Can developing country governments simultaneously integrate with the world economy and work towards poverty elimination? Who are the losers from globalisation and how should the international community respond to the fact of their loss?

A paper from the Institute for Development Studies takes globalisation and the massive restructuring of the world economy it entails as irreversible. Instead of agonising about the impact of globalisation, the paper looks at the practical measures required to ensure that benefits are spread as widely as possible, that the negative impact on the most vulnerable is minimised and, insofar as possible, the destabilising impact of volatile trade and financial flows is contained.

History shows that growth is fuelled by trade and access to international capital. Countries following this route have seen explosive growth in manufactured exports. Analysis of changes in the Human Development Index over the last four decades show that countries with a more open policy stance have achieved the greatest improvement.

The spread of globalisation is, however, uneven. While the ‘Big Five’ – Brazil, China, India, Indonesia and Russia – are on course to increase their share of global GDP from 21 percent (1995) to over 30 percent in 2020, sub-Saharan Africa and huge remote areas of open economies such as India and China are missing out. Africa’s share of trade has fallen from over 5 to under 2 percent in the last fifty years. While 20 percent of foreign direct investment (FDI) flowed to Africa in the 1970s, it now stands at under 3 percent.

What measures are needed to reap the benefits of globalisation? The report recommends that developing countries need to:

• Reduce uncertainty by signing up to international conventions on trade and investment.
• Encourage pro-poor business development services (especially better flow of information on market requirements) via partially self-supporting agencies.
• Plan safety nets to ensure minimum living standards for globalisation’s losers.
• Invest in construction and maintenance of infrastructure such as ports and roads.
• Allow marketing bodies to be quasi-autonomous with an element of self-financing.
• Let the market identify particular future growth sectors. The record of states which have tried to do so is poor.

In addition to doing far more to reduce the debt burden for states seriously pursuing poverty-reduction, developed countries should:

• Increase developing country market access particularly for agricultural products. A 40 percent cut in agricultural subsidies would deliver estimated benefits of $70 billion, which would help developing countries to make large gains relative to GDP.
• Ensure developing countries receive an appropriate share of income from taxing multinationals.
• Name and shame companies involved in environmental asset stripping, financing conflict, tax evasion or other morally reprehensible practices.
• Support voluntary labour, environment and fair trade schemes.
• Assist countries of the south to access bond markets.
• Remove the current uncertainty about aid flows by an agreed international system of transfers.

Source(s):
‘Pro-poor growth in a globalised economy’ Journal for International Development 13(5) 549-570 by Howard White July 2001 Full document.
'Inequality and pro-poor growth', Development Policy Review, 19(3) 267-289 by Howard White September 2001

Funded by: Department for International Development

id21 Research Highlight: 10 September 2001

Further Information:
Howard White
Institute of Development Studies
University of Sussex
Brighton BNI 9RE
UK

Tel: +44 (0)1273 606261
Fax: +44 (0)1273 621 202 / 691 647
Contact the contributor: H.White@ids.ac.uk

Institute of Development Studies (IDS), UK

Other related links:
'Globalisation’s litmus test: can it level world income distribution?'

'Reactions to the Thai economic crisis: informed critique of globalisation or utopia?'

'Learning to compete: African development responses to globalisation'

Visit the Centre for the Study of Globalisation and Regionalisation

The Microfinance Gateway reports on the IDS Globalisation and Poverty research programme

World Economic Forum has several reports on globalisation

G-DAE explores how societies can pursue their economic goals in a sustainable manner