Globalization is the cure not the problem

Robert Samuelson:

What's the world's greatest moral challenge, as judged by its capacity to inflict human tragedy? It is not, I think, global warming, whose effects -- if they become as grim as predicted -- will occur over many years and provide societies time to adapt. A plausible case can be made for preventing nuclear proliferation, which threatens untold deaths and a collapse of the world economy. But the most urgent present moral challenge, I submit, is the most obvious: global poverty.

There are roughly 6 billion people now alive; in 2004, perhaps 2.5 billion survived on $2 a day or less, says the World Bank. By 2050, the world may grow by another 3 billion; many will be similarly impoverished. What's baffling and frustrating about extreme poverty is that much of the world has eliminated it. In 1800, almost everyone was desperately poor. But the developed world has essentially abolished starvation, homelessness and material deprivation.

The solution to being poor is getting rich. It's economic growth. We know this. The mystery is why all societies have not adopted the obvious remedies. Just recently, the 21-member Commission on Growth and Development -- including two Nobel-prize winning economists, former prime ministers of South Korea and Peru and a former president of Mexico -- examined the puzzle.

Since 1950, the panel found, 13 economies have grown at an average rate of 7 percent for at least 25 years. These were: Botswana, Brazil, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Malta, Oman, Singapore, Taiwan and Thailand. Some gains are astonishing. From 1960 to 2005, per capita income in South Korea rose from $1,100 to $13,200. Other societies started from such low levels that even rapid economic growth, combined with larger populations, left sizable poverty. In 2005, Indonesia's per capita income averaged just $900, up from $200 in 1966.

Still, all these economies had advanced substantially. The panel then identified five common elements of success:

-- strong trade and, usually, an eagerness to attract foreign investment;

-- political stability and "capable" governments "committed" to economic growth, though not necessarily democracy (China, South Korea and Indonesia all grew with authoritarian regimes);

-- high rates of saving and investment, usually at least 25 percent of national income;

-- economic stability, keeping government budgets and inflation under control and avoiding a broad collapse in production;

-- a willingness to "let markets allocate resources," meaning that governments didn't try to run industry.

... Still, broad lessons are clear.

One is: Globalization works. Countries don't get rich by staying isolated. Those that embrace trade and foreign investment acquire know-how and technologies, can buy advanced products abroad and are forced to improve their competitiveness. The transmission of new ideas and products is faster than ever. After its invention, the telegram took 90 years to spread to four-fifths of developing countries; for the cell phone, the comparable diffusion was 16 years.

A second is: Outside benevolence can't rescue countries from poverty. There is a role for foreign aid, technical assistance and charity in relieving global poverty. But it is a small role. It can improve health, alleviate suffering from natural disasters or wars and provide some types of skills. But it cannot single-handedly stimulate the policies and habits that foster self-sustaining growth. Japan and China (to cite easy examples) have grown rapidly not because they received foreign aid but because they pursued pro-growth policies and embraced pro-growth values.

...

The reason most people are poor is they keep on doing the things that made them poor to begin with. This inability to accept change and respond to markets is just part of the problem. The other part is the anti globalization movement made up of labor and businesses who fear competition. They want to win the Super Bowl without have to play with others.