“Top carbon culprits”).

China and India are certainly taking steps towards environmental conservation. China has

stated that its carbon emissions will reach their highest level before 2030, and that it aims to

reduce carbon emissions by 45 percent by 2050, partly with the aid of a national carbon trade

system that will be established before 2017. China has also collaborated with the

Environmental Protection Agency to address pollution, waste management, emergency

preparedness and response, and contamination (“EPA Collaboration with China”). Indian

policymakers, however, have stated that India’s carbon emissions (in fact merely 1.7 tons per

capita in 2011 – a tenth of the emissions produced by the US) may indeed continue to grow in

the next few years. As a nation with 300 million people lacking electricity, India has a

justifiable need for greater energy resources in order to develop and grow (Doyle 2015).

China and India have also argued that climate change technologies are exorbitant, and that

the support of financial institutions and HICs would greatly enable them to adopt them.

Accordingly, previous COP meetings have established an annual contribution of $100 billion

by developed countries to enable developing countries such as China and India to fight

climate change. The COP21 led to an agreement that built upon this, with the US doubling its

commitment (“COP21”). Moreover, in 2013, China availed of a World Bank loan of $80

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million to “help control desertification and land degradation and protect farmland and

infrastructure for the benefit of around three million people in the Ningxia Hui Autonomous

Region” (“China: 3 Million People in Ningxia to Benefit from Desertification Control”).

Hence, large-scale production for export purposes has been implicated in the deterioration

of environmental conditions in China and India. The consequences have been evident in the

rise of pollution-related illnesses, as well as in tensions between developed developing

countries regarding climate change. In order to combat environmental degradation, it is

imperative that China and India receive support from other nations and organizations, or

mobilize their own resources.

CONCLUSIONS

It is safe to say that the acceleration of globalization in the 1980s did more harm than good

for China and India, especially in terms of inequality and regional disparities, labor

exploitation, and environmental degradation. It is essential that greater attention be focused on

developing strategies to address these challenges.

One idea is to use an antidote to globalization. If increased international cooperation and

integration has deteriorated the economy and society of China and India, then perhaps

stronger government action can rectify the problem. Further investment in public services,

poverty alleviation programs, and initiatives for the redistribution of wealth, (such as taxing

large businesses and giving subsidies to smaller ones), may do well to narrow the vast divide

between the haves and the have-nots. More stringent enforcement of existing labor standards

and regulations is also crucial to mitigate the exploitation of workers. Finally, the assertive

implementation of ecological conservation policies and a creative use of fiscal policy (perhaps

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taxing emissions or incentivizing greener fuels through tax cuts and subsidies) can ameliorate

existing environmental conditions.

Conversely, some scholars believe in fighting globalization with globalization. The

problems of inefficient allocation of resources and inequalities can be remedied through

further foreign investment, provided it is channeled into areas that need it most. Khanna

asserts that if foreign firms invest in connecting urban and rural markets, rural India can

become better integrated into the process of globalization. As an example, he discusses the

potential success of the collaboration between Bharti Enterprises (an indigenous corporation)

and the multinational, Wal-Mart, in linking small agriculturalists to large urban markets in a

way that could reduce wastage as well as prices (Khanna 2008).

This paper has examined the effects of globalization in China and India, two emerging

economies that share a border and opened their doors to the global economy in a similar time

period. A comparison of the effects of globalization in China and India and those in emerging

countries with different initial conditions – Mexico, Indonesia, and Turkey, to name a few –

may yield fascinating results that could lead to future growth efforts.

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APPENDICES:

Appendix 1: GDP GROWTH FROM 1978 TO 2012 China’s GDP has risen from under $150 billion in 1978 to $10 trillion in 2014, growing on average by 10 percent annually since 1978

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Appendix 2: GLOBALIZATION IN LATIN AMERICA VS CHINA Globalization has not always been correlated with a reduction in poverty, as the experience of several Latin America shows us

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Appendix 3: CHINA’S GINI 1980-2021 China’s Gini index between 1980 and 2012 increased from 30 to 55

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Appendix 4: INDIA’S GINI 1990s-2000s In the 1993, India’s Gini coefficient was close to that of developed countries, but at last count, this figure had risen to 38

Source: https://www.quandl.com/collections/demography/gini-index-by-country

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Appendix 5a: DISPOSABLE INCOME IN RURAL AND URBAN CHINA FROM 1978 TO 2012 In 2012, the annual average per capita disposable income in rural areas was less than a third of the average per capita disposable income in urban areas – a difference that did not exist in 1978

Appendix 5b: PROPORTION OF RURAL AND URBAN INCOME SPENT ON FOOD The wages of rural workers in China have not increased concomitantly with the skyrocketing of the price of rice, pork, and other food items, and they spend a higher proportion of their income on food than their urban counterparts

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Appendix 6a: HIGH PM2.5 CONCENTRATION IN CHINA China has faced enormous economic costs due to high PM2.5 concentration

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Appendix 6b: HIGH PM2.5 CONCENTRATION IN CHINA AND INDIA Several Chinese and Indian cities have PM2.5 concentrations that fail to meet World Health Organization’s (WHO) guidelines and national air standards