GLOBALIZATION: UNSPEAKABLE, YES, BUT IS IT REALLY EVIL? The media coverage has faded. The tripartite enforcers of global capitalism-the World Bank, the IMF and the WTO-still make loans and settle trade disputes. But the protesters who rang the alarm about global economics in Seattle and in Washington left a distinct legacy: they made globalization a naughty word, the New York Times (5/7, Sec. 3, p. 4) reports.
Stanley Fischer, the Deputy Managing Director at the IMF, says world leaders will have to come up with another way of describing economic integration if the idea is ever to become popular again. Lawrence H. Summers, the US Treasury secretary, delivered a long address on world development policies recently without so much as mentioning the term.
Among both mainstream economists and their left-leaning critics, it has become axiomatic that globalization leaves too many poor people behind. At best, it is described as a blunt instrument for growth that inflicts collateral damage on people who do not have the education or resources to defend themselves. At worst, it actually increases poverty, worsens social divisions and shifts power from people and governments to multinational corporations.
The World Bank recently released one of the few comprehensive attempts to assess the impact of globalization. The Bank, a leading target of some protesters, has also been flagellating itself recently, pledging to become a more effective poverty fighter. And its report, "Assessing Globalization," is less than cheery, the story notes.
The report found than progress on poverty reduction has been glacial. The number of people in extreme poverty-surviving on $1 a day or less- fell only slightly from 1990 to 1998, from 1.3 billion to 1.2 billion. The population in developing countries increased during that period, so the change in percentage terms was somewhat greater, from 29 percent to 24 percent.
The only region of the world where poverty declined much was East Asia from 27.6 percent to 15.3 percent. It barely budged in sub-Saharan Africa and actually increased in the former Soviet bloc. The report also found that many nations that opened their doors widest to foreign trade saw income accrue mostly to the rich. China, the US and Latin America all had bigger gaps between rich and poor by the end of the decade.
The figures help explain why few people these days talk about globalization as if it were a new Enlightenment. But if the era of globalization has hardly been one of universal prosperity, it is probably too early to conclude that economic integration is actually to blame for stubborn poverty.
The Bank report finds plenty of support for the premise that economic growth is the best antidote to poverty, and that the most open nations are usually, though not always, the fastest growers, whether wealthy or poor. It also finds some nations where the gap between rich and poor narrowed, rather than widened, as reliance on trade grew. That suggests, at a minimum, that the correlation between economic integration and social inequality is inexact. Other factors-effective government policies, strong labor laws-are also at work, the story adds.
Incomes in both African and Latin American nations were growing faster before globalization took hold than they have lately. But it's hard to say globalization is to blame, since Latin America has opened wide to trade and investment recently, but Africa has by some measures become less open. The protesters were right, Khan notes,-globalization is no panacea. But neither does it seem to be the disease some critics claim.