Globalization Week 2004 Keynote Speech: Is Globalization Good for the Poor?
Event summaries from Globalization Week Spring 2004
Date: Wednesday, April 14, 2004, 7-9pm
Location: Jack Morton Auditorium, MPA Building
Dr. Dollar was the keynote speaker of Globalization Week Spring 2004. In his speech, he discussed World Bank policies on development issues and how they relate to globalization.
Dr. Dollar first defined globalization as the growing economic and social integration among nations and the extreme poor as the 1 billion people in the world living on less than one dollar per day. He further noted another useful measure of extreme poverty to be the 3 billion, or one-half of the world's total population, who survive on less than two dollars per day. He then explained that all peoples of the developing world, including the extreme poor, maintain common aspirations of a better standard of living, education, health care and a cleaner environment.
Demographics, technological change and policy reform in developing countries are the driving forces of globalization. One-sixth of the world population live in the developed countries and control most of the world's capital and technological output. Five-sixths of the population reside in developing countries and have only limited access to capital and technology. Yet the largest amount of population growth is occurring in the developing world. These demographics represent the potential for a win-win situation: capital and technology from the rich countries combined with labor from the developing countries could be mutually beneficial for all nations. Thus, stressed Dr. Dollar, globalization creates potential through trade to combine capital and technology with labor.
Technological change is also an important driving force of globalization. Technological change makes it easier for people to move goods and ideas. In the example given by Dr. Dollar, he is far better connected to his mother in New York City when he travels to Beijing than his mother was with her family when fifty years ago she left St. Louis for New York. Increasing world integration has greatly expanded communication and transportation networks, allowing the world to be much more closely connected.
Finally, policy reform in the developing countries also drives globalization. Just a few decades ago, most developing nations maintained high tariff rates on imports and subsidies on domestic production. The effect of this was to create few jobs and from 1960 to 1980, the number of extreme poor in the world was rising. Today, developing countries are more outward-oriented. China's economic policy is called "Change system, open the door" and similarly, India has also implemented many positive economic reforms. Nevertheless, while Asian and Latin American countries have for the most part implemented many positive policy reforms, the Middle East and Sub-Saharan African countries are far behind. One such measure that can gauge openness to the world economy is to determine the time it takes to move goods through customs of any country. In some African countries, it takes over a month to get goods through customs, which effectively eliminates the desire of any company to export to those nations.
The effects of globalization have led to many positive outcomes. Growth rates are accelerating throughout the developing world, and now double the growth rates of the developed nations. This means that for the first time, developing countries are growing faster than their richer counterparts. This is partly due to the development of manufacturing industries in developing countries, which account for 80% of total exports from these nations. Anti-globalization critics claim that globalization has led to rising inequality. But for the most part, this is untrue. Both China and the United States have witnessed increased inequality, and these are assuredly important cases, but worldwide there has generally been little change in inequality. Many countries have also witnessed poverty reduction which has in turn led to increased school enrollment and a decrease in infant mortality rates. Indeed, since 1980, the amount of people in the world living on less than one dollar per day has declined by 400 million.
Nevertheless, there still remain important global challenges. First, many developing countries have been left out of the globalization process. Although aggregate growth rates are increasing, these figures are distorted by such large high-growth countries as China, India, Vietnam and Mexico, masking the countries who have not grown. These countries have not done as well because some of them have not integrated themselves into the world economy. For example, both Egypt and Nigeria trade less than they used to and they do not receive direct foreign investment. Another reason for poor growth on the part of some countries is due to poor governance. Countries who do not implement policy reform to make investment attractive to foreign investment risk foregoing an important source of income.
Another challenge that must be overcome is the rising threat of protectionist policies among developed countries. Many rich nations have seen their manufacturing jobs lost to developing countries, and are inclined to dismiss the whole globalization process as negative. Yet the reality of open trade is that jobs are constantly being destroyed and created. Indeed, during the 1990s, 17 million net jobs were created. But this net resulted from a loss of 303 million jobs and a creation of 330 million. Thus, while some will lose their jobs, they should find open jobs in another sector. Developed countries therefore need to implement safety nets to help the temporarily unemployed. Such safety nets could include unemployment benefits and job training programs.
Finally, even in the countries where globalization has gone well, there is still a tremendous amount of adjustment and dislocation that occurs. Globalization is a difficult process, leading to rural-urban migration and increased urban poverty and unemployment. Developing countries must therefore also implement safety nets to help ease this difficult process. While the opening up of economies to world trade will be beneficial in the long-run, countries must ensure that their citizens are taken care of during the short term.
Dr. Dollar will soon be moving to Beijing, China where will be the new World Bank country director for China.
