Tuesday, October 30, 2012

Globalization, reduction of poverty and the role of the State

This blog, apart from dwelling on the legal aspects of the multilateral trading regime, also ponders over larger questions of globalization, equitable growth and development. Does international trade lead to equitable growth? Is everyone equally participating in the globalized economy and taking the benefit of open markets, competition and lower prices? Is the market restricted to a few while the rest are negatively impacted by the consequences of growing disparities? These questions, I guess will remain, and there are opinions on both sides of the divide.

YaleGlobal Online recently had an interesting piece by Laurence Chandy and Geoffrey Gertz titled With Little Notice, Globalization reduced Poverty which essentially argued that over the years globalization has led to a reduction of global poverty and large segments of population, especially in China, have risen out of deprivation. 

Articulating their thoughts on the reasons for this decline they state:
"These factors are manifestations of a set of broader trends – the rise of globalization, the spread of capitalism and the improving quality of economic governance – which together have enabled the developing world to begin converging on advanced economy incomes after centuries of divergence. The poor countries that display the greatest success today are those that are engaging with the global economy, allowing market prices to balance supply and demand and to allocate scarce resources, and pursuing sensible and strategic economic policies to spur investment, trade and job creation. It’s this potent combination that sets the current period apart from a history of insipid growth and intractable poverty."
Looking at a very optimistic future where millions would rise out of poverty into being "middle class" they point out that globalization has had a positive impact on improving lives. 
 "Taking a long view of history, the dramatic fall in poverty witnessed over the preceding six years represents a precursor to a new eraWe’re on the cusp of an age of mass development, which will see the world transformed from being mostly poor to mostly middle class. The implications of such a change will be far-reaching, touching everything from global business opportunities to environmental and resource pressures to our institutions of global governance. Yet fundamentally it’s a story about billions of people around the world finally having the chance to build better lives for themselves and their children. We should consider ourselves fortunate to be alive at such a remarkable moment."
Where does the truth lie? Critics of globalization vehemently argue that globalization has led to marginalization, increase n poverty and destitution. Large populations are unable to participate in the national economy leave alone the global economy. Are both positions rhetorical? Countries exist in an interconnected world where multilateral trade rules continuously impact domestic policy. This domestic policy may be designed to address issues of poverty, development and equity as the countries see it. How does one negotiate this delicate situation? Can the role of States be completely ignored? WHat form the role of the State will take is a complicated issue. However, the abandoning of the State in a globalized world to usher in equitable development may not be the answer. While countries perhaps need to engage more with the global economy to partake of its benefits, a strong set of policies to enable millions to participate in the interconnectedness is crucial. What these sets of policies are and how they should be implemented is another debate altogether.The need for them however should not be disputed.

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