Clearly, much more needs to be done to accelerate poverty reduction in the coming decades.Finally, it is important to note that poverty is amultidimensional phenomenon and is not simply thesame as an insufficient level of monetary income.Other determinants of poverty include access to basicsanitation, education, and health services. Thisdistinction is important because some developingcountries have converged or almost converged withdeveloped countries in areas such as life expectancy,even though they have much lower income levels.For example, in Latin America and the Caribbean lifeexpectancy averages 70 years and average per capitaincome is only $6,868. In contrast, according to theUN Human Development Report 1999, the averagelife expectancy in developed countries is 78 years,while average per capita income is $23,741.
Evencountries as poor as India have a life expectancy (63years) that was not possible anywhere in the world ahundred years ago.
This shows that the worldwidedissemination of new technologies and knowledge,such as medical advances, reduces some aspects of poverty in developing countries even while monetaryincomes only slowly increase. (The UN recognizesthat health and other social aspects of poverty are notaccurately reflected in monetary measures and thusconstructs its own measure of poverty -- the humandevelopment index (HDI). This measure includes lifeexpectancy, literacy, school enrollment and incomes.In 1997, more than half of the 174 countriesmeasured by the UN had an HDI rank that was higher than their per capita income would predict).
The Inequality Gap
On the other hand, one of the main claims of theantiglobalization movement is that globalization iswidening the gap between the haves and the have-nots. It benefits the rich and does little for the poor, perhaps even making their lot harder. As union leader Jay Mazur put it, "globalization has dramaticallyincreased inequality between and within nations".The problem with this new conventional wisdom isthat the best evidence available shows the exactopposite to be true. So far, the current wave of globalization, which started around 1980, hasactually promoted economic equality and reduced poverty.Evidence that rising inequality in some countriesoccurs at the same time as rapid globalization doesnot prove causation. In fact, the evidence on thecausal relationship between globalization and internalinequality is mixed. One thing seems clear: there isno systematic relationship between openness to tradeand inequality. For example, while both Thailand andTaiwan have witnessed rapid economic growth andintegration into the global economy over the pastthirty years, inequality increased in Thailand but notin Taiwan. This and similar examples may lead oneto conclude that there is no simple relationship between openness and inequality.In addition, growth in general (whether caused by trade or other factors) does not automaticallyincrease inequality. A comprehensive study of 125countries by the World Bank showed that a 1 percentincrease in GDP is associated with a 1 percentincrease in the incomes of the poor. The studyconcluded that "there is no apparent tendency for growth to be biased against poor income householdsat the early stages of development. Thus, blanketclaims about globalization or growth increasinginequality cannot be substantiated by a careful look atthe evidence. Other factors -- such as domestic socialand other policies -- clearly play a role in howeconomic growth and integration in the globaleconomy affect the distribution of income. The samestudy, which is conducted by Dollar and Kraay(2001), states a finding of a statistically significantand economically meaningful effect of trade ongrowth: an increase in trade as a share of GDP of 20 percentage points increases growth by between 0.5and 1 percentage point a year.Figure 2. Real per capita GDP growth (annual rate)Source: Dollar and Kraay (2001b)
Global economic integration
has complexeffects on income, culture, society, and theenvironment. But in the debate over globalization'smerits, its impact on poverty is particularlyimportant. If international trade and investment primarily benefit the rich, many people will feel thatrestricting trade to protect jobs, culture, or theenvironment is worth the costs. But if restrictingtrade imposes further hardship on poor people in thedeveloping world, many of the same people willthink otherwise.The fact is; developing world can be divided intoa "globalizing" group of countries that have seenrapid increases in trade and foreign investment over the last two decades -- well above the rates for richcountries -- and a "nonglobalizing" group that tradeseven less of its income today than it did 20 years ago.One need to be cautious about drawing conclusionsconcerning causality, but no one can disagree thatopenness to foreign trade and investment (along with