It's all too easy, when the anti-globalization crowd hits town, to
get distracted by the cheap street-theater and ignore the fact that
these self-anointed "champions of the poor" have it exactly
backward when they claim a global economy brings more poverty.
They did provide a colorful diversion for those of us in
Washington recently as they poured out their frustrations on the
World Bank and the International Monetary Fund (IMF). But if they
want to help the poor, they should be chanting slogans in favor of
globalization.
Not that there is nothing wrong with the World Bank and the IMF.
There is plenty, starting with their remarkable lack of success in
helping poor nations grow economically. For instance, in
Sub-Saharan Africa, 17 countries saw a decline in real per capita
GNP between 1970 and 1999, despite receiving well over $100 billion
in World Bank assistance.
But the protesters shouldn't blame globalization for this
failure. It's the refusal of poor countries to adopt
pro-globalization policies and embrace economic freedom that
condemns their citizens to poverty.
A recent World Bank study found that, during the 1990s,
developing countries with more open economies grew at over 4
percent annually, while developing countries with more closed
economies shrank. This suggests that poor countries should embrace
globalization if they want to court wealth.
UCLA researchers Richard Roll and John Talbott bolster this
conclusion with a recent study showing that the amount of real
income per capita a nation enjoys depends almost entirely on its
economic, legal and political institutions. They examined more than
130 countries and how each performed between 1995 and 1999, and
found that the presence of strong property rights, political
rights, civil liberties, press freedom and low government
expenditures-hallmarks of a "globalized" economy-meant higher
incomes.
Roll and Talbott's work is backed up by the "Index of Economic
Freedom," an annual survey that measures economic freedom in 161
countries by ranking their economies on a scale from 1 ("free") to
5 ("repressed"). "Free" countries in the 2002 Index had a per
capita income of $23,325; "repressed" countries had a per capita
income of $3,829.
Why this dramatic difference? Roll and Talbott explain:
"Economic participants cannot save in a world of inflationary
government-sponsored counterfeiting. They cannot compete with
state-sponsored monopolies. They cannot trade efficiently with the
existence of high tariffs and phony official exchange rates. They
cannot easily overcome burdensome regulation and corruption. They
cannot capitalize future profits in a world devoid of property
rights. And they cannot prosper without economic and personal
freedoms."
Fifty years ago Hong Kong, South Korea and Singapore were about
as poor as many developing countries are today. What a difference
globalization makes: Real income per capita in Hong Kong in 1999
was 7.3 times larger than it was in 1960; in Korea, 9.6 times
larger; in Singapore, 9.8 times larger. Meanwhile, real per capita
income over the same time period in sub-Saharan African
countries-where globalization and economic freedom are virtually
unheard of-was only 1.2 times larger.
Some may ask: "But what about the concerns of the
protesters-environmental degradation and labor standards?"
Experience demonstrates that economic freedom and globalization, by
leading to higher per capita incomes, enable countries to improve
their labor and environmental standards. For instance:
- As the income of a country increases, so does its ability to
make investments and implement measures that raise labor standards.
The World Bank's 2001 "World Development Indicators" shows that in
countries with per capita incomes above $5,000, the number of
children working between the ages of 10 and 14 was less than 1
percent, while in countries with per capita incomes between $0 and
$1,000, the percent of children working between those ages was 21.7
percent.
- Richer countries also tend to have more sustainable
environmental policies than poor ones. The Environmental
Sustainability Index (ESI), a project of the World Economic Forum
and several other groups, assigns the health of a country's
environment a single number ranging from 0 to 100; zero means low
sustainability and 100 means high sustainability. Almost without
exception, one finds that wealthier economies have higher levels of
environmental sustainability.
If protestors truly want to see the poor become wealthier,
increase environmental protection, and raise labor standards, they
should back globalization. They could urge the senate to pass Trade
Promotion Authority, write the White House to object to high
tariffs on steel and textiles, or encourage poor nations to embrace
economic freedom.
Unfortunately, they're more likely constructing a new cast of
giant puppets for the next round of protests.
Brett
D. Schaefer is the Jay Kingham fellow in international
regulatory affairs in the Center for International Trade and
Economics (CITE) at The Heritage Foundation.