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How to Make Globalization Work for the Poor

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January 16, 2004—Globalization, arguably the most contentious subject in international economic debate over the past decade, is likely to be back in the headlines over the next week as two major world development conferences get underway.

Today in Mumbai, India, the World Social Forum (WSF) - which has traditionally been a platform for opponents of globalization - begins its 2004 meetings.

"The WSF focus will be on opposing globalization, war and all forms of discrimination including its racist, patriarchal and religious forms," WSF India organizing committee member Gautam Modi, told the Economic Times of India.

Next week, in Switzerland, the annual World Economic Forum's annual meeting in Davos, will begin under the theme "Partnering for Prosperity and Security".

Founder Klaus Schwab said the forum's ability to draw leaders from every sector of society meant that this year's meeting "will be fully equipped to forge partnerships to tackle the problems on the global agenda".

The World Bank has sent observers to both meetings.

In an interview published today, David Dollar, the World Bank's director of Development Policy. For more information see the World Bank's globalization web site which contains research papers on the effects of globalization, speeches on the topic and the 2002 publication Globalization, Growth and Poverty, A World Bank Policy Research Paper.

But he also notes that integration with the world economy causes disruptions and produces adjustment costs.

"Globalization is a messy process that requires adjustment and creates significant challenges and problems. But the evidence is pretty clear: integration (with the world economy) offers powerful net benefits for developing countries."

Dollar argues that countries can decide for themselves how they integrate with the world economy.

"It is not simply an either-or choice. Countries can open up to trade and direct investment while managing other aspects of their relationship with the larger world economy."

Globalization, Growth, and Poverty found that about three billion people lived in "new globalizing" developing countries.

"During the 1990s, this group grew at five percent per capita compared to two percent for rich countries. The number of extreme poor (living on less than $1 per day) in the new globalizers declined by 120 million between 1993 and 1998."

But it also found that many other developing countries - representing about two billion people - had been left out of the process of globalization.

"Clearly for this massive group of people, globalization is not working," Globalization, Growth and Poverty, said.

Some of the reasons for this were that these countries faced geographic handicaps such as being landlocked. But in many cases weak policies, institutions and governance were key problems. In others, civil war was a major cause of failing to benefit from globalization.

"Addressing the marginalized areas is a key part of our agenda for action," it said.

The report said that reducing poverty in these countries would require a combination of policy reform to create a better investment, development assistance to address problems of education and health, and out-migration to more favorable locations, both within and across national boundaries.

   




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