Study finds that globalization cures poverty

Subject: MFD List - Study finds that globalization cures poverty

"While acknowledging the number of poor people in the world remains
"disturbingly high," the study says that in 1950 about 55% of the world's
population lived on less than US$1 a day (in constant, inflation-adjusted
dollars). By 1992, only 24% of the world's population had to make do with
that tiny amount."

"The proportion of the world's population living in absolute poverty is
lower now than it has ever been," the report says."

"In many respects, the findings will prove controversial, at least to those
outside the circle of professional economists, contradicting as they do
certain deeply held beliefs about the negative consequences of
globalization," wrote Romano Prodi, the European Commission President."

----------
National Post
Globalization is responsible for dramatically reducing the number
of abjectly poor people around the world, a new study finds. "On
average economic growth is good for the poor, and trade is good
for growth," says London's Centre for Economic Policy Research.
(07/10/02)
http://www.nationalpost.com/home/story.html?id=7D0DFAD8-D129-40D8-A94C-D5D2F
D9E0CC2

Globalization cures poverty: study
Free markets credited with reducing misery - yet the gap between rich and
poor widens

Jan Cienski
National Post

Tuesday, July 09, 2002
ADVERTISEMENT

WASHINGTON - Globalization is responsible for dramatically reducing the
number of abjectly poor people around the world, according to a new study
that contradicts the claims of skeptics who say it has worsened global
poverty.

"On average economic growth is good for the poor, and trade is good for
growth," said the study by the London-based Centre for Economic Policy
Research.

The study, prepared for the European Commission by a group of respected
economists who surveyed existing literature and studies on globalization,
was unambiguous in saying that almost every criticism levelled by free
trade's skeptics is wrong.

Many globalization critics are "poorly informed about the historical record,
and appear not to be aware of the contribution played by globalization in
the struggle against poverty," the study's authors say.

They say closer economic ties between countries, reduced tariffs and greater
flows of investments have made the most startling impact on global poverty.

While acknowledging the number of poor people in the world remains
"disturbingly high," the study says that in 1950 about 55% of the world's
population lived on less than US$1 a day (in constant, inflation-adjusted
dollars). By 1992, only 24% of the world's population had to make do with
that tiny amount.

During that time the number of poor remained static at about 1.3 billion
people, while the global population grew rapidly.

"The proportion of the world's population living in absolute poverty is
lower now than it has ever been," the report says.

The study echoes a recent World Bank report which found the degree of an
economy's openness is closely linked to its standard of living.

The support for the often-controversial position of continuing to lower
tariffs and expand free trade was a little much for the European Commission,
which represents governments of various stripes and stressed that the study
was not its official position.

The study notes that, while there are fewer people in abject poverty, the
gap between average incomes in rich and poor countries is wider.

Improved communications has had the perverse effect of undermining the case
for globalization because "the poor that remain, though a shrinking
proportion of the whole population, are more than ever aware of their
relative deprivation."

Technology also makes it easier to draw attention to the startling
discrepancies in world incomes.

The study takes issue with the slogans of protesters at anti-globalization
rallies, like the one in Calgary during last month's G8 summit at
Kananaskis, Alta.

Critics charge globalization with increasing inequality, polluting the
environment, exploiting workers, undermining the ability of governments to
raise taxes to provide health care and welfare and with causing economic
instability.

Untrue, according to the study.

"Many of the charges against globalization are misguided," says the study,
which says that while globalization does carry some costs, they are more
than outweighed by the benefits.

The drumbeat of protest about manufacturers such as Nike and the Gap using
Third World sweatshops to make their products actually harms the workers in
those factories.

While a salary of $5 a day may seem "shockingly poor" to protesters in rich
countries, that is often five times more than the workers would have gotten
by staying in traditional industries such as agriculture, the study says.

Although there is some proof that countries exporting energy and natural
resources such as timber underprice those products, causing environmental
harm, there is no evidence of a "race to the bottom" in wages or
environmental standards.

Many critics contend that corporations will relentlessly hunt for the
cheapest place to do business, forcing richer countries to gut their social
safety nets and environmental rules to match those of the lowest-cost
country.

"If low wages alone were enough of an attraction, more [investment] would
have flowed to the poorest countries in Africa, rather than predominantly to
a small number of middle-income countries in Asia and Latin America," it
says.

In fact, it is in Africa that the study finds the weakest international
performers, and failed economies that drag down the statistics for the rest
of the world.

Recognizing that skeptics often make a better case than the proponents of
deeper globalization, the study recommends that rich countries do a better
job of explaining the benefits of globalization or else risk a backlash
similar to the one that ended the last burst of freer trade that lasted from
1870 to 1913.

The study also recommended the wealthiest nations commit to lowering tariffs
and subsidies for agriculture and textiles, which would boost incomes of the
poorest workers and farmers, and also increase their foreign aid to 0.7% of
GDP.

Currently, only Scandinavians, Luxembourg and the Netherlands give that
much. Canada gives only 0.24% of GDP in aid, while the United States gives
only 0.1% of GDP.

The study's optimistic conclusions were discounted by globalization
skeptics, who saw it as one of a host of biased reports aimed at confirming
the reigning orthodoxy.

"For the last 25 years, globalization has been heavily tilted in favour of
banks and investors and against the interests of working people," said
Robert Scott, an economist at the Economic Policy Institute, a left-leaning
Washington-based think-tank.

He charged that the numbers showing poverty reduction were skewed by the
exceptional cases of China and India. Removing those two huge nations
creates a much more ambiguous case for globalization and shows dramatic
increases in global inequality, Dr. Scott said.

"The evidence shows that unregulated capital and trade flows contribute to
rising inequality and impede progress in poverty reduction," a new Economic
Policy Institute study said.