Stick with globalization
Given the financial crisis in Southeast Asia, the Russian ruble devaluation, and civil wars and disease in Africa, one might well expect the developing world to be in bad shape.
Actually, most poor nations are doing better economically this year after a few rough years. Average growth in output in these countries, after inflation, should reach 5.3 percent this year, 5 percent next year, and ease to 4.8 percent in 2002, a World Bank report says.
At this goodly pace, poverty rates in the developing world should tumble over the next decade.
Also helpful, world trade volumes will increase about 12.5 percent in 2000, the highest rate of growth since the first oil shock of the 1970s.
In some cases, the handsome growth just reflects a snap back from recession or worse. Thailand, South Korea, and Indonesia were hit hard by the 1997-98 financial crisis. Nor have countries facing conflicts, including many in Africa, kept up.
But in general, over the past decade, poor countries that reduced tariffs, dismantled nontariff trade barriers, increased reliance on market forces, and accomplished other internal market reforms enjoyed an acceleration in growth and in exports, the bank report says.
Former communist nations, such as Russia and other parts of the former Soviet Union, suffered huge economic losses as they strove to make the transition to free enterprise. Russia, despite areas of technological sophistication, became a poor country.
This year, though, the Russian economy also is steaming. Blessed by higher oil prices, it's expected to grow a real 7 percent. The federal budget has shifted from a huge deficit to a major surplus. Inflation is falling.
A week ago, marking the first anniversary of the demonstrations that disrupted a World Trade Organization meeting in Seattle, a hundred or so people protested outside the Washington headquarters of the World Bank's sister organization, the International Monetary Fund. They charged that IMF and World Bank programs were exacerbating poverty in developing countries.
Undoubtedly these institutions have made some mistaken policy recommendations. It may be that the IMF's push to have Russia transform its economy in one big bang, rather than gradually, caused severe damage.
In general, though, the encouragement of the IMF and World Bank for moves toward freer trade, deregulation, and globalization has been beneficial to the poorer nations.
"On average, the countries that liberalized and reduced trade barriers the most have had higher rates of growth," says William Shaw, a World Bank economist.
Poor countries would do even better if rich countries trimmed their high trade barriers to agricultural and processed-food imports and their subsidies to domestic farmers.
There are economic hazards ahead. The American economy has slowed. Recoveries in Europe and Japan remain relatively weak. This could hit developing-country exports.
Further, the rise in petroleum prices hurts oil-importing countries.
Antiglobalization demonstrators can perform a useful role in pointing out problems rising from more trade and more international investment. The rapid meshing together of the world economy is proving uncomfortable. Governments in rich countries could do more to help the low-income workers that tend to be hurt by imports. But trying just to stop globalization is not the solution.
(c) Copyright 2000. The Christian Science Publishing Society
