Monday, May 08, 2006

Does globalization help the poor?

Angry Bear has an old post summarizing some recent papers linking trade and growth. The author concludes:
So let me amend my summary of the emerging consensus as follows: sometimes trade causes faster growth, and sometimes it doesn't. But protectionism is never good for growth.
Trade is good for growth, and growth is good for the poor, ergo trade is good for the poor. This is a conventional way for arguing the positive effect of trade liberalization on poverty. Globalization though is broader than trade liberalization, and "the poor" are not some homogeneous mass of people whose well-being move in the same way. Pranab Bardhan's article in Scientific American provides good overview of globalization and the poor. A more technical discussion is found in this forthcoming volume on Globalization and Poverty from an NBER Conference.

My answer to the question: yes, on the whole; sub-sectors though will suffer from increased global competition. Globalization is neither the catastrophe that critics decry, nor the panacea that some proponents profess. This may help explain why the Philippines, despite two decades of trade liberalization, has failed to reap the expected reform dividends. (On the other hand, it is almost certain that the economy would be even worse off had the status quo on trade been maintained; moreover in many industries there has been significant flip-flopping on liberalization, especially in agriculture.) To end with a quote from Easterly (from his contribution to the abovementioned volume):
Globalization is less important for the wellbeing
of the poor than the (unfortunately more mysterious) process of productivity growth.

1 comment:

Amadeo said...

Neither the catastrophe, nor the panacea . . .

But we know too well that those intransigently opposed to it see not only the trees for the forest, but see only the dead trees..