Second Opinion by Cliff Slater
May 8, 2001
(1) Agence France Presse/AFP. May 2, 2001.
(4) Cooper, Helene. WTO Talks: Third-World Visitors Are Upset By Protests at Seattle Conference. Wall Street Journal. December 2, 1999. “SEATTLE -- Protesters who have spent the past three days here venting their ire against the World Trade Organization say they want to help poor countries attain a better standard of living. Diplomats from the developing world who have spent the past three days venting their ire at the protesters say they want the protesters to get lost.”
(6) “In 1970, living standards in Ghana and South Korea were roughly comparable. Ghana's 1970 gross national product (GNP) per head was $250, and South Korea's was $260. By 1995, the situation had changed dramatically. South Korea had a GNP per head of $9,700, while Ghana's was only $390, reflecting vastly different economic growth rates. Between 1968 and 1995, the average annual growth rate in Ghana's GNP was under 1.4 percent. In contrast, South Korea achieved a rate of about 9 percent annually between 1968 and 1995.” Dallas Seminars.
Abstract: Income of the poor rises one-for-one with overall growth. This general relationship between income of the bottom fifth of the population and per capita GDP holds in a sample of 80 countries covering four decades. Although there is a fair amount of variation around this general relationship, a number of popular views about the poverty-growth relationship are not true. The effect of growth on income of the poor is no different in poor countries than in rich ones. Incomes of the poor do not fall more than proportionately during economic crises. The poverty-growth relationship has not changed in recent years. We also show that policy-induced growth is as good for the poor as it is for the overall economy. Openness to foreign trade benefits the poor to the same extent that it benefits the whole economy. Good rule of law and fiscal discipline are other factors that benefit the poor to the same extent as the whole economy.
(9) Ibid. p. 30.
(10) Ibid. p. 30.
(11) Pilot Environmental Sustainability Index: An Initiative of the Global Leaders for Tomorrow Environment Task Force, World Economic Forum Annual Meeting 2000 Davos, Switzerland In collaboration with Yale Center for Environmental Law and Policy (YCELP),Yale University and the Center for International Earth Science Information Network (CIESIN), Columbia University.
(13) Lindert, p. 2.
a little shrill
The protest movement is swimming against the tide of free trade, which improves the lot of even the poorest.
Last week, as we prepared for the Asian Development Bank Group to convene here in Hawaii, there were world-wide May Day “protests against globalization, capitalism and political corruption” by “an alliance of anarchists, Trotskyists, green groups, students and schoolchildren.”(1)
They protested, “The rules that allow multinational corporations to plunder resources, devastate ecosystems, exploit disempowered workers”(2) and charged that, “our economic system creates this poverty and is destroying our biosphere.”(3)
Since these remarks are a trifle shrill, a little perspective might be in order.
First, in Seattle, many of the nations that were supposedly threatened objected to such protests.(4) They understood what the protesters did not. That liberalizing their economies by adopting transparent financial reporting and establishing a respected legal system with real property rights, spurs globalizing which, in turn, generates economic growth.
They know that free economies correlate strongly with growing economies.(5) How else explain the fact that in 1957, Ghana and South Korea had the same per capita GDP but today South Korea’s is 20 times larger (6) and is now sending aid to Ghana? It is South Korea’s economic freedom that is now different.
And growing economies benefit everyone down to the poorest of the poor. The latest World Bank study shows that income for the poor rises one-for-one with overall growth.(7) When the British switched to free trade in the mid-1800s, “the big gainers from this leading-country liberalization were British laborers and the rest of the world, while the clear losers were British landlords, the world’s richest group.” (8)
Let’s face some harsh realities of trade-offs in this life:
Yes, there are many people in the developing countries existing on $2 a day but that is far better than the $1 a day they used to earn—and would again if the protesters had their way.
Yes, some very young children may be producing your clothing. But to prohibit them from doing so would send these children back to agriculture “where they work the most and attend school the least.”(9) Very young children work in all cultures until general affluence allows them to do otherwise. The good news is that the number of young children working in manufacturing is declining everywhere and every year.(10)
And, yes, growing economies will be less concerned about their environments initially—as we did not so long ago. You cannot ask hungry people to be more concerned about their environment than about eating.
As it did in the U.S., concern about the environment will come with greater affluence. Greater affluence will come from freeing their economies. It is no surprise that low scores on the Environmental Sustainability Index (11) strongly correlates with a country’s score on the Economic Freedom index.(12) At the bottom of both are the least economically free.
In any case, as a Harvard study demonstrated last week, even though these protesters are opposing governments’ policies, “globalization in the past has been driven mostly by forces unrelated to [any government] policy such as productivity improvements, rising potential gains from specialization, and transport revolutions”(13)
Try rolling those back.
Cliff Slater is a regular columnist whose footnoted columns are at: www.lava.net/cslater