The main theme which is discussed in the articles “Spreading the Wealth” and “The micromagic of microcredit” is the poverty of the developing countries and how it is affected by a variety of economic phenomenas (globalization and microcredit, respectively). In particular, the authors of first article discusses the globalization and the standards of living in poor countries. The second article reveals the features of microcredit and how it affects the lives of poor people in Africa. It is difficult to compare the two articles thoroughly, since both of them describe different concepts, however, it is easy to see that they have opposing views on the influence that this two concepts have on the economic system impacting the population.
The "Spreading the Wealth " by David Dollar and Aart Kraay categorically asserts that the globalization does not lead to an increase in the inequality between poor and rich population and multiplies the ranks of the poor. On the contrary, according to their data, the global economy has led to the world's poverty reduction. The authors are also deeply immersed in the history and trying to identify the path of the global economy and the involvement of different countries. They note that over 200 recent years, the rapid acceleration of global economic growth was accompanied by increasing integration of different local markets: for example, an increased development of transport systems, migration, labor productivity. The authors also acknowledge the global distribution of income inequality among the population shows the growing inequality in the period from 1820 to 1975. Then they make out that trends in global inequality began to change along with changes in the economic policies of a number of large developing countries. First of all, it is believed that those countries where globalization has actually increased the gap between the rich and the poor, the problem lies not in it, but it is related to the ineffectiveness of the national systems of education, fiscal and social policy. However, they do not present the accurate studies and research of this issue. This question remains debatable. The authors provide examples of the positive impact of an open economy in countries such as India, China, Vietnam, and Mexico. The involvement of these countries in the global economy, their inclusion in the integration process of the global economy is indeed accompanied by the rapid growth of these countries. However, this is just a small part of the country. On the one hand, the authors mention that India, Vietnam, Uganda and Mexico are not the only examples of countries that have embarked on the path of rapid development, after they had started to carry out an open policy and what benefits has brought, but they do not represent any information about the real income of the population and well-being of inhabitants. The fact that population welfare is not identical to the material wealth of the country as a whole. Parameters which can adequately measure national welfare include lack of hunger and food quality, mortality rates, using child labor, level of education, access to drinking water and life expectancy. The authors believe that the advantage s of globalization and the open economy will benefit any country, even the poorest one. However, they stipulated true that to eliminate inequality depends also on the ability of poor countries to integrate into the global economic system. In order to achieve genuine integration it requires not only the trade liberalization, but also a large-scale reform of public institutions. The authors also examine in detail the issue of migration from poor countries. In their opinion, it carries some benefits: when the migrant from the poor country travels because of primarily economically motivated migration, it rises the standard of living of the place which he leaves it gets a triple benefit. Firstly, the migration reduces the number of workers in the poor country, and so the salary is increasing for remaining population. Secondly, migrants send remittances to the country in cash currency. Finally, the migration contributes to an increase in transnational trade and investment rate.
The article «The micromagic of microcredit» by Karol Boudreaux and Tyler Cowen describes in turn the situation with microcredits in the poor countries. The article cites the story of the emergence of microcredit, which indicates that they have understood and explored this question. They clearly operate with the concept of microcredit. Basing on interviews with some borrowers and the information they was able to found, the authors have concluded that, despite the proclamation of the popularity of micro-loans as a magical means to higher standards of living, in fact, only a small proportion of borrowers is unable to move forward. This statement is supported by two well-made points. Firstly, the microcredit has become so popular in the poor countries, since it was obvious that to borrow money from moneylenders even more prohibitive bondage that leads to the impoverishment of the borrower. Secondly, most of the loaners of micro-credits covers their running consumer costs, and rarely uses loans for business development. Thus, the authors come to the conclusion that if the microcredit can save a particular family from a stall in the pit of poverty, in general, it does not raises the standard of living in a particular country. The article cites the history of specific borrowers from African, South-East Asia and Latin America countries. These stories are told about successful examples of microcredits use for business expansion, as well as there are still number of cases when the borrowed money is used wholly or partly for daily consumption. The great weight for argument adds the fact that the authors personally communicated with real borrowers, lenders, banks, microcredit organizations. They have thoroughly examined the mechanism of microcredit and created an accurate portrait of an average borrower. Unfortunately, there is no exact data about where this information came from. The authors do not refer to specific studies or resources on this matter. The authors compare the conditions and interest rates that the borrower can get for a loan and microcredit taking money from a moneylender. It provides a very good description of the differences, advantages and disadvantages, for example, a moneylender may charge from 200 to 400 percent or interest per year, which is practically very heavy for the borrowers to pay. On the one hand, the borrower can very quickly get money from the moneylender unlike microcredit. But on the other hand, they can also threaten home or property, which can take away. This comparison does support the idea that microcredits increase the debts of the already poor people. The authors also proclaim that microcredit has educational aspect. Bureaucratic procedure of issuing educates the borrowers on the concept of formal commercial credits, introduces them to aspects of the functioning of the financial institution. With this knowledge they can in the future use the services of an ordinary commercial bank with greater competence. Maybe this article seems to be more convincing, because it is easy to understand for the general reader. It is a brief, but it clearly describes what the authors wanted to say. Moreover, its main disadvantage is that it has no precise scientific studies and can be only partially correct.
Two articles are very similar in their argumentation. Both considered positive and negative effects. However, an article on globalization, is more convincing because it uses more concrete examples and figures, as well as considering the subject on a deeper level. The author discusses the problems of microcredit basing on stories of specific people, but do not conduct a large-scale survey or study of the subject. In the first case, Kray and Dollar deeper approach to the study of the effects of globalization. Dollar and Kraay are carried a sufficiently detailed analysis of the data to support their idea that globalization do not to multiply the amount of the poor. At the same time they bring the positive effects of the globalization, which has affected a number of developing countries, but it is stipulated that globalization in itself does not lead to a fundamental gap between the incomes of rich and poor countries. The second article “The micromagic of microcredit” examines the idea in a global sense that microcredit does not help the majority of people in poor countries to go out of the debt hole. This idea makes sense, but needs much more data to be confirmed using specific figures. Article by David Dollar and Aart Kraay seems to be more scientific, it is much more analyzed, it references to the research better than in the Karol Boudreaux and Tyler Cowen article. But this is the second article which is more accessible to understand by an ordinary reader, which not even possessing deep knowledge in the economy.
Work cited
Boudreaux, Karol C., and Tyler Cowen. "The Micromagic of Microcredit." The Wilson Quarterly (2008). Web.
Dollar, David, and Aart Kraay. "Spreading the Wealth." Foreign Affairs 81.1 (2002):120. Web. 23 Apr. 2016.
