Thursday, December 25, 2003
A False Alarm: Overcoming Globalization's Discontents
...To the claim that globalization increases poverty, Bhagwati's response is, rubbish. As a young economist at the Indian Planning Commission 40 years ago, he observed that redistributing wealth is not an effective way to reduce poverty; far more effective is to create more wealth. And engagement with the rest of the world facilitates growth. During the three decades that Bhagwati's India was a relatively closed economy, for example, the economy grew at 4 percent a year, and the poverty rate hovered around 55 percent. But in the two decades since it opened its economy to foreign trade and investment, economic growth averaged five percent; by 2000, the poverty rate had fallen to 26 percent. China's experience was similar: with liberalization came spectacular growth, and poverty declined from 28 to 9 percent between 1978 and 1998. Although India and China provide the most dramatic examples, the rule applies more broadly: openness brings growth, which reduces poverty. ...
Posted by JLT at 10:08 AM