There
is no doubt that globalization "can work" for poor people. Global
integration can be a powerful force for reducing poverty and empowering
people. The question of whether it "does work" is much less certain.
According to Ian Goldin of the Oxford Martin School, the relationship
between globalization and poverty reduction is far from automatic — and
far from simple.
 Globalization
today is at a critical crossroads. It has provided immense benefits,
but the systemic risks and rising inequality it causes require urgent
action. The failure to arrest these developments is likely to lead to
growing protectionism, nationalist policies and xenophobia, which will
slow the global recovery and be particularly harmful for poor people.
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If
the globalization train is to pull all citizens behind it, policies and
institutions that ensure that the poor share in its benefits are
required.
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The
scope and scale of the required reforms are vast and complex. Urgent
action is needed for globalization to realize the positive potential
that increased connectedness and interdependency can offer. Action is
also needed to address systemic risks such as pandemics, climate change,
cybersecurity and financial crises.
Weak and ineffective policies taken at the local, national and
global level have frustrated the potential benefits of globalization to
reach the world's poorest people and dramatically exacerbated the
associated risks. But when you consider crucial areas of trade, finance,
migration, aid and innovation, there are accessible policies within
reach that could ensure globalization reaches its potential and that the
risks are mitigated.
In trade, this would include substantially increasing market
access for goods and services from developing countries, while also
confronting issues of arms trading and forced labor.
The creation of a more even playing field requires that the EU,
the United States and Japan dramatically reduce their protection of key
crops and redirect their $250 billion of subsidies to policies that
benefit small farmers and the environment. (Their policies currently
benefit the rich and penalize poor people in both rich and poor
countries, and result in water and soil pollution.)
These changes will benefit the overall majority of poor people
not only in rich countries, but in developing countries, too. For
example, Vietnam used to be a net importer of rice, but is now one of
the world's largest rice exporters as a result of reforms in the 1980s
that included gradual trade liberalization.
Rice exports have increased the incomes of small farms and,
because rice production is labor intensive in Vietnam, increased the
demand for rural labor. These reforms have therefore supported rural
incomes, helped to alleviate poverty, and even improved nutrition and
reduced child labor.
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| If
the globalization train is to pull all citizens behind it, policies and
institutions that ensure that the poor share in its benefits are
required. |
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The
financial crisis provides ample evidence of the need for
macro-prudential policies to reduce systemic risk, particularly with
regard to governance gaps at the local and national level. The race to
the bottom in deregulation has harmed all countries. Poor people and
poor countries are particularly vulnerable to crises because they do not
have the savings or safety nets to protect themselves from the income
losses that are an inevitable consequence of these events.
The 1997 Asian crisis, for example, is estimated to have cost the
region up to 1.5% of GDP. It pulled 20 million people back into poverty
and pushed one million children out of school. Meanwhile, in the first
year after the 2008 financial crisis, an estimated 50 million people had
become unemployed, approximately half of them in low-income countries.
In migration, increasing restrictions in rich countries are
eroding this powerful driver of development. An increase of only 3% in
employment of migrants would generate global income gains estimated at
more than $350 billion — far more than the global total of development
aid to poor nations.
In addition to benefiting the poor, there is growing evidence
suggesting that recipient countries have the most to gain from higher
levels of migration. At the global level, greater multilateral
coordination could assist in tempering the tensions between rich-country
sensitivities and the potential benefits for the poor.
The challenge, as in many dimensions of globalization, is to
ensure that political leaders are able to compensate for local and
short-term costs to ensure that they do not frustrate the national and
longer-term interests of society as a whole.
Inclusive globalization
In aid, moderate changes — such as untying aid, harmonizing donor
activities and development goals, and using evidence-based evaluations —
could significantly improve outcomes.
Evidence suggests that developing countries have never been
better able, as a group, to absorb aid — and that aid agencies have
never been better able to disburse aid as effectively. Yet while there
is virtual unanimity that aid effectiveness has improved, the amount of
aid given by rich countries as a share of their national income has for
the most part declined.
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| Global
institutions need urgent reforms to ensure that they have the necessary
capacity to support globalization that works for development. |
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Africa
now receives lower per capita levels of aid than it did in the 1980s,
when aid was largely directed to autocratic and ineffective regimes. We
need to reverse this depressing trend given the power of aid to spur
economic growth and to help alleviate poverty.
Finally, through the harnessing of ideas and knowledge,
increasing the voice of developing countries for a more inclusive
globalization is absolutely essential. This is no small challenge. The
evaluation and adaptation of ideas requires local capacity in the form
of both skills and institutions.
It also requires a culture of learning and adaptation, of
openness to ideas and to challenging past practices. Global institutions
need urgent reforms to ensure that they have the necessary capacity to
support globalization that works for development.
Policy recommendations like these are not new, nor are they
radical. But, unfortunately, they are lost in the current
misunderstanding of the relationship between globalization and poverty.
Without these fundamental changes, the positive reach of globalization
will remain uneven.
If the globalization train is to pull all citizens behind it,
policies and institutions that ensure that the poor of the world share
in its benefits are required.
Now is the time to design policies at the global, regional,
national and community levels to reach the billion or more people who
are currently excluded from globalization's benefits. The solution to
many of the greatest challenges of the 21st century lies in more
effective policies and institutions to manage connectivity and
integration at all levels of governance.
Failure
to act means that systemic risks will overwhelm the gains of
globalization. This would be disastrous for everybody — but especially
for the poor.
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