Tuesday, May 09, 2006

Scientific American: Does Globalization Help or Hurt the World's Poor?

SciAm has an accessible and balanced article by Pranab Bardhan on the pros and cons of globalization. A few excerpts to give a you a feel, but it's worth reading the entire thing if this issue interests you:

In 1993, anticipating a U.S. ban on imports of products made using child labor, the garment industry in Bangladesh dismissed an estimated 50,000 children. UNICEF and local aid groups investigated what happened to them. About 10,000 children went back to school, but the rest ended up in much inferior occupations, including stone breaking and child prostitution. That does not excuse the appalling working conditions in the sweatshops, let alone the cases of forced or unsafe labor, but advocates must recognize the severely limited existing opportunities for the poor and the possible unintended consequences of "fair trade" policies.

[...]

Although the island economies of Mauritius and Jamaica had similar per capita incomes in the early 1980s, their economic performance since then has diverged dramatically, with the former having better participatory institutions and rule of law and the latter mired in crime and violence. South Korea and the Philippines had similar per capita incomes in the early 1960s, but the Philippines languished in terms of political and economic institutions (especially because power and wealth were concentrated in a few hands), so it remains a developing country, while South Korea has joined the ranks of the developed. Botswana and Angola are two diamond-exporting countries in southern Africa, the former democratic and fast-growing, the latter ravaged by civil war and plunder.

[...]

Simplistic antiglobalization slogans or sermons on the unqualified benefits of free trade do not serve the cause of alleviating world poverty. An appreciation of the complexity of the issues and an active interweaving of domestic and international policies would be decidedly more fruitful.

2 comments:

Anonymous said...

Interesting article. It appears that globalization does improve conditions, though not always in ways we expect.

I also noted that he often attributed poverty improvements to the green revolution rather than globalization. The green revolution is often also opposed by the same people who protest globalization.

Finally he suggested that the places where globalization doesn't work well are the places that have weak property rights and have excessive government interference.

All these things fit with free trade expectations. The anti-globalizationists are wrong. Open up the markets and the world will be a better place.

Ami Ganguli said...

Brian: I agree that the anti-globalizationists are wrong. Trade is the way to pull countries out of poverty.

But the article makes the point (and I'm sure Weaz could come up with lots of examples if he hadn't gotton tired of us) that there are lots of cases where globalization has gone wrong. Obviously there's a right way and a wrong way to do it.

Private property rights are needed, but if they just allow corrupt officials or foreign companies to pocket the gains from trade, then something is wrong.

Also, any change in economic structure creates losers as well as winners. These people need to be compensated in some way to ensure political stability, and simply in the interest of fairness.

... Ami.