Has Globalization Helped the Poor?

July 15, 2001

Mark Weisbrot
Santa Barbara News-Press, July 15, 2001

Knight-Ridder/Tribune Media Services, July 12, 2001

Huntsville Times (AL), July 15, 2001
Anniston Star (AL), July 15, 2001

The Sunday Gazette-Mail, (Charleston), July 23, 2001

It has become increasingly fashionable for our government officials and their friends to promote Washington’s global agenda as a helping hand to the world’s poor. “If one is concerned about the developing countries, both history and recent studies would suggest an open system is going to be the formula for them,” said Bob Zoellick, US Trade Representative at a recent press briefing.

Even less partisan observers such as Joseph S. Nye, Jr., Dean of Harvard’s Kennedy School, assert that globalization “has improved the lot of hundreds of millions of poor people around the world.”

But what if it just weren’t true? Is it possible that globalization has been a losing proposition for most of the countries — and people — of the world?

It is generally considered heresy to even ask such questions. Everyone who has managed to stay awake through an introductory economics course knows that the world is better off when trade expands — at least in theory.

But the real world is often more complex. Over the last 20 years most countries have increasingly opened their economies to international trade and investment. They have also adopted — under the theory that “Uncle Sam knows best” —  a host of related economic policies promoted by Washington-run institutions such as the IMF and the World Bank.

The real world results look very bad. For the vast majority of countries, the last two decades have shown considerably — and often drastically — slower growth than was seen in the previous 20 years (1960-1980). And the poorer countries have generally suffered the worst declines in the growth of income per person, the most basic indicator of economic progress.

The exceptions tend to be countries like China — which has highly protected domestic markets, extensive currency controls, and a banking system dominated by state-owned banks. This is not to say that any of these policies would necessarily work elsewhere, or that there are no gains to be had from international trade and investment.

But there is clearly something wrong with the prevailing orthodoxy. Strategies for economic development have been abandoned, and it is generally assumed that open markets, privatization, and attracting foreign investors will do the job.

The last 20 years of globalization have also shown substantially diminished progress in health outcomes, such as infant and child mortality, and life expectancy. The same is true for other social indicators, including education and literacy. Again, the slowdown in progress is worse among the lower-income countries.

A world in which half of humanity survives on less than $2 a day cannot afford to postpone development for the sake of being “economically correct,” or for the special interests of transnational corporations. The expansion of trade and international markets is not an end in itself, however much it may appear that way to our corporate and political leaders.

The Bush Administration is now urgently seeking “Trade Promotion Authority” to negotiate a Free Trade Area of the Americas, stretching from Canada to Argentina. This would mean that Congress would have only an up-or-down vote on the FTAA, with no amendments.

It’s going to be a hard sell, with our economy at a virtual standstill, and no recovery yet in sight. During the economic expansion of the 1990s, it was easier not to notice the millions of jobs lost to expanding trade. Even then, workers who lost their jobs in manufacturing usually ended up working for lower pay (if they were lucky enough to find a job at all). But now the economy is not even creating enough jobs to keep unemployment from rising. In June, employment actually fell even in the service sector, for the first time since 1958.

Labor can be expected to fight Trade Promotion Authority and the FTAA. They will be joined by environmental and public interest groups who oppose granting corporations new rights — as NAFTA did — to sue governments directly and overturn regulations designed to protect the environment and public health.

The opposition will be accused of turning their backs on the world’s poor. But the last 20 years of corporate-led globalization tell a different story: the world’s poor need a New Deal even more than we do. American labor and citizens’ groups should ignore these self-righteous and self-serving accusations, and carry on against the FTAA — as well as the IMF, World Bank, and World Trade Organization — with a clear conscience. They are not only protecting American jobs, wages, and natural resources — they are also saving the rest of the world.

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