Reducing poverty by leveraging globalization: SciAm

Another post rescued from my archives. This SciAm article on Globalization was published in April of 2006. I hope to add the key points to my old web page on reducing poverty.

Science & Technology at Scientific American.com: Does Globalization Help or Hurt the World's Poor?

.... Capital controls. The flow of international investment consists both of long-term capital (such as equipment) and of speculative short-term capital (such as shares, bonds and currency). The latter, shifted at the click of a mouse, can stampede around the globe in herdlike movements, causing massive damage to fragile economies. Many economists (including those who otherwise support free trade) now see a need for some form of control over short-term capital flows, particularly if domestic financial institutions and banking standards are weak. It is widely believed that China, India and Malaysia escaped the brunt of the Asian financial crisis because of their stringent controls on capital flight. Economists still disagree, though, on what form such control should take and what effect it has on the cost of capital.

Reduced protectionism. The major hurdle many poor countries face is not too much globalization but too little. It is hard for the poor of the world to climb out of poverty when rich countries (as well as the poor ones themselves) restrict imports and subsidize their own farmers and manufacturers. The annual loss to developing countries as a group from agricultural tariffs and subsidies in rich countries is estimated to be $45 billion; their annual loss from trade barriers on textile and clothing is estimated to be $24 billion...

Trust-busting. Small exporters in poor nations often lack the marketing networks and brand names to make inroads into rich-country markets. Although transnational retail companies can help them, the margins and fees they charge are often very high. Restrictive business practices by these international middlemen are difficult to prove, but a great deal of circumstantial evidence exists. The international coffee market, for example, is dominated by four companies. In the early 1990s the coffee earnings of exporting countries were about $12 billion, and retail sales were $30 billion....

Social programs. Many economists argue that for trade to make a country better off, the government of that country may have to redistribute wealth and income to some extent, so that the winners from the policy of opening the economy share their gains with the losers. Of course, the phrase "to some extent" still leaves room for plenty of disagreement. Nevertheless, certain programs stir fairly little controversy, such as assistance programs to help workers cope with job losses and get retrained and redeployed. Scholarships allowing poor parents to send their children to school have proved to be more effective at reducing child labor than banning imports of products.

Research. The Green Revolution played a major role in reducing poverty in Asia. New international private-public partnerships could help develop other products suitable for the poor (such as medicines, vaccines and crops). Under the current international patent regime, global pharmaceutical companies do not have much incentive to do costly research on diseases such as malaria and tuberculosis that kill millions of people in poor countries every year. But research collaborations are emerging among donor agencies, the World Health Organization, groups such as Doctors Without Borders and private foundations such as the Bill & Melinda Gates Foundation.

Immigration reform in rich countries. A program to permit larger numbers of unskilled workers into rich countries as "guest workers" would do more to reduce world poverty than other forms of international integration, such as trade liberalization, can. The current climate, however, is not very hospitable to this idea...

I spent a year in the development world after college, hiding out in the UN building in Bangkok (security was pretty light back then) and USAID offices in Bangladesh, so I have a tenuous connection to the world of international development. We've been more-or-less trying to move millions of people out of poverty for decades, and the results are increasingly good. We know far more than we did in 1981, and we're learning more all the time ...