Is globalization bad for poor people? The New Republic editor Peter Beinart wrote an article for that magazine the other day making the case for the advantages of globalization.
Ahead of the expected protests in Quebec City, Beinart writes that the anti-globalization movement had its origins in the best of intentions but has been derailed into the wrong position. According to Beinart, “Throughout the ’80s and early ’90s, thoughtful social democrats called on the left to turn its energy away from identity politics and towards poverty. And now the left has; too bad it’s taken the pro-poverty position.”
Beinart argues that globalization has done more than anything else to reduce world poverty levels, although of course it hasn’t done much to deal with the Leftist buzzword of the decade, inequality. Beinart writes,
Free trade and investment, the protestors say, give free reign to the rapacious multinational corporations that exploit the poor. But if those multinational corporations are so rapacious, why do they systematically pay better than their local competitors? In fact, as Columbia University’s Jagdish Bhagwati has pointed out, the phenomenon of higher multinational pay is so widespread that economists have given it a name: the “wage premium.” And if infiltration by multinationals is so bad for the poor, then the countries that have the least contact with them should have the fewest poor people, right? North Korea, anyone? Haiti? Myanmar? Sudan? In fact, it’s the Third World countries with the most foreign direct investment and foreign trade that have generally seen the greatest reductions in poverty over the last couple of decades. In East Asia, the World Bank notes, the number of people living on less than $1 a day fell from roughly 420 million in 1987 to roughly 280 million in 1998. In other words, the number of desperately poor people fell by about one-third in just over a decade (a financial crisis notwithstanding). That’s not simply a breathtaking economic achievement; it’s a breathtaking moral achievement. And globalization’s achievements aren’t confined to East Asia. A raft of recent economic studies utterly discredits the anti-globalization movement’s claim that the rapid economic growth in Latin America in the ’90s only helped the rich. While it’s true there is no correlation between growth and inequality (i.e., economic growth sometimes increases inequality and sometimes reduces it), there is a strong correlation between economic growth and a reduction in poverty, which is what the protestors in Quebec City say they care about most.
While I wholeheartedly agree with Beinart about the importance of free trade and a removal of barriers to entry, it is also important to point out that some multinational corporations do cross ethical boundaries (such as Shell’s apparently close cooperation with the military in Nigeria) and transitions to free market economies in developing countries are often done in ways that seem designed to benefit large corporations at the expense of local producers.
To the extent that the anti-globalization movement highlights these problems, it can do a lot of good. To the extent that it attacks the notion of free trade itself, however, the movement is wrongheaded and aiming at the wrong target.
Trade Off. Peter Beinart, The New Republic Online, April 16, 2001.