The increased integration of the world economy is a factor of reducing poverty in the developing countries
Globalization -the increased integration of the world economy- is often accused of worsening the condition of the poor in developing countries. Multinational corporations frequently appear as villains in this scenario. The United Nations Human Development Report 2001 tells a rather different story. It shows that, although much of the world still lives in horrific poverty, the situation is improving.
Between 1975 and 2000, average real incomes in developing countries doubled, from $1,300 to $2,600. Between 1900 and 1998, the number of under-nourished people fell by approximately 40 million, and infant morality declined by more than 10%. Despite a rising world population, the number of people living on less than $1 per day fell by 160 million between 1993 and 2000, and by 200 million since 1980. This represents the first absolute decline ever in the number of those living in extreme poverty.
Some might regard these reductions in poverty as trivial in view of the overall scale of the problem, but they are far from trivial to those involved. They can quite literally be a matter of life and death.
These improvements have not, however, occurred uniformly. To give just one indicator, in 1960 average incomes in East Asia were one-tenth of those in OECD countries. By 1998, they had risen to nearly one-fifth of the OECD level, even though OECD-country incomes had themselves increased massively. In Sub-Saharan Africa, on the other hand, incomes in 1960 were slightly higher than in East Asia -at one-ninth of the OECD level. By 1998 they were just one-eighteenth of OECD average income.
World Bank research from 2002, shows that the most significant factor explaining such differentials the degree to which countries have been integrated into the global economy. East Asian countries, by and large, have successfully integrated into the global economy. Sub-Saharan African countries, by and large, have not.
It is the countries that have integrated into the world economy -the "globalisers"- that have grown richer. Anti-globalization protesters respond that GPD is not everything, and that globalization has actually reduced living standards and increased poverty and inequality. But the World Bank study shows that "the only countries in which we have seen large-scale poverty reduction in the 1990s are ones that have become more open to foreign trade and investment". This increased wealth has led to a fall in child labor and an increase in school enrolment. In the globalizing countries, life expectancy, infant morality and under-five morality have all improved rapidly. These figures are fast approaching those prevalent in the West as recently as the 1960s.
The period of rapid globalization since 1980 has been marked by the first reduction in global income inequality in more than 200 years. Research shows that, within countries, there is no systematic relationship between increased integration into the world economy and rising inequality. In some of the "globalisers", such as Malaysia and the Philippines, inequality of income has fallen. In others, such as Costa Rica and Vietnam, it has been stable. In yet others, especially China, inequality has risen. The Chinese example, however, shows that rising inequality is not necessarily a bad thing. The Chinese people used to be very equal in their poverty. Now they are somewhat less equal -and somewhat less poor. The decision to open up and globalize China' s economy has undoubtedly benefited its people as a whole.
According to M. Mosbacher, director of Social Affairs, the new opponents of globalization are, at bottom, the old foes of economic freedom, wearing new hats and carrying updated protest signs. They do not offer new insights. Instead, they reheat long-discredited arguments, including those which portray multinational corporations in a negative light, ignoring their contributions to economic advancement and human progress in the developing world. Still, they have been remarkably successful at gaining media attention and at putting the leaders of the wealthier countries and of major business enterprises on the defensive. But when we examine the data above, and ask -what is really making people in the developing world richer, healthier and more free?- we have to ask: are the wrong people doing the apologizing?
By: N. Peter Kramer
