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Globalisation has helped the truly poor: Study

Jeremy Gaunt

Far from creating poverty as critics claim, rapid globalisation of the world economy has sliced the proportion of abject poor across the planet, according to a controversial new study released on Monday.

It says that freer commerce, epitomised by the cutting of tariffs and the lifting of trade barriers, has boosted economic growth and lifted the incomes of rich and poor alike.

"The proportion of the world's population in absolute poverty is now lower than it has ever been," the study, written by a group of respected economists for the London-based Centre for Economic Policy Research, said.

While accepting that there are costs to globalisation that require robust policy making, the study seeks to refute the claims of anti-globalisation campaigners that Western-dominated capitalism has damaged the world's poor in the name of profits for large, multinational and mainly US companies.

It says that while there has been an increase in wealth inequality between the richest and poorest countries, this is primarily due to African economic stagnation, which may not be the result of globalisation.

Income distribution between the rich and the poor within most countries is said to have become more equal, the report says.

Claims by those opposed to globalisation that multinational firms exploit workers in developing countries with sweatshop pay are countered with the argument that such pay is usually higher than local standards and that real wages have risen.

The study uses 1992 data -- the latest that was available -- to make some of its key points, but one of its authors, Anthony Venables of the London School of Economics, said more recent post-publication research supported the trend.

CONTROVERSY

The study has already brought a less-than-glowing response from the European Commission, the European Union's executive body that commissioned the report.

In a foreward that broadly endorses the report's conclusions, Commission president Romano Prodi distances the Commission from some parts of the report, saying it could not concur with all the study's analysis.

"In many respects, the findings will prove controversial, at least to those outside the circle of professional economists, contradicting as they do certain deeply held beliefs about the negative consequences of globalisation," Prodi wrote.

The study accepts that the number of truly poor people in the world -- defined as those living on less than an inflation adjusted $1 a day -- has changed little in the last 50 years in actual numbers.

But it says that the globalised economy has more than halved this number as a percentage of the world's growing population, from 55 per cent in 1950 to 24 per cent in 1992.

"Although too many people live in poverty, the problem has proportionately diminished during the recent era of rapid globalisation," the study says.

Looking at the claim that the wealth divide is now greater between rich and poor countries, the study admits that average incomes are wider between the two than ever.

But it says this is mainly because Africa has stayed put while rich countries have grown. Other poorer countries such as India and China, have grown rapidly, it says, and Africa's woes may not be related to globalisation.

"Whether the disastrous African performance is due to insufficient globalisation on the continent or whether Africa's weak governance, low education levels and fragmented civil society put the opportunities of globalisation out of reach is almost impossible to tell," its says.

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