World Inequality and Globalization http://www.st-and.ac.uk/academic/economics/papers/dp0204.pdf says: "Lomborg’s typically unqualified assertion that global inequality in real PPP income has been declining is contradicted by research from the World Bank (2002). "In fact, real incomes in the less globalised developing countries with a third of the world’s population have been declining for the last decade, thus increasing the gap with the rich-and the more globalised developing-countries, though the latter two groups have been converging." >Grinch: >Yes... that's what the World Bank paper did say: > > The poor nations holding most of the world's population that *are* >developing their economies through "globalization" *are* growing >richer fast and are "converging" with the rich nations. > Meanwhile, the poor nations that aren't participating in >globalization -- because they are led by Mugabe or whatever -- are >indeed falling behind. > >And this is the argument that they use *against* economic >liberalization and globalization. Hi, Recent posted links give opposing views of globalization. Brad DeLong says the poor have been getting richer faster for the last 25 years, and cites India and China as examples: http://econ161.berkeley.edu/TotW/world_income_dist.html Since these two countries contain about 2 billion people (1/3 of humanity), and since there are many other such countries (South Korea, Indonesia, Brazil, etc.) things should be looking up. Then Robert Vienneau posted this opposing URL: hhttp://www.cepr.net/publications/globalization_2001_07_11.htm "In this study, countries are grouped by their level of the indicator (GDP, life expectancy, etc.) at the start of each period. We are therefore comparing the countries that start each period at similar levels, rather than comparing the same country across the two 20-year periods. This eliminates the problem that it might be more difficult, for example, for a country to make the same amount of progress going forward from an average life expectancy of 65 years, as it made from a life expectancy of 50 years. (See the Introduction for a more detailed explanation.)" ... "The evidence presented in this study does not prove that the broad decline in progress in the areas of economic growth, health outcomes, or other social indicators are a result of any one or more of these policy changes. But it does present a very strong prima facie case that some structural and policy changes implemented during the last two decades are at least partly responsible for these declines. And there is certainly no evidence in these data that the policies associated with globalization have improved outcomes for most low to middle-income countries. To argue that this is the case, it would be necessary to show that outcomes would have been even worse in the era of globalization, if countries had not adopted these policies." .... "For example, in the case of per capita GDP growth, there are data in the first period for 116 countries. For the second period there are also data for 116 countries, giving a total of 232 data points -- average annual growth rates.[2] These coountries are then divided into five groups of 46 or 47 each, according to the amount of per capita GDP they had in either period. For example, the third or middle-income category (see Figure 1) includes countries that started either period with a per capita GDP between $1,826 and $3,364, measured in 2000 dollars. In 1960 there are 29 countries that fall into this income range; in 1980 there are 17 countries. [3] We can therefore compare whether the countries that started the period in this income range (per capita GDP between $1,826 and $3,364) grew faster on average in the years from 1960 to 1980, or whether they grew faster in the years from 1980 to 2000. The same comparison can be made for the other 4 income groupings." ..... "The slowdown is quite dramatic for the poorer countries. The second set of countries, with per capita GDP ranging from $1,121 to $1,826 in 2000 dollars at their starting points, saw growth fall from an annual average of 2.1 percent to 0.8 percent. "Among the 26 countries that began the first period (in 1960) in this income range are Egypt, the Philippines, South Korea, and the Dominican Republic. In the second period (beginning 1980) this category included Kenya, China, and Zimbabwe, among 20 countries" ..... "The most tragic picture appears in the data for the poorest countries (per capita GDP between $375 and $1,121). In the first period, 1960 to 1980, these countries sustained a rate of growth of per capita GDP that averaged 1.9 percent. While this is lower than the growth rate for the other four groups, it was at least positive and not trivial. By contrast, the seventeen countries that were in this income grouping in the second period actually experienced negative growth, on average, over the period from 1980 to 2000.[5] Among the countries in this grouping for the first period (beginning 1960) are Ethiopia, Romania, Indonesia, and Chad. In the second period (beginning 1980), Burkina Faso, Uganda, and Niger were among the countries that started at this income level." END OF QUOTES My comments on this study: First, no weighting of countries by population. China and India with billions of people are treated on an equal basis as countries with populations of a few thousand. While I agree that tracking the same country for 2 intervals of 20 years has a problem, if the point of the study is the effect of "globalization", I would think that countries should be divided into groups based on the extent to which they adopted policies of open trade and market economies. Compare those countries that have taken part in globalization with those that have not. Should "globalization" be seen as a failure because Burkina Faso, Uganda, Niger, Kenya, and Zimbabwe have not done as well during the last 20 years as Egypt, the Philippines, South Korea, Ethiopia, Romania, Indonesia, Dominican Republic, and Chad? It would help if the authors had included a list of exactly which countries were being compared to which in each category. I am a chemist, and have been trained to think that if I want to study the effect of X on a set of subjects, I should compared those subjects exposed to X with those not exposed, or to group the subjects by the extent of their exposure. ,,,,,,, _______________ooo___(_O O_)___ooo_______________ (_) jim blair (jeblair@facstaff.wisc.edu) Madison Wisconsin USA. This message was brought to you using biodegradable binary bits, and 100% recycled bandwidth. For a good time call: http://www.geocities.com/capitolhill/4834 REPLY: From: RArmant : The Heritage Foundation has an index that rates the degree of protectionism by country on a scale of 1 to 5 -- with 1 being the most open while 5 being the most protected. See: http://www.heritage.org/index/ On the above form where it says -- 2. Sort by Policy Factor: -- select 'Trade Policy' ALSO, see: http://biz.yahoo.com/rb/020707/financial_poor_1.html LONDON (Reuters) - Far from creating poverty as critics claim, rapid globalization of the world economy has sliced the proportion of abject poor across the planet, according to a controversial new study released on Monday. It says that freer commerce, epitomized by the cutting of tariffs and the lifting of trade barriers, has boosted economic growth and lifted the incomes of rich and poor alike. "The proportion of the world's population in absolute poverty is now lower than it has ever been," ..... In a foreward that broadly endorses the report's conclusions, Commission president Romano Prodi distances the Commission from some parts of the report, saying it could not concur with all the study's analysis. "In many respects, the findings will prove controversial, at least to those outside the circle of professional economists, contradicting as they do certain deeply held beliefs about the negative consequences of globalization," Prodi wrote. The study accepts that the number of truly poor people in the world -- defined as those living on less than an inflation adjusted $1 a day -- has changed little in the last 50 years in actual numbers. But it says that the globalized economy has more than halved this number as a percentage of the world's growing population, from 55 percent in 1950 to 24 percent in 1992. "Although too many people live in poverty, the problem has proportionately diminished during the recent era of rapid globalization," the study says. Looking at the claim that the wealth divide is now greater between rich and poor countries, the study admits that average incomes are wider between the two than ever. But it says this is mainly because Africa has stayed put while rich countries have grown. Other poorer countries such as India and China, have grown rapidly, it says, and Africa's woes may not be related to globalization. "Whether the disastrous African performance is due to insufficient globalization on the continent or whether Africa's weak governance, low education levels and fragmented civil society put the opportunities of globalization out of reach is almost impossible to tell," its says. AND THIS FROM MASON CLARK (Aug 2002) Jim, In case you didn't see this. (It was posted on an economics newsletter (PKT) I subscribe to.) Mason http://www.nytimes.com/2002/08/15/business/15SCEN.html The Rich Get Rich and Poor Get Poorer. Or Do They? By VIRGINIA POSTREL To critics of economic liberalization and international trade, it is an article of faith that the rich are getting richer and the poor poorer. "Inequality is soaring through the globalization period - within countries and across countries," Noam Chomsky told a conference last fall, summarizing this common view. Antiglobalization activists are not just making up this idea. They have taken it from seemingly authoritative sources, notably the 1999 United Nations Human Development Report. That widely cited report stated: "Gaps in income between the poorest and richest countries have continued to widen. In 1960 the 20 percent of the world's people in the richest countries had 30 times the income of the poorest 20 percent - in 1997, 74 times as much." It added thatt "gaps are widening both between and within countries." Fortunately, this scary portrait is highly misleading. "When I started looking at the numbers, I saw a lot of mistakes," says Xavier Sala-i-Martin, an economist at Columbia. Some were departures from standard economic procedures, like not correcting for price levels from country to country. "Some agencies didn't adjust for the fact that Ethiopia is cheaper than the U.S.," he said. "Some of them were hiding numbers that we know exist." For instance, the report included data from only 19 of the 29 industrialized countries then in the Organization for Economic Cooperation and Development. But the biggest problem was not so technical. It was hidden in plain sight. The United Nations report and others looked at gaps in income of the richest and poorest countries - not rich and poor individuals. That means the formerly poor citizens of giant countries could become a lot richer and still barely show up in the data. "Treating countries like China and Grenada as two data points with equal weight does not seem reasonable because there are about 12,000 Chinese citizens for each person living in Grenada," writes Professor Sala-i-Martin in "The World Distribution of Income (Estimated from Individual Country Distributions)." That is one of two related working papers for the National Bureau of Economic Research. (The papers are available on Professor Sala-i-Martin's Web site at www.columbia.edu/~xs23/home .html.) Counting by countries misses the biggest economic advance in history, completely distorting the record of the globalization period. Over the last three decades, and especially since the 1980's, the world's two largest countries, China and India, have raced ahead economically. So have other Asian countries with relatively large populations. The result is that 2.5 billion people have seen their standards of living rise toward those of the billion people in the already developed countries - decreasing global poverty and increasing global equality. From the point of view of individuals, economic liberalization has been a huge success. "You have to look at people," says Professor Sala-i-Martin. "Because if you look at countries, we do have lots and lots of little countries that are doing very poorly, namely Africa - 35 African countries." But all Africa has only about half as many people as China. In his paper, "The Disturbing `Rise' of Global Income Inequality," he estimates the worldwide distribution of income by individuals rather than countries. The results are striking. In 1970, global income distribution peaked at about $1,000 in today's dollars, a common measure of poverty ($2 a day in 1985 dollars). In 1998, by contrast, the largest number of people earned about $8,000 - a standard of living equivalent to Portugal's. "That's what I call a new world middle class," says Professor Sala-i-Martin. It is mostly made up of the top 40 percent of Chinese and Indians, and the effect of their economic rise is big. What about the argument that income gaps are widening within these rapidly advancing countries? With a few exceptions, it is true, but still misleading. The rich did get richer faster than the poor did. But for the most part the poor did not get poorer. They got richer, too. In exchange for significantly rising living standards, a little more internal inequality is not such a bad thing. "One would like to think that it is unambiguously good that more than a third of the poorest citizens see their incomes grow and converge to the levels enjoyed by the richest people in the world," writes Professor Sala-i-Martin. "And if our indexes say that inequality rises, then rising inequality must be good, and we should not worry about it!" There is, however, one large country where the poor really are getting poorer while the rich grow richer: Nigeria, the most populous country in Africa. Nigeria's economy has actually shrunk over the last three decades, and the absolute poverty rate (the percentage of the population living on less than $1 a day in 1985 dollars) skyrocketed to 46 percent in 1998 from 9 percent in 1970. While most Nigerians were falling further into destitution, the political and economic elite grew richer. The problem is not too much liberalization but too little, a politicized economy with widespread corruption. "The rich guys are doing well, therefore reforms will not come," says a pessimistic Professor Sala-i-Martin. He has begun studying Nigeria, trying to come up with ways around the political problem. That country is typical of Africa, which is growing ever poorer. Fully 95 percent of the world's "one-dollar poor" live in Africa, and in many countries they make up the vast majority of the population. That poverty, not the rising wealth of Asian countries, is the global economy's real problem. "The welfare implications of finding how to turn around the growth performance of Africa are so staggering," he writes, "that this has probably become the most important question in economics."