Global Policy Forum

By Maria Livanos Cattaui

Those who really want to alleviate the poverty of hundreds of millions of people in the developing world should look at practical remedies instead of making globalization a scapegoat. There is absolutely no evidence that the accelerated integration of markets around the world is increasing the sum of human misery - rather the contrary.

But that was not the picture painted in Geneva at the special session of the United Nations General Assembly, called to review progress since the UN social summit in Copenhagen five years ago.

Rhetoric inside the conference and the clamour of demonstrators outside gave the opposite impression. Headlines projected the sad news from the UN that since 1995 the number of people living in absolute poverty has grown from about one billion to 1.2 billion. This terrible picture is depicted as an indictment of globalization, evidence that it has somehow flunked its test.

Given the steady rise in the world population - up by almost 400 million to 6.1 billion over the five years - how much worse would the figures have been without the benefits of trade liberalization, foreign investment and the knowledge economy? If the UN's figures are right, the world economy has managed to place an extra 200 million people above the poverty line.

Little useful can learned by juggling with numbers, which can be used to prove almost anything by selecting the most convenient set of figures and time frames. There is no getting around the fact that economic growth must be the point of departure for all improvements in living standards.

How on earth will it help the poor if governments try to strangle globalization by stemming the flow of trade, information and capital - the three components of the global economy?

That disparities between rich and poor are still too great is undeniable. But it is just not true that economic growth benefits only the rich and leaves out the poor, as the opponents of globalization and the market economy would have us believe.

A recent World Bank study entitled "Growth is good for the poor" reveals a one-for-one relationship between income of the bottom fifth of the population and per capita GDP. In other words, incomes of all sectors grow proportionately at the same rate. The study notes that openness to foreign trade benefits the poor to the same extent that it benefits the whole economy.

Globalization was never a one-size-fits-all miracle cure for poverty eradication. The economic growth that globalization brings is certainly essential, but it is not enough. A much more complex set of policies must be brought into play, which will include multilateral technical and financial assistance from global institutions, and targeted bilateral aid, to least developed countries in particular.

Improved market access for the exports of developing countries is indispensable so that they can have the chance to pay their own way. Let us hope that they will benefit more fully from trade liberalization in the next round of world trade negotiations.

Above all, progress will require self-help by individual countries: the rule of law, financial probity, political stability, the absence of conflict, a legal framework that encourages investment, both domestic and foreign.

Nobody expects the poorer countries to prosper without help. Poverty reduction will be greatly assisted by external support for education, health programmes and basic social services that are taken for granted in the industrialized world.

As UN Secretary General Kofi Annan said in Geneva, the case for making extra resources available can be made compellingly when those resources are to be used for social services which benefit the poor rather than for weapons or to raise the living standards of an already privileged elite.

The World Trade Organization recently buttressed the case for globalization with a study showing that those developing countries that are the most open to trade - that is, most ready to take part in the global economy - are the most successful in catching up with rich countries. Countries that stay on the sidelines tend to languish.

Cynics will say that the evidence in these and similar studies is self-serving. But leaving aside the war of figures and statistics, it is surely no more than common sense to state that the more wealth in cash and kind that is moving around the world, and the more widely it is distributed, the better for everybody.

Governments must not be stampeded into a futile attempt to stop or slow globalization when the causes of poverty and exclusion lie elsewhere.

¹ Maria Livanos Cattaui is Secretary General of the International Chamber of Commerce

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