TCS Daily

Globalization: A Primer

By Robert Krol - October 3, 2002 12:00 AM

The anti-globalization crowd came out last weekend to demonstrate against the evils of capitalism at the annual IMF/World Bank meeting in Washington. Ralph Nader ranted on about how multinational corporations either exploit or ignore the poor in developing countries.

Protestors believe that the introduction of market reforms in developing countries and the expansion of world trade have failed to improve the quality of life for the poor. The facts paint an entirely different picture.

Increased trade and the movement away from government economic controls over the last two decades have provided tremendous benefits to the developing world. Market reforms, enforcement of property rights, and international trade can be given the credit for improved conditions across the globe.

The Institute for International Economics in Washington, D.C. just released a study documenting a significant reduction in poverty over the last 20 years. Thanks to faster growth in low-income countries, the share of the world population living in poverty declined, remarkably, from 44% in 1980 to 13% in 2000.

Much of the gain occurred in Asia, the result of increased international trade and market-based economic reform. Sadly, little progress was made in the economically repressed countries of Africa.

International trade generates economic growth, leading to improvements in standards of living worldwide. A report from Cato Institute scholar Indur Goklany documents this improvement. Goklany finds that, worldwide, food supplies are more plentiful, infant mortality has fallen, life expectancy has increased, and child labor is less common.

Over the last 40 years, improved farming techniques have lead to an expansion of food production. Globally, daily calories per person have increased 24% since the early 1960s. In the developing world, daily calories per person increased 39% over the same period, reaching almost 2700 calories per person per day by 1999.

Advances in medicine, improved public health policies, and greater food supplies have lowered infant mortality and lengthened life expectancy. In the 1950s, 178 children out of every 1000 live births died before reaching their first birthday in developing countries. By the late 1990s, the infant mortality rate in these countries declined to 64. Life expectancy for people living in low-income countries increased from 44 years in 1960 to 59 years in 1999.

Critics of globalization point to child labor as evidence that greater world trade is harmful. However, the use of child labor is the result of poverty, not international trade. Child labor declines as a country's income increases. As trade promotes economic growth, globalization will result in less child labor over time. In 1960, children comprised 32% of the labor force in low-income countries. Forty years later, following the massive expansion in international trade, child labor has declined to 19% of the workforce of low-income countries.

The benefits of globalization have eluded Africa. As a group, African countries have grown little over the last 20 years. Improvement in standards of living has been limited or non-existent. Much of the blame falls on the African governments. War, political instability, corruption, and failure to develop the necessary economic institutions have stymied economic growth.

The industrialized countries of the world haven't always helped. Massive agricultural subsidies and import restrictions favor producers in developed countries. If the free-trade governments in the developed world were to practice what they preach, and reject special interest protectionism, they could give a huge boost to developing economies and
their own economies as well.

Income growth and improved living conditions are closely related. Higher incomes allow individuals to improve their diets, educate their children, and purchase health care. Better diets, education, and health increase productivity, leading to further improvement in standards of living.

Opponents of globalization see capitalism as the cause of the world's economic problems. They are wrong. Open markets and international trade are the primary means by which living standards can be improved. International trade facilitates the spread of knowledge and technology, helping to make people in the developing world healthier and more productive. Rather than deter it, globalization has played a central role in accelerating economic growth and improving living conditions worldwide.

Robert Krol is a Professor of Economics at California State University, Northridge and author of a Cato Institute study "The Case for Open Global Capital Markets."

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