Posted 22nd July 2001

Globalisation Going Down
By Mark Weisbrot, Dean Baker, Egor Kraev and Judy Chen Mark Weisbrot and Dean Baker are Co-Directors of the Center for Economic and Policy Research (CEPR). Egor Kraev and Judy Chen are Research Associates.

It is commonly accepted that the increased opening to international trade and financial flows that has occurred in the vast majority of countries in the world has been an overall success. Even critics of globalization have generally accepted that the reforms of the last two decades, in low to middle-income countries, have boosted economic growth rates.

They have argued that this growth has left many people behind, and has often been at the expense of the natural environment. However, for economic growth and almost all of the other indicators, the last 20 years have shown a very clear decline in progress as compared with the previous two decades. For each indicator, countries were divided into five roughly equal groups, according to what level the countries had achieved by the start of the period (1960 or 1980). Among the findings: Growth: The fall in economic growth rates was most pronounced and across the board for all groups or countries. The poorest group went from a per capita GDP growth rate of 1.9 percent annually in 1960-80, to a decline of 0.5 percent per year (1980-2000). For the middle group (which includes mostly poor countries), there was a sharp decline from an annual per capita growth rate of 3.6 percent to just less than 1 percent. Over a 20-year period, this represents the difference between doubling income per person, versus increasing it by just 21 percent.

The other groups also showed substantial declines in growth rates. Life Expectancy: Progress in life expectancy was also reduced for 4 out of the 5 groups of countries, with the exception of the highest group (life expectancy 69-76 years). The sharpest slowdown was in the second to worst group (life expectancy between 44-53 years). Reduced progress in life expectancy and other health outcomes cannot be explained by the AIDS pandemic. Infant and Child Mortality: Progress in reducing infant mortality was also considerably slower during the period of globalization (1980-1998) than over the previous two decades. The biggest declines in progress were for the middle to worst performing groups. Progress in reducing child mortality (under 5) was also slower for the middle to worst performing groups of countries. Education and literacy: Progress in education also slowed during the period of globalization.

The rate of growth of primary, secondary, and tertiary (post-secondary) school enrollment was slower for most groups of countries. There are some exceptions, but these tend to be concentrated among the better performing groups of countries. By almost every measure of education, including literacy rates, the middle and poorer performing groups saw less rapid progress in the period of globalization than in the prior two decades. The rate of growth of public spending on education, as a share of GDP, also slowed across all groups of countries. 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. The last two decades have seen a number of important changes in economic policy adopted throughout much of the world, and especially in the low to middle-income countries.

Many of these measures fall under the common definition of globalization: i.e., the removal of tariff and non-tariff barriers to trade, and capital account liberalization (the removal of restrictions on international investment flows). Other policies directly related to globalization have also been implemented over the last two decades. For example, the International Monetary Fund and World Bank have increasingly, during this period, required a number of measures to be adopted by borrowing countries as a condition of their access to foreign credit. These have included contractionary monetary policies (higher interest rates and tighter credit), public spending cuts, privatization of public enterprises, increasing foreign reserve requirements, and a long list of "micro-interventions" ranging from user fees for primary education and health care to removing various government subsidies. Many poor as well as medium-income countries have also faced historically unprecedented levels of foreign debt and debt service.

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.

The burden of proof would be squarely placed on those who claim success -- by any available measure of human well-being -- for the last two decades of the experiment in globalization.....

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