Globalization paper
Table of Contents
Abstract ……………………………………………………………………………………………………………………….. 2
Introduction ………………………………………………………………………………………………………………….. 2
Facets of Globalization ………………………………………………………………………………………………….. 3
Globalization & Poverty…………………………………………………………………………………………………. 4
Globalization & Inequality …………………………………………………………………………………………….. 5
Poverty in China & India……………………………………………………………………………………………….. 8
Globalization: life expectancy & child and infant mortality ………………………………………….. 13
Conclusion …………………………………………………………………………………………………………………… 18
References………………………………………………………………………………………..22
Abstract
| Huge and magnificant advances have been made by large parts of the world population in the age of globalization. Yet, there the idea that globalization is creating inequality, to some extend making it worse by erdoing and lessen the poor people income in certain ways; from one aspect this might be universal outgrowing fear, but for the world citizen it might be creating a precetion which cannot be underestimated and ingnored
There are very strong evidence that Globalization had and still has a very important and caytalic role in rudcing poverty in the most populated areas of the world such as China and India, besides, and some how to the top of it the reviews proves the undeynable effect of this phenomenon on life expectancy and child and infant mortality in developing and in LDC (least developed countries).
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Introduction
We can define Globalization as global mobilization of goods, services and capital, but also of information, thoughts and people. It was given birth formed all of the 20th century, albeit with large cyclical variations, and has become an increasingly obvious force in recent decades.
The past century was a spectator toward achieving more advances in global peace & prosperity, and many people were able to get out of poverty, in all of human history. There are lots of reasons for this achievement, but no one can deny or ignore the latent power which globalization brought to speed up this process. Yet, there is a widespread perception that globalization to aspect have a negative impact on the poor. These wrong and sometimes biased notion about globalization does not only exist among people be it common or those joining the anti-globalization movement or some distinguished academician but among some renowned world leaders who believe many rich countries try to use this phenomenon to colonize and dominate the poor countries; for example: “Is globalization only to benefit the powerful and the financiers, speculators and traders? Does it offer nothing to men and woman and children ravaged by the violence and poverty?” (Nelson Mandela at the World Economic Forum in Davos, Switzerland, in February 1999). But meanwhile there are many leaders who tries to concentrate on the positive aspects of this phenomenon and make it work in a better way; “Globalization need not to be about free capital flows only. Regulated globalization – one that is not absolutely free nor purely market driven – can still be compatible with today’s idea or concept of globalization. There is nothing scared about the present concept of globalization that it cannot be changed, radically if necessary, so that it poses less danger to those accepting and practicing it. Free trade is not synonymous with globalization. If we have to regulate trade in order to benefit from globalization, why not?” (Globalization and the New Realities by Dr. Mahathir Mohamad)
Although there are many factors that have taken place and then consequently have been reinforced by globalization, two of them outstandingly played a very important role in contributing to its accelerating pace in the 1980s and 1990s. The first is technical progress especially in information technology, international communication and global transportation. Not only goods but also services and knowledge can move place to place country to country much more easily because of innovations like Internet. The second major development is the to somewhat drastic change in policy making and orientation as governments everywhere have reduced barriers which has made trade among countries much more easier as barriers are getting less.(Poverty In The Age of Globalization-The World Bank October 2000).
Finally the international financial institutions is to some part responsible to obersevuing globalization occurring in a right manner. This role have become more illustrated with the financial crisis that hit emerging market in the recent years; while hardships resulting from these crises have far from erased the gains from openness in the countries affected, preventing such crisis and alleviating their consequences would clearly be beneficial. In particular IMF must help to create a financial architecture that decrease the risk of crisis and eases the burden of adjustment on countries negatively affected by the crisis.
Facets of Globalization
What can be easily proven that is that the developing countries are becoming more integrated with the global economy and that the speed has accelerated over the past decade. But except for the successful East Asian economies, the level and speed of their integration has until recently became slower in comparison to that of the developed countries. Moreover, progress on integration has been uneven among developing countries particularly in trade and international finance and more recently in terms of information technology.
Trade. There has been a growing force over the last thirty years in the part of shares of
trade, between those countries who are active participant in the global economy and countries that don’t take part be in actively or not completely. For many poor countries considered to be Least Developed Countries (LDC) are getting weaker by globalization, also they are in danger of being largely excluded from it. The minuscule 0.4 percent share of these countries in world trade in 1997 was down by half from 1980.
Financial flows. Similarly, despite the dramatic growth of financial flows in many developing countries, they tend to remain concentrated: “fifteen emerging market countries, mainly in East Asia, Latin America and Europe, accounted for 83 percent of all net long-term private capital flows to developing countries in 1997. Sub-Saharan Africa as a whole received only2percent of the total.”(Articles on Globalization View current and archived articles. Leading publications, worldwide. www.MyWire.com)
Information Technology. Rapid technological change and global connectivity has
generated an information and knowledge gap between countries, the so-called “digital
divide.” About half of the world’s population has never made a phone call, while Africa has
only 2 percent of the world’s telephone mainlines. Only 2.4 percent of the world population
are users of the internet, almost all of whom are concentrated in the OECD countries. Roughly
90 percent of Internet host computers are located in high-income countries that account for
3 only 16 percent of world population. Overcoming this digital divide is going to be a key
challenge for developing countries in the coming years. (Globalization facts & figures, Pual Masson)
Globalization and Poverty
Different types of claims have been heard whilst the development of community is been made about how just much progress is made toward fighting poverty (Ravallion, 2003). As a matter of fact, many researches have been carried out and presented conflicting arguments and estimations, some suggesting that poverty is little by little declining, while others claim otherwise. (Ibrahim F. Akoum 2008). The World Bank’s (2001, p. 21) figures indicates that between 1987 and 1998 the population in some countries with developing economies living on less than $1 a day fell from 28 percent to 24 percent. Moreover, it has claimed that the number of the poor people in the glob were 200 million fewer in 1998 in comparison to 1980 (World Bank, 2002). The millennium development goals (MDGs) web site portal’s estimations disclose that the amount of people w living on less than $1 a day has decreased to about 19 percent in 2002 from nearly 28 percent, its level in 1990, and that in 2001 there were 100 million fewer than people living in poverty than in 1990. “Chen and Ravallion (2004, p.1) “estimate that there were almost 400 million fewer people living in poverty in 2001 than 20 years earlier, adding that if the trends over 1981-2001 continue then the aggregate $1 per day poverty rate for 1990 will be almost halved by 2015. (Ibrahim F. Akoum 2008).”
although, many others issues are with these findings and the present estimates in order to support their argument that the international community seems incapable of creating a good notion to face the poverty menace and thereby reach the theory of separating poverty by 2015, which was agreed in 2000 by the United Nations, as a main framework of the MDGs. (Ibrahim F. Akoum 2008).Arguing the empirical basis of the neoliberal theories, Wade (2004, p. 572) showe that the World Bank’s poverty estimates contain a significant margin of error for some reasons mainly that poverty headcount is very important to the vital level of the international poverty lines and to the reliability of household surveys, especially that the bank introduced a new methodology in 1990, making comparisons with previous estimates unreliable. Deaton (2002) presented a similar argument. (Ibrahim F. Akoum 2008).
But it is very important to understand the difference between the incidence of poverty as a percentage of a total population and the absolute number of the poor (Globalization facts & figures, Pual Masson). But the we cannot deny the fact that the poverty is declining for developing countries the population in poverty has declined for developing countries as a whole (from 28.3% in 1987 to 24% in 1998 based on $1/day and from 61% in 1987 to 56% in 1998 based on $2/day) and in all developing regions except Sub-Saharan Africa and Eastern Europe and Central Asia. (Globalization facts & figures, Pual Masson). “Declines have stated and maintained over a longer time for the most important and renown developing countries. For example, the incidence of poverty in India which was measured by the official poverty line fell from 57% in 1973 to around 35% in 1998, whereas the incidence of poverty fell from 60% to 20% between 1985 and 1998 for Indonesia.” .(Poverty In The Age of Globalization-The World Bank October 2000). Standards of living are changing and at the same time boosting in an improving manner; Infant mortality rates in the world have been become half during 1970-1997, from 107 to 56 per thousand; and life expectancy has grown up from 55 years to 67 years. However, despite the progress made, about 40 developing countries with 400 had almost zero in some places negative per capita income growth in the last thirty years. Poor people number is rising in many regions excluding East Asia and the Middle East. Though the growth in many large developing countries is quite impressive the absolute poverty worldwide is still increasing. (Poverty In The Age of Globalization-The World Bank October 2000).
The surprising visibility of international organizations World Trade Organization
No one could ever imagine to see a multilateral trade-promoting organization is getting a anti-globalization backlash? The WTO with its members which consist of 144 countries have agreed for trying to lessen the trade barriers among themselves. (Rich man, poor man: resources on globalization Carol Hammond, Carol Hammond 2003) This group was established (originally under the name of GATT, or General Agreement on Tariffs and Trade). The WTO’s meeting are to negotiate multilateral reduction of tariffs and non-tariff among all of member countries. (Rich man, poor man: resources on globalization Carol Hammond, Carol Hammond 2003).
Globalization, Growth and Poverty. Globalization has a very important role in cutting poverty in developing countries through its impact on growth. The more open economics, and those were able to move faster and have better growth, whereas developing countries with inward oriented policies have lost the accelerating pace of growth rate. A recent study proves that an increase in the ratio of trade to GDP by a percent will rise the level of income by one-half to two percent (Frankel and Romer, 1999). By making higher growth, integration is able to have significant impact on reducing poverty. (Globalization facts & figures, Pual Masson). There are firm evident that cross-country that growth is on average associated one – for – one with higher incomes of the poor (see figure 1). There are some important variations in this relation among countries.”In the aggregate, no more than 50% of the variation in the poverty measure is explained by differences in growth.” (Globalization facts & figures, Pual Masson). Another way of stating this is to say that poverty is affected by many factors other than growth. For example, the first step toward income inequality and alterations in inequality may also impact poverty. So it seems to be, consequently a huge large scale in order to design more pro-poor growth policies albeit more investigation is required to create more understanding of the poverty impact of specific policies. Also, average changes in poverty creates a huge deal of churning related to growth and structural change, in which some lose and other gain. (Globalization facts & figures, Pual Masson).
Globalization and Growth
“There are essentially three main sources of economic growth: growth in inputs of production;
improvements in the efficiency of allocation of inputs across economic activities; and innovation
that creates new products, new uses for existing products, or brings about more efficient use of
inputs.” (T.N. Srinivasan, Jessica Seddon Wallack: Globalization, Growth, and the Poor)
The combination of the change in these three dimensions which is able to create and bring higher long-run growth which is in many senses depended on the characteristics of the target country economy. A sort of extrovert alteration in percentage of accumulation of a factor of production or the efficiency of the factor allocation; for instance, has long – term or the only transitional effects on growth depends in part on technology of production. “An exogenous change in the rate of investment or opening the economy to foreign trade has only a transitional effect on growth in a Solow type two-factor (capital and labor) constant-returns-to-scale growth model if the marginal product of capital declines to zero as capital increases indefinitely relative to labor. On the other hand, if the technology is such that the marginal product of capital is bounded away from zero, transitional as well as steady state growth effects could arise from an exogenous change in investment or foreign trade policy.” (T.N. Srinivasan, Jessica Seddon Wallack: Globalization, Growth, and the Poor).
Direct Impact of Trade Integration on the Poor. Trade integration has the capability to affect the poor, above its capacity to impact through higher growth, but these effects are not crystal clear.
Totally, for the underdeveloped countries, it is not easy and possible to expand the production of goods intensively by using low – skilled labor, but the demand for the low – labor will be easily affected and vanish by technological progress so the openness of the trade cannot boos the situation. (Globalization facts & figures, Pual Masson). “For middle-income countries, the impact on the poor is likely to be even less clear cut based on the prevalence of the poor in previously sheltered sectors relative to
potentially expanding sectors, and the competition coming from large low-income countries.
The impact of trade liberalization will also vary depending on the post-liberalization pattern
of inequality, which in turn will depend on the way trade reform is managed and on other
accompanying reforms. There is evidence, however, from a large developing country sample
of medium-to-long term growth episodes that, on average, in economies/periods of fast trade
integration, income growth of the poor has kept pace with mean income growth” (Global
Economic Prospects 2001, forthcoming).
Globalization and Inequality
Trends in Inequality. The main framework trends in global inequality is depended on changes of this concept within countries. we can put inequality among countries into 2 subcategories in the recent decades. A huge gap has been created and this gap is widening
Between rich countries and poor countries (for example, doubling between the top 20 and bottom 20 countries over the past 40 years — figure 2) not only to some industrial countries are subject to it; but other developing countries are involved (figure 3). (Global
Economic Prospects 2001, forthcoming).
Meanwhile there has been an boost in growth in many developing countries so it happens to be that the gap between their average incomes and that of industrial countries started to narrow. At overall in developing countries the rate of inequality is decreasing as a result
China and India (figure 3). While we have the improvement of inter – country inequality
but we can see a large number of poor has increased modestly (figure 4). (Globalization facts & figures, Pual Masson)
Role of Globalization. There are very strong evidence that openness to trade and investment has a deep impact on reducing poverty and boosting growth amongst the increasing number of developing countries and consequently reducing global inequality. Conversely, the countries which are not open to trade like some closed developing economies have performed very weakly in compare to open ones. (see figure 6). The very poor performance of these countries is not due to the result of lack of integration by the world economy, but due to their incapability to achieve greater integration. The reason for this incapability is because of some domestic conditions (including wars and chronic macro instability), but this bad conditions are sometimes worsen by barriers imposed rich countries (see also box 1). At the same time, we in some areas cannot clearly find evidence of a systematic relationship between globalization and inequality trends within a nation, either through growth or directly. (Globalization facts & figures, Pual Masson).” The inverted-U relationship between growth and inequality suggested by
Kuznets is not borne out by evidence for a large sample of countries spanning several
decades. Periods of growth are almost as often associated with increases in inequality as they
are with declines. Similarly, there is no simple association between openness to trade and
changes in inequality (see figure 5). There are about as many cases where inequality fell with
more trade openness as cases where it increased.” (Globalization facts & figures, Pual Masson)
Poverty in China & India (an additional note on the 28/12/2008 debate for the opponents view)
THERE is no doubt that one of the great men of 20th century was Deng Xiaoping, The father of China’s Four Modernizations. There is also no doubt that two of his wise sayings should be in the forefront of our mind when we talked the great public issues of our time, indeed when we talk of the great issues of any time. They are and indispensable aid to analysis and an invaluable guide to action. They are very useful whether you are running a trade union, a multinational corporation or a country.
Deng said that we should seek truth from facts. That means we should not deduce truth from our hopes, however noble. We should not deduce truth from our expectations, however certain. Or from conventional wisdoms of the day, however widely held. Or from the edicts of theologians, however exalted. Or from the simple ideology of ideologues, however persuasive. We should deduce truth from facts.
“Today what you see in China & India is the result of Globalization as the development in the life of poor people, on the contrary the poor people is deteriorating.” (Mona Ershadi; the opponent leader of Globalization Debate on Dr.Cheng’s Macroeconomic class held on 28/12/2008).
“People with low wages are employed by big companies which gains more profit out of that and impose policy on the governments”(Mohamad Tehrani second speaker of opponent team Globalization Debate on Dr.Cheng’s Macroeconomic class held on 28/12/2008). He also brought up the so called Sweet Shops phenomena as well.
To be realistic and have a bird eye view of what happened in these years in China & India let us have a look at the Poverty Statistics in these countries; at first China.
Poverty Alleviation in Post-reform China
Poverty alleviation is one of the largest challenges in the developing process of China. After years of strenuous endeavor, Chain has achieved great success in anti-poverty struggle. Along with socio-economic changes and shifting of the anti-poverty policies and strategies, the poverty alleviation in post-reform China could be roughly divided into 4 phases:
1978-1985. During this period, economic and social transitions have played a dominant
role in poverty alleviation. The reduction of poverty incidence was mainly due to general
economic growth, in particular the institutional transitions around 1980 when the whole
nation was dominated by planned economy with relatively equal income allocation. The
population in poverty dropped from 250 million (poverty headcount rate = 30.7%) in 1978
to 125 million (14.8%) in 1985 with the continuous 7 years of rapid economic growth in
rural areas.
1986-1993. With further economic reform, the gap between rural and urban income
gradually widened. The overall rural economic growth had less and less impact on
poverty reduction. Since 1986, the poverty reduction programs targeted to poor
population and poor areas played a more prominent role in poverty alleviation. The
Chinese government has been planning and organizing a lot of large-scale anti-poverty
programs all over China. The infrastructure was largely improved in order to enhance
both the capacity of poor areas and of poor rural households. At the same time, farmers
contributed their own investment (self-accumulation) and self-development for solving
their own subsistence problems and achieving some poverty alleviation and a better life.
By the end of 1992 (1993 data is not available), after 7 years of development-oriented anti-poverty activities, the rural poverty population was reduced to 80 million and poverty headcount rate of 8.8%.
1994-2000. The launch of 8-7 Poverty Alleviation Plan (1994-2000) opened a new page
in rural China’s poverty reduction. The main point of 8-7 Plan is that the Chinese
government will basically eliminate the absolute poverty in 7 years through the tax
favorite policy, financial support and social-economic development program. 592 poorest
counties, selected from morn than 2000 counties of China, were designated as “national
poor counties’. It’s estimated that more than 70% of the 80 million poor concentrated in
the 592 counties with very bad natural environments and backward social-economic
conditions in 1994. Anti-poverty approaches aiming at the poor population different from
the regional development approach were gradually adopted. Livestock raising and cash
crops planting was one of the focus. At the same time, labor migration was encouraged.
to reduce poverty and to provide possibilities for farmers in the non-agricultural sector
Through years of efforts, the poor population dropped to 32.1 million, and the poverty
headcount rate is 3.4% by the end of 2000.
2001-2010. In 2001, the Development Orientated Poverty Alleviation Program in Rural
China (2001-2010) has been promoted and implemented, aiming to solve the
subsistence problems of the remaining absolute poor, and to help the low-income group
to improve their development capability. Firstly, poverty alleviation work is not only to
solve the subsistence problem of the poor, but it should also assist vulnerable
populations in guaranteeing their sustainable subsistence by increasing their income and
improving their living and working conditions. Secondly, focusing on integrated and
comprehensive development means to improve infrastructure, technology, education,
public health care and cultural development so that the social and economic sectors of
poor areas will develop in a harmonious and comprehensive way by enhancing
community development and living standards. Thirdly, farmers’ participation is
emphasized again, as a participatory bottom-up mechanism has been applied in poverty
alleviation planning and implementation. By the end of 2003, the absolute poverty
population is 29 million (3.1%) and the population of low-income group (people living
above poverty line but under low-income line) is 56.2 million (6.0%).
Main Results and Findings
Poverty Population and the Regional Distribution
Undoubtedly, China has achieved great success in anti-poverty process since 1978. The
poverty population and poverty headcount rate dropped steadily (Table 1), while the
annual decrease of poverty population slowed down gradually in recent years. During
1978 to 1990, the annual decrease of poverty population was 10 million, and during 1990
to 2000, 5 million. The poverty population dropped 2.82 million in 2001, 1.07 in 2002. In
the year 2003, the poverty population increased 80 thousand mainly due to natural
disasters. The disparity between different regions/provinces is huge. 58.6% of the poor lived in the12 western regions, 60.8% in 592 national poor counties, 47.7% in main grain production provinces, and 48.8% in mountainous area. Among the 31 provinces, 8 had the poverty headcount rate less than 1%, 13 provinces between 1-5%, 7 provinces between 5-10%, 3 provinces above 10%. The highest rate is 15.6% in one western province. If we use a higher poverty line, the low-income line, 9 provinces had low-income headcount rate less than 5%, 13 between 5-15%, 9 above 15%. The highest figure is 33.5%, in the same western province.
So as you can see the main findings and result China had and still have a up sloping move in the reduction of poverty.(Rural Survey Organization of National Bureau of Statistics, China September 2004) as for India we have almost the same story.
Poverty in India is reducing but it is still a major issue. Rural Indians depend on unpredictable agriculture incomes, while urban Indians rely on jobs that are, at best, scarce. Since its independence, the issue of poverty within India has remained a prevalent concern. According to the common definition of poverty, when a person finds it difficult to meet the minimum requirement of acceptable living standards, he or she is considered poor. Millions of people in India are unable to meet these basic standards, and according to government estimates, in 2007 there were nearly 220.1 million people living below the poverty line. Nearly 21.1% of the entire rural population and 15% of the urban population of India exists in this difficult physical and financial predicament. The following chart presents the poverty situation:
So as we can see the number of poor people are dropping rapidly after 1980s. But to be realistic it is still an issue which government has planned and implemented poverty eradication programs, but the benefits of all these programs have yet to reach the core of the country.
Globalization & Life Expectancy
Since the Second World War, globalization has resumed, as the barriers to trade in goods and services, capital, and ideas that were imposed during the great depression and the world conflict were rolled back, and technology has advanced (table 2), especially in the area of communication and computers. The past fifty years have also seen a remarkable rise in living standards, as well as dramatic improvement in health and education (table 3). While these advances have had other causes, including reconstruction after the wars, globalization has facilitated their spread throughout the world. For instance, medical advances have been pioneered in the richer countries, but improvements in the health have also occurred in developing countries- indeed, to an even greater extent. Infant mortality rates declined by 40-50 per thousand from 1970-1999 in developing country regions, versus 13 thousand on average in the developed countries. Life expectancy rose dramatically, as well. In China it essentially doubled (to 70 years) over 1960-99, while in India, it rose by 20 years, to 64 years (life expectancy rose in the United States from 70 to 77 years over the same period). Education has also shown a strong improvement in developing countries. for instance, adult illiteracy rates (table 4) have declined bay about 30 percentage in China, Ghana Korea and Mexico, over the past three to four years. The advances in living standards, health and education have occurred because flows of goods, capital information have allowed poorer counties to use modern technology in local production and public services.
This important factors such as economic growth which in some ways contribute to a better per capital income which sort of lead’s to a boost in developing counties life expectancy and infant mortality cannot be fulfilled unless a country shows openness toward globalization as this figures proves that.
And the table 3 shows the boosting condition of life expectancy and infant mortality in developing countries.
Also we can see the life infant mortality is in a rocket soaring reduction even in LCD (least developed countries) like Bangladesh as the below bubble map shows:
As we can see we have completely a different image of the world regarding child death and infant mortality. As we see the number rapidly dropped due to this phenomenon and its facets for all counties and as you can see for Bangladesh.
Conclusion
“It does not matter whether the cat is black or white so long as it catches mice” Deng Xiaoping…
Globalization, Governance and Empowerment
Good governance has emerged as one of the most important prerequisites for development. This is both because of the role of government as a builder and provider of institutions, and because the failure of governance can lead to an overall political breakdown. Once a country becomes a “failed state” (Yugoslavia, several African countries) development can be set back by decades. Weak governance has been an overriding characteristic of the poorest performing economies. Globalization has put a premium on good governance, because of the need to put in place policies and institutions demanded by an increasingly competitive global market place, because of pressures on governments to be transparent and more accountable to their citizens, and because of the higher costs of mismanagement. Globalization has also raised new challenges for governance above the level of the nation-state. Technological gains, shifting geopolitics, expanding trade and financial flows and cheaper communications have created tremendous opportunities and lifted barriers to global knowledge and problem solving. They have also raised new risks and challengesfor example, financial instability, disease transmission and cross-border criminality. These challenges raise several questions for which there are no simple answers. How to adapt political and governance institutions to the new technological, financial and economic realities? How to secure the support and financing needed for collective action since many of these concerns are of a public good (or public “bad”) nature? How should the global community deal with the problems of “failed states” and conflict resolution? How to deal
with wide ranging misperceptions and concerns of legitimacy on issues related to globalization? People everywhere want to be “empowered”, and there is a heightened concern that global trends and forces are affecting people and societies without there being channels or institutions through which people could participate in influencing or controlling these trends. This is a challenge for the international community. A huge education effort is needed so that there can be greater legitimacy and political backing for international collective action. In this, there is an important role for global civil society, and post-Seattle, for a better dialogue and partnership between the official community and global civil society.
An Agenda for Action
Poverty in the midst of plenty is the central challenge in today’s global economy and
society. There are some striking contrasts that underlie this challenge at the turn of the
millennium: ÿ While, for the first time in history, developing countries as a group have grown faster during the past decade than industrial countries—indeed almost twice as fast—and while
some developing countries are becoming major players in the world economy, the least
developed countries have seen large declines in living standards and are almost becoming
invisible on the world scene. While the real income of the “average” person in developing countries has risen rapidly over the past ten years, the number of people in absolute poverty has not declined. Even countries that have benefited from globalization have large pockets of poor people, and in many countries, the divide between the rich and poor is increasing. Of the 2.8 billion.
people living on less than $2 per day, approximately 1.9 billion people reside in emerging
markets. 1.7 billion, or 59 percent of the world’s poor, live in G20 countries. Notwithstanding the positive impact of globalization on growth and poverty, if the trends of the past decade are extrapolated forward, inequalities between and within many countries will likely increase and many of the international development goals set by the international community for poverty reduction will not be achieved. With a legacy of poor policies and poor performance, too many of the least developed countries and, worldwide, too many poor people are being left behind, in trade, in finance, in technology, in precisely the things that could help them grow and reduce poverty. Policies at the country level remain key for poverty reduction even in an age of
globalization. Assessment of development experience suggests several lessons for a more
pro-poor development strategy at the country level: Attainment of sustained growth (in excess of 2 percent per capita income growth over along period of time) is essential for poverty reduction.
Macro stability, more open trade regimes and a vibrant private sector are core requirements to facilitate growth. Good governance and institutions have a crucial role in these processes. Governments should provide or foster the institutions which make markets work efficiently, thereby promoting entrepreneurship, competition and a positive investment climate. With weak
institutions, poor governance and unsound policies, market reforms can go badly awry
with great costs, particularly for the poor. Combating poverty involves much more than fostering sound market-oriented growth. The World Development Report 2000/1 highlights the importance of actions in three main areas:
First, to enhance the capabilities of the poor, particularly through the improved
provision of education and health, which are fundamental to well-being and which
promote participation in market opportunities.
Second, to facilitate empowerment by making institutions more responsive and
accountable to the poor, by strengthening the participation and influence of the poor in
political processes and by removing social barriers. A particularly important
dimension relates to gender: the Policy Research Report Engendering Development
(World Bank, 2000) provides compelling evidence that removing barriers faced by
women can have a significant positive impact on growth performance.
Third, to understand better and reduce the vulnerability of the poor to ill-health,
economic shocks, natural disasters, violence, and transitional costs arising from
market reforms.
All of these policies must be designed in a way that takes account of financial
constraints and local realitieswith special attention to the impact on the poor and on
transitional lossesand secures ownership of key stakeholders through participatory
processes. The comprehensive development framework and the new Poverty Reduction
Strategy Papers are built on these principles and can provide the basis both for concerted
action at the country level, and for mobilizing effective support from the international
community.
Poverty reduction also requires global collective action because it is a global public
good. Societies everywhere gain from poverty reduction, especially in a globalizing world,
not just because of the moral imperative, but because of the negative externalities associated
with poverty—such as conflict and violence, the spread of communicable diseases, illegal
immigration and pressures on the environment. Public goods carry free-rider problems that
are better addressed through collective action, because individual countries may be unwilling
or unable to expend as much resources as is desirable. This need for collective action through
pooling of knowledge and financial resources is also the ultimate rationale for global public
institutions. The following are the most critical areas where global collective action is needed to
complement and reinforce country-based efforts on poverty reduction:
Sustain steady global economic expansion, and reduce the likelihood of, and contain
the effects of global volatility. Poorer countries, and especially the least developed,
remain dependent on the sustained growth of demand in both OECD and emerging market
countries. Developing countries also remain more vulnerable to shocks in the global
economy. There is a continued need therefore for careful international policy
coordination, and for efforts to strengthen the international financial architecture so as to
reduce volatility and manage financial crises better when they occur.
Mobilize adequate and more effective aid for poverty reduction. A first priority is
eliminating the debt overhang of the poorest heavily indebted countries through concerted
support for the HIPC initiative. But accelerated progress will also require more and better
targeted financial support for poverty reduction in both low and middle income countries.
Poverty cannot be fought effectively at the global level if the approach to foreign
assistance is based on an oversimplified dichotomy of the very poor countries getting
grants or concessional assistance and other countries relying solely on financial markets.
Given that poverty reduction is a global public good, global collective action is needed to
support poverty reduction in both low and middle income countries, even if the strongest
and most focused support is for the poorest countries. Different degrees of concessionality, therefore, constitute a better response to the geographic incidence and political economy of poverty reduction.
Remove barriers to trade and provide preferential access to the poorest countries.
Elimination of barriers by industrial countries and emerging markets in some key areas
(agriculture, labor intensive manufactures and services) can bring large benefits to the
poor in developing countries. OECD import restrictions are especially harmful to the least
developed countries, given that they are much more dependent on those export markets.
Trade restrictions are exacerbated by agricultural subsidies: during 1997-99, the average
annual value of industrial country subsidies amounted to 60 percent of total world trade in
agriculture, and almost twice the agricultural exports of developing countries. Beyond
removal of barriers, preferential access could help accelerate integration of the least
developed at little cost to industrialized countries at large. Capacity building to support
policy formulation and implementation, including for trade negotiations, also remain
critical for these countries.