13Dec
NewsOpinionPoliticsWorld

Globalisation: Still the Best Chance for the World’s Poor

The Guardian recently published an editorial reiterating many of the concerns of both the populist right and regressive left: that ever-greater global integration and competition has been to the benefit of the few, whilst inequality increases amongst the poor. In one sense, this sentiment is correct – we should care about how global trends affect outcomes for the most disadvantaged; but this is exactly why we should embrace globalisation. Individual nations, and the world as a whole, are miraculously better off due to the increasing free-flow of goods, knowledge, and people, even as certain sectors are harmed by the side effects of this creative destruction.

In a rapidly changing world, there have undoubtedly been growing pains associated with the process of global integration. Once prosperous regions of America are now subject to plight and abandonment, with traditional manufacturing jobs continuing to decline.  A life once idolized is now seemingly rendered obsolete, and there are scapegoats everywhere. Crony politicians are reviled as serving the interests of elites; influxes of immigrants are viewed as taking from, rather than adding too, the economic pie; and faceless, distant, international competitors are blamed for the destruction of a proud industrial power.  One has to look no further than the recent Presidential election for this kind of sentiment. There are legitimate concerns as nations grapple with market forces often beyond their control, but these must be considered within the wider narrative of global economic development. To pull back from international trade, capital flows, and immigration, is to kill the goose that laid the golden egg.

Globalisation has been occurring ever since man first began to trade with his neighbour. Although it has only picked up momentum most recently, it is not going to disappear anytime soon. It is the natural process of international integration, of knowledge and prosperity, and it would be to our detriment to resist. According to the World Bank, 2015 marked the first year in history that extreme poverty fell below 10% of global population. In the broader scheme of things, this is the first decline in inequality between world citizens since the Industrial Revolution, most of which has come from the world’s poorest. It is almost without objection to argue that the Third-World’s opening up to trade and investment has been beneficial. Liberalised markets in both China and India have resulted in dramatic increases in income levels, lifting hundreds of millions out of poverty. The most impoverished are benefitting drastically thanks to increased economic freedom, international trade, and investment.

It is also evident that developed Western nations have benefitted from this revolution, despite the pain of economic adjustment. Trade allows workers to specialise in goods and services that they produce more efficiently than the rest of the world, and then to exchange them for goods and services that other countries produce at higher quality and lower cost. Quite simply, it has significantly broadened the bundle of goods an average American can purchase for the same level of work. Trade is essential to America’s prosperity – fuelling growth, supporting jobs, and raising standards of living. As the economist Arthur Laffer put it at an IPA event, “without China there is no Wal-Mart, and without Wal-Mart, there is no middle class and lower class prosperity in the United States.”

According to The Guardian, it would seem as though globalisation is on its way out. “We need to settle whether globalisation in its current incarnation aids or relieves poverty in an equitable way… [and] the answer would seem to be that it doesn’t.” In reality, however, the phenomenon has welcomed a period of unprecedented prosperity in the Third-World. For the West, it has been an occasionally tough, yet fruitful process. It is self evident that the majority of us are better off today than decades ago due to closer economic and cultural ties with the rest of humanity. There has never been a more prosperous time to be alive. To defy global integration is to defy progress itself. Solving world poverty and increasing national living standards absolutely hinges on increasing economic freedom and the flow of resources between nations, from goods to capital, and people to ideas. Globalisation is not the cause of inequality, but the cure.

Political populism does not change the law or history of economics. To pull back from the world is to increase global inequality, dampen domestic growth, and hamper social and economic progress. We are all made better off through increased voluntary exchange, of goods, capital, knowledge and people, to which global integration is the greatest driver. We are living in an unprecedented age of prosperity, and improving outcomes for all. Globalisation is greatly to thank for this, and we would be foolish to turn our backs on it

Daniel Press

Daniel Press graduated with a BA from the University of Western Australia. His research focuses on the economics of development and international trade. He currently resides in Washington DC.

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