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Technological development in trade and its impacts on poverty Cause and Effect Essay


Over the past few decades, trade has helped many economies develop and consequently raise the standards of living for their households. Due to the rapid rate at which the world is becoming a global community, technological advancements have played a pivotal role in the development and enhancement of international trade in terms of communication, production and service delivery across the boarders.

This paper shall in detail focus on analyzing the impacts of technology on trade. It shall then evaluate the effects that such impacts have had on the poverty levels on a global perspective.

According to Pressman (2008, p. 27), trade refers to the commercial exchange of goods and services for money. The author claims that when such transactions are within the boarders, it is known as local trade and when they go beyond the boarders then it is known as international trade.

Due to globalization, many business entities have been forced to change their business practices in a bid to ensure that they compete effectively in the global scene. Technological advancement has therefore been the main determinant towards the success of any organization trading in the international markets.

This is attributed to the fact that all business entities are aggressively embracing capital intensive methods of production in order to gain a competitive advantage over their rivals in terms of quantity and quality of production. However, the assimilation of technology in trade has had diverse impacts on the poverty levels experienced by different economies across the globe.

Das and the IMF institute (2007, p. 14) asserts that on a daily basis, the world is constantly experiencing some form of technological advancements geared towards improving human interaction. However, these advancements come at a very high cost. Small and medium sized businesses which at most times lack the financial backing required to update their technology regularly are therefore at a loss in comparison to their financially able counterparts.

As such, small businesses and some developing countries are inevitably forced to trade locally since they cannot compete with multinational companies. Consequently, they never grow or realize their full potential. In addition to this, due to the technological divide, multinational companies are able to infiltrate and dominate domestic markets especially in developing countries.

According Lipsey and Mucchielli (2002), this has led to foreclosure of small businesses which cannot compete effectively with these FDIs. As a result, most of the local businesses end up without markets for their products, many employees are left without jobs and these factors lead to increased poverty within these economies.

In addition to this, through the use of technology, multinational companies are able to acquire scarce resources much faster than the local companies which lack the technical know-how. As a result, the local businesses cannot compete effectively for these resources, meaning that their profits and quantities are lower.

On the same note, Cypher and Dietz (2004, p. 166) claim that due to the expenses incurred in updating the technology to international standards, many business organizations have over the years been increasing the prices of their commodities in order to cover the costs incurred in transporting, training and installing these new versions of technology.

The rapid increase in prices reflects badly on the consumers because their salaries in most cases are not increased and as a result, they are forced to spend more than they save; a factor that has increased poverty in the world. Most of the third world countries are still in poverty despite the fact that international companies invest in them.

One of the greatest advantages of FDIs is technological transfer. According to the Organization for Economic Co-operation and Development (2002, p.95), foreign investors bring in new technology which can be used to develop and improve the economic standing of the host nations.

However, many countries are still not capable of affording such technology and they are stuck on using the little that they have. In addition to this, these FDIs in most occasions repatriate their profits back to their parent countries instead of investing them in the host nations. As a result, the hosts are left in a poverty ridden state while the wealthier countries and companies become richer.

Communication is the key to success in any business venture. Statistics indicate that by December 2009, 26.6% of the world population were conversant with the internet and had mobile phones. The number has ever since been growing at an alarming rate. Through communication mediums such as the internet, telephones and facsimiles, businesses are able to identify new markets, make mergers and other transactions with ease.

Statistics indicate that internet advertisement grew by 20% in the last year. However, many countries have not yet gone digital and as a result, they loose out on business opportunities which could have been at their disposal. On the other hand, wealthier countries and companies which have adopted these means of communication take advantage of the situation and record millions in profits while their poorer counterparts wallow in poverty.

In addition to this, technological advancements have enabled many companies to market and advertise their products on the international scene. It goes without saying that worldwide publicity is good for business. Through the internet, investors are able to identify viable investment opportunities in different countries.

For example, currency traders have highly benefited from the internet because they are able to update the rates and inform their clients on the changes in real time. As such, technological advancements have therefore helped such businesses make profits in the international markets.

Without such technology, such businesses would never thrive because they would otherwise have to deal with the local market which in most cases does not offer much opportunity and market. Therefore, the assimilation of technology in this sector has helped alleviate poverty in these businesses and subsequently; economies.

France states that, ‘technological advances in the transportation industries have also benefited wealthy countries more than poor countries’ (2006:p.102). Due to the development of cars and airplanes, the transportation of goods and services has been made faster and easier especially in international trade. However, the costs of these modes of transportation are too high and small businesses cannot afford to use them.

As a result, most poor countries and their businesses use ships as the main mode of transport for international trade. They take too long and are not entirely reliable. On the other hand, wealthier nations and their businesses use airplanes and automobiles to transport their goods and services to foreign markets.

On average, a ship travelling to Africa would take up to 4 weeks on the ocean. Within that duration, a company using airplanes as their primary mode of transportation would make more than 20 trips within the same period. This means that by the time the ship arrives, the market will already be flooded with goods and services brought in by other means. Poor transportation and communication infrastructure are closely related to the poverty levels of a given economy. In addition to this, France (2006) reports that:

‘If a country does not update its transportation industries, international companies will not want to build warehouses and distribution centers within that country. This, in turn, creates high unemployment rates, driving the people further and further into poverty,’ (p.102).

Most of the developing countries especially in Africa and Asia are characterized high unemployment and lack of creativity and innovation. This is because they mainly depend on agriculture as the main source of income and trade. The Africa research bulletin (2006, p. 6911) assert that due to poor technology, infrastructure and methods of farming, most developing countries which primarily depend on agriculture are facing high levels of poverty.

The authors acclaim that this is due to the fact that climatic conditions are worsening, and they lack formidable links to international markets due to poor transport and communication channels. However, due to technological advancements, countries like Thailand and Kenya have been able to develop agricultural provisions which can withstand the harsh climates.

This has seen the economies of these countries thrive because they can produce as much as they can and market their products abroad. In addition to this, most of the agricultural economies have also been able to access machinery which they use to produce their products (tractors, harvesters and soil analyzing equipments).

As such, they have over the years been able to produce quality agricultural products which fetch good markets on the international scene. Arguably, it is therefore a fact that technological advancement in the agricultural sector has helped alleviate poverty in the economies that rely on agriculture.

In most cases, technological advancement determines the standards of quality for the products in the international markets. Without adequate technology, a country or company cannot produce the right quality and quantity. Low quantity/ productivity is considered as a major source of poverty.

This is because it has negative effects on the standards of living of the households within a given economy. In addition to this, low productivity within such economies makes it Nevertheless, countries and businesses must always work to increase the speed of difficult to compete on the international scene.

As such, if a country or company cannot update their industries and technologies then they will not be competitive and will have a considerable increase in its poverty levels. Rivera-Batiz and Olivia (2003, p.576), state that technological advancement and transfer has contributed to the success of globalization. Through technology, many organizations and countries have in the recent years been able to form economic alliances and integrations.

However, it would seem like the countries that have benefited the most from such alliances are the wealthier ones while poor countries and small organizations are left to suffer. Statistics indicate that the establishment of trade agreements and treaties among countries has contributed highly towards the development of international business and technological transfer.

However, the establishments of such business relationships have to a larger extent contributed to increased poverty in countries that have no claim to these economic benefits. France reports that, ‘such business agreements cause the economies of many countries and smaller companies to collapse’ (2006:p.103).

In a bid to encourage equality and competition in the world, technological advancement and globalization have single handedly made it difficult for some countries and companies to venture in international trade. In as much as they may be fairing well in the local scene, the cost of going global is too high thereby rendering their efforts fruitless.

In addition to this, the use of technology in businesses has also led to high unemployment rates especially in developed countries where businesses are opting for capital intensive methods of production than human labor. The use of robots in the industrial and manufacturing sectors is slowly replacing human beings whose livelihoods depend on these jobs.

For example, ATMs are increasingly replacing human attendants in the banking sector, smart buses have eliminated the need for bus conductors and robots and other assorted machineries are currently being used in the manufacturing sectors to handle activities that human laborers are capable of doing.

Conclusively, the assimilation of technology in to trade has had many impacts on the poverty levels of many economies. Poorer countries and small sized businesses have a long way to go before they can realize the economies of scales brought about by technology. From this paper, the impacts of technology on trade have been discussed.

The fact that technology has enabled economies to rapidly advance due to efficient transport and communication systems has also been highlighted. The impacts of the assimilation to poverty have also been analyzed. Arguably, technology does present the business world with a chance to excel even more.

However, wealthier nations must ensure that they assist their poor counterparts embrace technology in order to create a business environment characterized by fairness and equitable distribution of resources. This will not only promote healthy competition, but will also have a hand in the global war against poverty and its associated vices.

References

Africa research bulletin. (2006) Africa research bulletin: Economic, financial, and technical series. Oxford, Blackwell Publishers.

Cipher, J.M. & Dietz, J.L. (2004) The process of economic development. 2nd ed. USA, Routledge.

Das, G.G. & IMF Institute. (2007) Does trade and technology transmission facilitate inequality convergence?: an inquiry into the role of technology in reducing the poverty of nations. USA, International Monetary Fund.

France, F.G. (2006) Debating Globalization. USA, GYAN France.

Lipsey, R.E. & Mucchielli, J.L. (2002) Multinational firms and impacts on employment, trade, and technology: new perspectives for a new century. USA, Routledge.

Organisation for Economic Co-operation and Development. (2002) Foreign direct investment for development: maximising benefits, minimising costs. USA, OECD Publishing.

Pressman, D. (2008) Patent it yourself. 13th ed. USA, Nolo.

Rivera-Batiz, L. & Olivia, M. (2003) International trade: theory, strategies, and evidence. London, Oxford University Press.

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IvyPanda. 2019. "Technological development in trade and its impacts on poverty." April 20, 2019. https://ivypanda.com/essays/technological-development-in-trade-and-its-impacts-on-poverty-essay/.

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IvyPanda. (2019) 'Technological development in trade and its impacts on poverty'. 20 April.

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