Asymmetric Globalization: Global Markets Require Good Global Politics

By Birdsall, Nancy | Brookings Review, Spring 2003 | Go to article overview
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Asymmetric Globalization: Global Markets Require Good Global Politics

Birdsall, Nancy, Brookings Review

The globalization of markets can benefit--and has benefited--rich and poor alike. But the integration of the global economy is outpacing the development of a healthy global polity. To realize the values and rules critical to a secure and just world--and to make the full benefits of a global market available to all--will require a better global politics.

The debate about the implications of market-led globalization for the poor has taken on new urgency in the past several years. On one side are most mainstream economists, international institutions such as the United Nations and the World Bank, most finance ministers and central bank governors in poor and rich nations alike, and most professional students of development. They argue that globalization is not to blame for any increase in world poverty and inequality--and point out that the world's poorest people, those living in rural Africa and South Asia, are those least touched by globalization. On the other side of the debate are most social activists, members of nonprofit civil society groups who work on environmental issues, human rights, and relief programs, most of the popular press, and many sensible, well-educated observers. To them, the issue seems self-evident. Globalization may be good for the rich countries and the rich within countries, but it is bad news for the poorest countries and especially for the poor in those countries.

One central issue is whether the current distribution of economic and political power in the world is just or fair--whether it provides for equal opportunities to those who are poor and, in global affairs, relatively powerless. On this score, I believe it is time for the first group to internalize the arguments of the second and recognize the need for an improved global politics, in which more democratic and legitimate representation of the poor and the disenfrachised in managing the global economy mediates the downside of more integrated and productive global markets.

Globalization, Poverty, Inequality

Most developing countries began to be tied into the world economy only in the 1980s. Before that, although they participated in some multilateral trade agreements, special preferences permitted them to protect their own markets. In the 1980s, however, and increasingly in the 1990s, most developing countries took steps to open and liberalize their markets. In addition to reducing and eliminating tariffs and nontariff barriers, they made fiscal and monetary reforms, privatized and deregulated their economies, eliminated interest rate ceilings, and, in the 1990s, opened capital markets--a package that came to be known as the Washington Consensus. These market reforms and accompanying, often socially painful, structural changes were encouraged and supported by the International Monetary Fund, the World Bank, and the U.S. Treasury with large loans typically conditioned on countries' adopting and implementing agreed policies. The increasing reliance on markets in the developing world and, in the 1990s, in the countries of the former Soviet empire is with good reason seen as part and parcel of globalization. And because of the conditioned loans, many opponents of globalization today see the turn to the market--and thus to global capitalism--as imposed on the developing countries. (Ironically, the loans often were disbursed even when agreed conditions were not implemented.)

With the growing influence of markets in the past two decades have come changes in global inequality and world poverty. Over the past century, global inequality by most measures has been growing. At the end of the 19th century, the ratio of the average income of the richest to the poorest country in the world was 9 to 1. Today the average family in the United States is 60 times richer than the average family in Ethiopia or Bangladesh (in terms of purchasing power). The increase in inequality is the result of a simple reality. Today's rich countries, already richer 100 years ago (thanks to the Industrial Revolution), have been blessed with economic growth and have gotten a whole lot richer.

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