Getting Globalization Right
Getting Globalization Right
To lift people out of poverty, developing countries need to enter the global economy, writes Dani Rodrik of the John F. Kennedy School of Government at Harvard University.
The proximate cause of poverty is low productivity. Poor people are poor because their labor produces too little to adequately feed and house them, let alone provide adequately for other needs such as health care and education.
Low productivity, in turn, has diverse and multiple causes. It may be the result of lack of credit, lack of access to new and better technologies, or lack of skills, knowledge or job opportunities. It may be the consequence of small market size—or exploitative elites, in cahoots with the government, who block any improvement in economic conditions that would threaten their power.
Globalization promises to give everyone access to markets, capital and technology, and to foster good governance. In other words, globalization has the potential to remove all of the deficiencies that create and sustain poverty. As such, globalization ought to be a powerful engine for economic catch-up in the lagging regions of the world.
And yet, the past two centuries of globalization have witnessed massive economic divergence on a global scale. How is that possible?
This question has preoccupied economists and policy makers for a long time. The answers they have produced coalesce around two opposing narratives.
One says the problem is “too little globalization,” while the other blames “too much globalization.” The debate on globalization and development ultimately always comes back to the conundrum framed by these competing narratives: if we want to increase our economic growth in order to lift people out of poverty, should we throw ourselves open to the world economy or protect ourselves from it?
Unfortunately, neither narrative offers much help in explaining why some countries have done better than others, and therefore neither is a very good guide for policy.
The truth lies in an uncomfortable place: the middle. It’s a point best illustrated by the country that has contributed the most—given its overall size—to the reduction of poverty globally: China. China, in turn, learned from Japan’s example, as did other successful Asian countries.
Read the full article at www.AmericasQuarterly.org.
Dani Rodrik is Rafiq Hariri Professor of International Political Economy at the John F. Kennedy School of Government at Harvard University.
