Saving globalization

Neither protectionism nor fundamentalism
Jay R. Mandle

I

In recent years the experiences of the underdeveloped regions of the world have dramatically diverged from one another. Economic growth has accelerated in Asia, while growth has slowed in Latin America and has come to a halt in Sub-Saharan Africa. This is a fundamental reversal in trend. Before World War II, Asia lagged behind the other regions. Between 1913 and 1950 its per capita GDP actually declined, while Latin America grew rapidly and Africa followed not far behind. Furthermore, the recent growth in Asia has been impressive when viewed in historical perspective. In Angus Maddison's estimates, the 3.54 percent annual growth rate recorded in Asia between 1973 and 1998 is the highest level recorded in any time period for any region of the world (Table 1).

Asia's growth has produced an important decline in poverty while elsewhere economic stagnation has resulted in its increase. Table 2 reports on poverty estimates made by Surjit S. Bahalla. Though Bhalla's income estimates exceed those of The World Bank and therefore have been the source of much dispute, few doubt that the basic story told in the table is accurate.1

Table 1 Growth of Per Capita GDP by Region, 1870-1998

  Asia (ex Japan) Latin America Africa
1820-1870 -0.11 0.10 0.12
1870-1913 0.38 1.81 0.64
1913-1950 -0.02 1.42 1.02
1950-1973 2.92 2.52 2.07
1973-1998 3.54 0.99 0.01

Source: Angus Maddison, The World Economy: A Millennial Perspective, Table 3-1a, p. 126

 

Table 2 Average Annual Growth Rate Gross Domestic Product, 1980-2000
and Number of People Living at $2.00 per day or Less, by Region, 1980-2000 (millions)

Region Growth Rate 1980 2000
East Asia 7.6 1114 306
South Asia 5.6 508 286
Sub-Sahara Africa 2.0 235 441
Middle East & Nth Africa 2.5 24 53
Latin America 2.5 30 54

Source; Growth Rate GDP: The World Bank, World Development Indicators 2002, Table 4.1. Number of Poor People: Surjit S. Bhalla, Imagine There's No Country: Poverty Inequality, and Growth in the Era of Globalization, (Washington DC: Institute for International Economics, 2002) Table 9.4, p. 148

 

The number of people living at an income level of less than $2.00 per day has declined in Asia from about 1.6 billion people in 1980 to about 600 million in 2000. In Latin America, Sub-Saharan Africa and the Middle East and North Africa, that number increased from about 289 million to 548 million - with the bulk of the growth occurring in Africa.

Another way to look at what has happened to poor people in the developing world is to examine directly the incomes of the bottom one-fifth of the population in these nations. To do so I have again used Bhalla's income estimates to compute the per capita income (or consumption) level of the first quintile of households in 1980 and 2000 and on that basis calculated the implied annual rate of income growth for the poorest quintile in the seven largest countries in Asia (Table 3).

Again the general pattern is clear. The continent's economic growth has substantially raised the average incomes of its poorest households. In general, furthermore, there is a positive association between the rate of economic growth among the seven nations and the rate of income growth for the poor, though the number of observations is too small to test the statistical significance of this relationship. The fact is that of the seven countries considered here the incomes of the poor in the four most rapidly growth countries grew at a substantially higher rate than was the case in the three nations where economic growth was relatively slow or, in the case of the Philippines, non-existent.

Table 3 Average Annual Rate of Growth of GDP per capita and Average Annual
Increase in Per capita Incomes or Expenditures for Lowest Income Earning Quintile, 1980-2000

  GDP per capita Per capita consumption or expenditure of poorest quintile
China (Inc) 8.9 6.6
Thailand (Exp) 4.6 3.2
India (Exp) 3.9 3.3
Indonesia (Exp) 3.5 5.9
Bangladesh (Inc) 2.5 1.2
Pakistan (Exp) 2.4 2.1
Philippines (Inc) -0.1 0.5

Source: Computed from Surgit S. Bhalla, Imagine There's No Country, Table c.1

 

To be sure, in every case except that of Indonesia, the incomes of the poor grew more slowly than did the economy as a whole, implying that the relative share of the national income received by this group declined.2 Nevertheless there is no doubting the fact that Asia's economic growth has substantially raised the incomes of the poor.

That the poor benefited in this way is an event of historic importance. There are 465 million people in the poorest quintiles of China and India alone. The fact that in China the income of these low income people grew by 6.6 percent per year and in that in India the expenditures of the poorest quintile increased by 3.3 percent per year implies a historically unprecedented process of poverty alleviation. There never has been a twenty year period in which the incomes of so many of the poorest people in the poorest countries grew so rapidly.

II

An industrial revolution is underway in Asia and the resulting growth in manufacturing there has been a critical element in its economic growth.3 Between 1980 and 2000, the last year for which it is possible to obtain consistent data, the East Asia and Pacific region (as defined by The World Bank) saw its manufacturing sector grow by 10.2 percent per year and its manufactured exports increase by the very high rate of 13.2 percent annually. South Asia too experienced high rates of growth of manufacturing and manufactured exports (Table 4). Furthermore, the Asian experience stands in contrast to what happened elsewhere. Latin America's manufacturing sector as a whole grew slowly, though computed from a small base, its percentage increase in manufactured exports was high. In the Middle East and North Africa and in Sub-Saharan Africa both the manufacturing sector and manufactured exports lagged seriously behind that of the manufacturing - that economic growth was most rapid.

Table 4 Average Annual Rate of Growth of Gross Domestic Product per capita
and Manufacturing Output, 1980-2000

  GDP per capita Manufacturing Manuf. Exports
East Asia & Pacific 6.1 10.2 13.2
South Asia 3.6 6.8 9.6
Latin America & Carribean 0.7 2.0 10.8
Middle East & Nth Africa -0.1 3.81 4.6
Sub-Sahran Africa -0.6 1.7 5.7

1. 1990-2000 only. Source: Gross Domestic Product per capita computed from The World Bank, World Development Indicators 2002, Table 2.1 and 4.1. Manufacturing Output computed from World Development Indicators 2002, Table 4.1; Manufactured Exports, Computed from World Development Indicators 2000, Table 4.5 and World Development Indicators 2003, Table 4.5

 

Within Asia, China was by far the star performer. On all three measures - increases in GDP per capita, manufacturing output and manufactured exports - China's growth exceeded that of the other six countries in the region (Table 5). Even so, economic growth of Thailand, other regions.

Table 5 Average Annual Rate of Growth of Gross Domestic Product,
Manufacturing Output and Manufacturing Output, 1980-2000

  GDP per capita Manufacturing Output Manuf. Exports
China (EAP) 9.9 12.2 18.2
Thailand (EAP) 4.6 8.0 17.9
India (SA) 3.9 7.2 10.7
Indonesia (EAP) 3.5 9.81 22.3
Pakistan 2.4 5.6 9.6
Philippines -0.1 1.6 13.8

Sources: Rate of Growth of Gross Domestic Product per capita, Calculated from World Development Indicators 2002, Tables 2.1 and 4.1; Manufacturing Output: World Development Indicators 2002, Table 4.1; Manufacturing Exports: Calculated from World Development Indicators 1999, Table 4.5 and World Development Indicators 2002, Table 4.5

 

It was in Asia - the location of the boom in India and Indonesia too was impressive in these years. In all four of these cases the growth in manufactured exports exceeded the growth of the manufacturing sector, and that in turn grew more rapidly than did the economy as a whole. Indeed that same pattern prevailed for the three countries that grew relatively slowly. Put more generally, all of the big Asian countries experienced a boom in manufactured exports and in the cases of China, Thailand, India and Indonesia that export boom was associated with a general process of rapid economic growth.

III

The recent growth experience of the big Asia countries since 1980 has come as much of a surprise as did the economic development that occurred in the smaller 'Asian Tigers' - South Korea, Taiwan, Singapore and Hong Kong - during the 1970s. No one that I know of predicted it and the growth that occurred cannot easily be explained by conventional economic analysis.

During the 1980s and much of the 1990s there was a widespread belief in the development community that market liberalization was the key to long-term growth. Joseph E. Stiglitz writes governments were told that 'free markets were the solution to the problems of developing countries' and that, as Gerald M. Meir reports, 'markets, prices and incentives should be of central concern in policymaking.'4 To that end, the policies that were required by the International Monetary Fund, and the World Bank as a condition for assistance almost always involved freeing markets from governmental intervention. In this regard, The Heritage Foundation devised an index of economic freedom which ranks countries on ten variables designed to indicate the extent to which free markets are operative.

Table 6 Index of Economic Freedom, 2005 by Region and Country

Region Median Score Country Score
North America 2.35 China 3.46
Asia & the Pacific 3.34 Thailand 2.98
Latin America & Carribean 2.99 India 3.53
Nth Africa & Middle East 3.10 Indonesia 3.54
Sub-Saharan Africa 3.37 Bangladesh 3.95
    Pakistan 3.37
    Philippines 2.35

Source: 'Index of Economic Freedom 2005,' Executive Summary,' p. 3-4; individual countries: 'Index of Economic Freedom 2005,' http:www.heritage.org/research/features/index/

 

To this day, the authors of the index claim that 'the countries with the most economic freedom also have higher rates of long-term economic growth.'5 In fact, however, The Heritage Foundation's own index makes it clear that market fundamentalism was not responsible for the growth in the big Asian countries.6 On one hand, as indicated in Table 6, the index for Asia and Pacific countries ranks that region as 'mostly unfree' with a higher score (less free) than Latin America and the Caribbean, and the North Africa and Middle East regions, and barely different from that of Sub-Saharan Africa. As is also shown in Table 6, where the seven large Asian countries are ranked in descending order of economic growth rates, there is no association between rates of economic growth and the economic freedom index. Of the seven, only Thailand is designated as 'mostly free.' China, the most rapidly growing country, is considered 'mostly unfree,' as are India and Indonesia, the other two countries with rates of economic growth of at least 3.5 per cent per year.

IV

Insight into Asia's growth is obtained by recalling that Simon Kuznets, the pioneer of the empirical study of modern economic growth, went out of his way to emphasize the centrality of institutions in that process. While the application of advanced technology is necessary for output to increase over the long run, he writes that the existence of that technology is 'only a potential, a necessary condition, in itself not sufficient.' According to Kuznets, if technology is to be 'employed efficiently and widelyÂ…institutional and ideological adjustment must be madeÂ….'7

Institutions are critical to success in development because they determine the structure of incentives and levels of competencies present in a society. Where substantial rewards are offered for the use of modern technology and people are empowered effectively to use advanced production methods, growth is likely. Where the incentives work inadequately in encouraging the use of advanced technology or people are not sufficiently well educated to employ sophisticated production methods, economic development will fail.

Market liberalization alone therefore cannot be relied upon to successfully promote economic development. Modern economic growth is a process centered on technological change and product innovation. But the presence of markets does not ensure rapid growth in either. Markets act to allocate resources, whatever the rate of change in production methods or the structure of output. For that reason market theory is not sufficient to explain growth. It does not account for differences in the variables that must be explained. Thus Douglas C. North, himself a Nobel Prize winner in economics, complains about economists who approach development with 'a body of theory developed to deal with advanced economies of nineteenth century vintage in which the problems were those of resource allocation. That theoryÂ…is simply inappropriate to deal with the issues of [long term economic growth].'8

Social institutions are shaped over time. Economists like North refer to this as 'path dependence,' defined by him as 'the constraints on the choice set in the present that are derived from historical experiences of the past.'9 What this really means is that the problem of economic development is much deeper than simply unleashing market forces. The historical process by which institutions emerged and specific forms of behavior were encouraged and facilitated has to be considered for an accurate assessment of a nation's growth potential. Because of this, there is no unique formula by which to achieve economic development. Each country's path to modernization is unique, conditioned by its own historical circumstances. The lesson is clear and North is straight-forward in articulating it: 'Â…the process of economic growth is going to vary with every society, reflecting the diverse cultural heritages and the equally diverse geographic, physical and economic settings.'10

V

What differentiates the era of globalization from preceding periods are the technologies that developed during the late twentieth century with regard to communications, information processing, storage and retrieval, and transportation.11 In each case, the advances that occurred allowed firms to extend their production processes over a greater geographic space than had been the case in the past. With those advances, it became possible more widely to disperse the production of intermediate and final manufactured goods. Multinational firms now could minimize their production costs and still maintain quality control by having subsidiaries or licensed firms undertake production at locations far from the head office. Referred to as chains, linkages, or alliances, this geographic dispersion of production has resulted in manufacturing's being undertaken in poor countries that in the past had only been suppliers of raw materials or agricultural products. Those technologies then provided opportunities for development. The growth data suggest that the countries of Asia, more than nations in Latin America and Africa, possessed the institutions which enabled them successfully to take advantage of those opportunities.

The spread of manufacturing to Asia, like the diffusion of growth more broadly, was unanticipated. Even John H. Dunning, a leading theorist and promoter of 'alliance capitalism' was doubtful. Writing as late as the early 1990s, Dunning thought that 'there would appear to be little prospect that most of the poorer countries will derive much immediate benefit from the new global economic order,' though he did concede the 'possibility' that growth might occur in China and India.12 In general, however, the success of Asia's policies and institutions in facilitating growth has come as a great surprise to economists.

In particular, China's and India's recent history seemed to militate against development. Both countries had for a long time possessed institutions and policies that discouraged competitive success in international markets. Through the 1970s there was no basis to believe that either would adopt policies or reorient their institutions to reward and encourage firms to using modern technology in order to compete successfully in global markets. Indeed, The Great Proletarian Cultural Revolution in China between 1966 and 1976 almost perfectly represented the antithesis of such a commitment.13 Information about the world outside of China was all but barred, and rewards for entrepreneurial success were beyond the pale. Though India was not as insular as China, its 'license raj' - a system of licensing that constrained private business and benefited the public sector - also impeded growth and seemed to be a permanent component of that country's economic strategy. 14

But in 1978 when China began the process of rewarding innovation and opening the country to outside knowledge, its economic growth rate accelerated. And similarly, in the mid-1980s when under the government of Rajiv Gandhi, India created an environment more favorable to growth by relaxing the constraints under which businesses in that country functioned, growth there too accelerated.15 From circumstances in which the incentives and ability to adopt modern technology were constrained, the leaderships in both these poor countries moved to reconstruct an economic environment that had proved to be harmful to modernization.

These reforms did not create free market economies, and in general Asian economic growth did not occur in a laissez-faire environment. Rather the successful countries of the region adopted what Charles Gore calls the 'Southern Consensus,' a strategy that 'rejects the idea that growth with late industrialization can be animated using a general blueprint,' such as The Washington Consensus and its market fundamentalism.16 The policy measures included in this new approach included, in Dani Rodrik's words, 'export subsidies, domestic-content requirements, import-export linkages, patent and copyright infringements, restrictions on capital flows (including direct foreign investment), directed credit and so onÂ….'17 Central to the success of this strategy was a determined effort to reward only success. The subsidies made available to firms were to be conditional on their achieving investment, export or productivity explicit targets.18

VI

A crucial question that the Asian economic success raises is whether, in Gavin Kitching's words, globalization 'marks the beginning of a process that may lead to the achievement ofÂ… a material standard of living' that the people in the poor countries will regard as 'satisfactory or acceptable.'19 Asia has not yet accomplished that goal, and Africa and Latin America have an even longer road to travel. And it must be added that this question arises at all only if development can be accomplished without an environmental crisis. In this, it has to be assumed the World Bank is right when it optimistically argues that effective technological responses to environmental degradation means, 'continued and even accelerated economic and human development is sustainable and can be consistent with improving environmental conditions.'20 If the possibility of a binding environmental constraint is put aside, the issue that determines the answer to Kitching's question is whether globalization will proceed in a way that allows growth not only to be sustained in Asia and but also to accelerate in Latin America and Africa.

In this regard, two important potential impediments loom. Both concern future changes in the rules governing international trade. Because of them, there is a real risk that late-comers to globalization will confront a less favorable international environment than did the pioneers in Asia. The first is that as the rules concerning the global economy become codified, they will impose a market fundamentalist straight-jacket on the development process. The second is that the process of trade liberalization will come to a halt and future developers will not have as much access to the markets of the rich countries as had been the case for the Asian developing nations.

As we have seen, Asia's economic growth did not occur in a laissez-faire environment, and growth is not an outcome that automatically happens when a market environment is created.21 An imposition of market fundamentalist rules - rules constraining the use of government instruments and policies to achieve specific objectives - would run the risk of outlawing the very policies that have enabled the Asian nations to develop.

The risk in this regard derives primarily from the fact that market fundamentalism forms the basis of the development policies insisted upon by the United States government. That is the content, for example, of the Bush Administration's new foreign assistance program. Under its Millennium Challenge Act, many of the criteria that are imposed on a country before it qualifies for assistance are of the kind present in The Heritage Foundation's Index of Economic Freedom. Under the terms of the program, a country must satisfy 16 different standards, six of which come under the heading of 'encouraging economic freedom.'22 None of the criteria involves the kind of promotive activities that have been successfully employed in the rapidly growing Asian countries. To date only two countries, Madagascar and Honduras, have qualified for assistance on the basis of these standards. In explaining the selection of Madagascar, the Millennium Challenge Corporation's Chief Executive Officer noted that it was selected because the government of that country had adopted a 'pro-reform, pro-free marketÂ…approachÂ….'23 If rigorously imposed as the basis for evaluating whether a country should be a recipient of foreign assistance, this market fundamentalist bias could seriously hamper the nations of Africa and Latin America as they attempt to follow Asia's lead with regard to growth.

American dictates in this regard have also been apparent in the bilateral and regional trade agreements it has entered into. The problem here is that compared to large multinational settings such as those at the World Trade Organization (WTO) it is easier for a powerful nation like the United States to coerce small and poor nations into agreements. Access to the large and wealthy American market alone may induce countries to accept terms they would otherwise resist. Indeed, the provisions the United States frequently require not only fail to possess a developmental justification; they often contradict even market fundamentalist precepts. This typically occurs when such provisions are included at the behest of special interests. In the Africa Growth and Opportunity Act involving the United States and 37 African countries for example, it is not hard to see the power of textile industry lobbyists in the stipulation that clothing imported into the United States from Africa must be made of cloth that uses United States-produced fabric, yarn and thread.24 In another case, Aadittya Mattoo and Arvind Subramanian, World Bank economists, argue that in its regional agreements with Jordan as well as those separately with Morocco and Vietnam, the United States has secured protection for intellectual property that harms the ability of the smaller countries do develop pharmaceutical industries.25

Aside from the risks that governments may be barred from intervening to achieve development, the second threat to development concerns market access. In this regard, the future of development will to a large extent will be shaped by the World Trade Organization's (WTO) Doha Round of trade negotiations. Initiated in 2001, these talks were intended explicitly to address the problem of economic development. In them the poor countries are seeking enhanced access to markets - particularly agricultural markets - in the rich nations. Whether growth spreads beyond Asia will be determined by whether Doha results in an agreement and its content.

To date in these talks, the developed countries have proved reluctant to further open their markets to the products of the developing world. This resistance reflects the fact that there is only tepid support for liberal trade in several of the rich countries. This is the case when, for example, liberalization involves the dismantling of agricultural subsidies as it does in France, or the elimination of non-tariff barriers to manufactured imports as it does in the United States. In both of these countries, an alliance of the political right and left stands in opposition to enhanced trade liberalism.

The appeal of protectionism lies in the fact that liberalizing trade causes painful dislocations. International trade, of course, benefits consumers. It makes more goods available at lower prices than would be the case without it. Nevertheless those decreased prices put pressure on industries that compete with imports. With increased overseas competitors, domestic firms may experience reduced profits or even go bankrupt; and employees may be forced to accept lower wages or may lose their jobs altogether. Specific industries and their employees are therefore in effect asked to bear the costs of the gains that global market integration produces. Not surprisingly, they resist.

Standard international trade theory calls for the beneficiaries of the process to share their gains with those who are harmed. Typical in this regard are the analysts at The Brookings Institution who write that 'economists have long recognized that while free trade confers net benefits on the economy as a whole, it also inflicts harm on certain workers and firms' and that 'a standard remedy for the economic fall out from free trade is to require that the winners share some of their gains with the losers.'26

In practice, however, the admonition to share the benefits of trade has largely been overlooked. Compensatory policies are not included in the trade agreements themselves, and they have been neglected or treated as an after-thought when those agreements are considered by legislators. In this regard a consultative board's report to the Director-General of the WTO complained that the organization 'says practically nothing, even by way of exhortations, to WTO Members and to aid-giving institutions, or adjustment assistance.'27 And yet dislocations are every bit as much part of the process of global market integration as are the increases in well-being for which that globalization is responsible.

By failing adequately to address the damage that progress inflicts, proponents of trade liberalization have created a vocal constituency of victims. Because proponents of freer trade have been slow to respond to the legitimate claims of the victims of globalization, the political demand for protection has been powerful. As Gavin Kitching puts it, 'the worker-citizens of [developed] countries Â… are increasingly being left alone to cope with consequences of rapid structural change as best they can.'28

In a worst case scenario, a failed Doha Round will mean that the developing world will confront a toxic combination of continued restricted access to international markets, while being compelled domestically to adopt market fundamentalism. In this setting, rich countries, under pressure from the political opponents of liberal trade, will fail to open their markets to the products of the poor nations. This in itself would constitute a major blow to the interests of the poor countries. But the damage that would result from the continued stunting of their exports would then be compounded. With a Doha failure, bilateral agreements would become even more important than they are at present.

With that the case, the United States in particular would be able successfully to insist upon market fundamentalism as the price that poor countries will have to pay to gain access to its markets. In the process countries aspiring to growth will be denied the very tools that have proved effective in achieving high rates of economic growth.

VII

What the successful spread of economic development therefore requires is a counter-weight both to protectionism and market fundamentalism. At the moment unfortunately, such a counter-weight is more conspicuous by its absence than by its presence. It is here that the real tragedy of the anti-globalization movement lies. There is no doubting the desire of its members to alleviate impoverishment. Yet the fact remains that all too often the practical consequences of the policies they call for are perverse. This is particularly the case with regard to the relatively large segment of the movement that demands the curtailment of global market integration and affirms the desirability of 'localism.' 29

But even beyond those who reject modernization in the name of 'community-based' economies, there is a more general failure in the movement to appreciate the real positive importance of globalization. To begin with, its adherents have not acknowledged the significance of the economic advances that the integrating of the world economy has resulted in. Because of that, the movement is too willing to entertain policies that would slow growth such as the imposition of standards on wages. At the same time, because it undervalues growth, the movement supports protectionism in the developed world as part of its effort to defend the interests of workers there. In this too it has not come to terms with the damage that the resulting slowing of growth would inflict on the poor of the underdeveloped world. But above all, the movement has not come to see that globalization can be used to link together the interests of the poor and working classes of both rich and the developing nations.

There is a new politics waiting to be born here. Such a politics would call for a globalization that was composed of three equally important components. It would of course require liberal trade as fundamental to successful globalization. In this it would point to the many persisting situations in which both rich and poor countries adhere to a special-interest driven protectionism that stifles growth. But it would also insist, as a matter of fairness and justice, that generous assistance is provided to workers who are displaced by global market integration. Doing so is the only way to ensure that globalization is fair and that its benefits are as widely distributed as possible. And, third, it would explicitly call for the right of governments to engage in development-promoting interventions in their economies. The international policy framework governing globalization must not be confined to a growth-inhibiting laissez-faire regime.

Admittedly, implementing a package that further extends trade liberalization, adds the right of poor countries to employ government interventions and secures new social policies to reduce the harsh edge of globalization will not be an easy accomplishment. It will necessitate the emergence of a social movement that advocates for the poor by affirming the desirability of economic growth, while at the same time insisting that the fruits of that growth be extended widely. But success in this project would have a double pay-off. On one hand it would serve to speed growth and thereby reduce poverty. On the other hand the adoption of compensatory policies to offset the costs of globalization might well reduce the populist hostility to international market integration that exists all over the world and that threatens to derail the process. It would thereby speed growth and hasten the day when global poverty is eliminated.

Political and economic activism can be made consistent with the interests of the poor in both the rich and the poor nations. But what is needed is that activists do a radical rethinking of their position. They will have to shift their focus from attempting to impede globalization to an effort to promote it in their own countries as well as elsewhere, with support systems in place to compensate those who pay the price for its gains.

We do not yet have a political movement that accepts this viewpoint. The ever-more-integrated nature of the world economy increasingly means that we need one.


This paper was presented to a research seminar held at the University of New South Wales on Friday 19th August 2005. Jay R. Mandle is W. Bradford Wiley Professor of Economics, Colgate University, Hamilton, New York. His publications include Globalization & the Poor (Cambridge, 2003).


Notes

1. Angus Deaton, 'Counting the World's Poor: Problems and Possible Solutions,' The World Bank Research Observer, Vol. 16, no. 2 (Fall 2001), pp. 125-48.

2. Thus the experience of these countries is not consistent with that reported by David Dollar and Aart Kraay who find that for a much bigger sample of countries that the incomes of the poorest fifth rise proportionately with average income. See David Dollar and Aart Kraay, 'Growth is Good for the Poor,' Journal of Economic Growth, Vol. 7, No. 3 (September 2002), pp. 195-225.

3. For the continued importance of agriculture as a source of employment in poor countries see Louis A. Ferleger, 'A World of Farmers, But Not a Farmer's World,' The Journal of the Historical Society, Vol. II, No. 1, Winter 2002, pp. 43-53.

4. Joseph E. Stiglitz, Globalization and its Discontents, (New York: W.W. Norton & Company, 2002), p. 13; Gerald M. Meier, 'The Old Generation of Development Economists and the New,' in Gerald M. Meier and Joseph E. Stiglitz (eds) Frontiers of Development Economics: The Future in Perspective, (Washington DC and New York: The World Bank and Oxford University Press 2001), p. 17.

5. Marc A. Miles, Edwin J. Feulner and Maray Anastasia O'Grady, '2005 Index of Economic Freedom: Executive Summary,' http://www.heritage.org/research/features/index/chapters/Executive_Summa....

6. In the index, a score of 1.99 or less is used to designate a 'free' country; a 'mostly free country scores between 2.00 and 2.99; a score 3.00 to 3.99 goes to 'mostly unfree' nations; and 4.00 to 5.00 is reserved for 'repressed' nations. The Heritage Foundation, 2005 Index of Freedom, (Washington: The Heritage Foundation, 2005) p. 59.

7. Simon Kuznets, 'Modern Economic Growth: Findings and Reflections,' in Assar Lindbeck (ed.) Nobel Lectures: Economic Sciences 1969-1980, (Singapore: World Scientific Publishing Co. Pte. Ltd, 1992), p. 87.

8. Douglass C. North, Understanding the Process of Economic Change, (Princeton and Oxford: Princeton University Press, 2005), p, 168-9.

9. ibid. 52.

10. ibid. 165.

11. Thomas L. Friedman has brought this development to the attention of a wide audience in his The Lexus and the Olive Tree: Understanding Globalization (New York: Farrar, Straus, Giroux, 1999) and The World is Flat: A Brief History of the Twenty-First Century (New York: Farrar, Straus, Giroux, 2005).

12. John H. Dunning, 'The Advent of Alliance Capitalism,' in John H. Dunning and Khalil A. Hamdani, The New Globalism and Developing Countries, (Tokyo: The United National University Press, 1997), p. 35.

13. Jay R. Mandle, 'Economic Reform and the Communist Party in China,' Socialism and Democracy, (Fall/Winter, 1987), pp. 71-6.

14. J. Bradford DeLong, 'India Since Independence: A Analytic Growth Narrative,' in Dani Rodrik (ed.) In Search of Prosperity: Analytic Narratives of Economic Growth, (Princeton and Oxford: Princeton University Press, 2003), p. 190-3.

15. ibid. 197.

16. Charles Gore, 'The Rise and Fall of the Washington Consensus as a Paradigm for Development Countries,' World Development, Vol. 28, no. 5, (2000) p. 796.

17. Dani Rodrik, The Global Governance of Trade As if Development Really Matters (New York: United Nations Development Programme, 2001), p. 28.

18. Charles Gore, 'The Rise and Fall of the Washington Consensus as a Paradigm for Developing Countries,' p. 797. See also Alice H. Amsden, The Rise of 'The Rest': Challenges to the West from Late-Industrializing Economies, (New York: Oxford University Press, 2001), pp. 251-283.

19. Gavin Kitching, Seeking Social Justice through Globalization: Escaping a Nationalist Perspective, (University Park: The Pennsylvania State University Press, 2001), p. 219, 218.

20. The World Bank, World Development Report 1992: Development and the Environment, (Washington DC: The World Bank 1992), p. iii. Emphasis in original.

21. Joseph E. Stiglitz, Globalization and its Discontents, pp 53-60.

22. Report on the Criteria and Methodology for Determining the Eligibility of Candidate Countries for Millennium Challenge Account Assistance in FY 2004, p. 2. http://www.mca.gov.

23. Millennium Challenge Corporation Chief Executive Office Paul Applegarth on the Board's Decision to Approve the First Millennium Challenge Compact with Madagascar, March 14, 2005, htt://www.mca.gov/public_affairs/press_releases/remarks_031405.shtml.

24. Africa Growth and Opportunity Act, 'AGOA's 'Wearing Apparel' Rules of Origin,' http://www.agoa.info/index.php?view=about&story=apparel_rules.

25. Aaditya Mattoo and Arvind Subramanian, 'Why Prospects for Trade Talks are Not Bright,' Finance and Development, Vol. 42, no. 1, March 2005, p. 20.

26. Gary Burtless, Robert Z. Lawrence, Robert E. Litan and Robert J. Shapiro, Globaphobia: Confronting Fears About Open Trade (Washington DC: Brookings Institution Press, 1998), p. 131.

27. Peter Sutherland et al, The Future of the WTO: Addressing Institutional Challenges in the New Millennium (Geneva: World Trade Organization, 2004), p. 16.

28. Gavin Kitching, Seeking Global Justice through Globalization, p. 290.

29. Jay R. Mandle, Globalization and the Poor, (Cambridge University Press, 2003), pp. 49-52.

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