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|Poverty And Trade: A Socially Sustainable Trade Is Possible by EXIMA: 11:55am On Jan 15|
Free trade can make an essential contribution to social welfare by increasing competition among providers. If free trade can lessen the prices of products for consumers, it will make products cheaper, and people from the low-income class could purchase more items. Following this theoretical approach, free trade has the potential to reduce poverty in all countries by decreasing prices and improving incomes.
The volume of international trade has reached a value of over $20 trillion in 2018. This is a significant jump, considering the volume of trade was $3 trillion in 1970. Poverty has also been steadily decreasing over time, and nowadays, around 700 million people are living in extreme poverty. Considering that the number of people living in extreme poverty was almost 2 billion in 1990, it is safe to say that there is a negative relation between increasing world trade volumes and the decreasing number of people living in extreme poverty. However, although free trade seems to contribute to the reduction of extreme poverty, almost 1 in 10 people are still poor. The goal should be under 5%, or even much smaller than this. There are also two huge problems in the global economy and most of the national economies: income and opportunity inequality. 5% of the world population is receiving almost 70% of the income in the world. Free trade has not provided equal opportunities for everybody, and income inequality is still increasing to this day.
Other serious issues need to be solved as well to successfully lower financial inequality. Some large capital groups own more than half of the total capital accumulated in the global economy. Even further, international companies have been implementing destructive competition strategies against their local competitors. The decisions regarding local markets are made by global companies, and the relations between local markets and local people have weakened. This creates serious problems regarding the economic and social development of local people because their markets do not provide enough contribution to their welfare. In other words, large companies gather profits from local markets and transfer them to their bank accounts, causing local people to suffer from a lack of local businesses. This situation has created socially unsustainable results, but free trade has continued to serve global capital groups more. For a socially sustainable free trade, it should provide equal opportunities to local businesses. Strengthening local SMEs might make a much higher contribution to the reduction of poverty.
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