Linking Globalization to Poverty in Asia, Latin America and Africa

www.wider.unu.eduNUMBER 3, 2010OverviewDespite the enormous potential ofglobalization in accelerating economicgrowth through greater integrationinto the world economy the impact ofglobalization on poverty reduction hasbeen uneven. Asia has been the majorbenefi ciary of globalization where highgrowth rates and its labor-intensivepattern contributed to a spectacularreduction in poverty. In contrast, theintegration process in Latin America didnot contribute to accelerating growthand employment and even led, in someinstances, to an informalization of thelabor force. In spite of opening up, thefailure of sub-Saharan Africa to diversifyand undergo structural transformationhas led to the persistence of low growthand debilitating poverty. While theimpact of globalization on poverty iscontext-specifi c, we argue that countriesintent on benefi tting from globalizationneed to adopt a pro-active stand informulating regional and nationalstrategies to enhance the potentiallypositive effects of globalization andmoderate the negative effects.Written by MACHIKO NISSANKE ANDERIK THORBECKE© United Nations University, 2010ISBN 978-92-808-3080-4ISSN 1813-5706Licensed under the Creative CommonsDeed “Attribution-NonCommercial-NoDerivs 2.5”Linking Globalization to Poverty inAsia, Latin America and AfricaGLOBALIZATION AND POVERTY, ALONGSIDE THE ISSUE OFchange epitomize two of the most pressing contemporaryinternational development issues. Despite the enormous potentialof globalization in accelerating economic growth and development throughgreater integration into the world economy, the spread and transfer oftechnology, and the transmission of knowledge, the impact of globalizationon poverty reduction has been uneven and even marginal in some regions,such as in much of sub-Saharan Africa (SSA). Both the prevalence and depthof poverty in many parts of the developing world remain unacceptably high.A question often raised is whether the actual distribution of gainsfrom globalization is fair and, in particular, whether the poor benefitproportionately less from globalization and could actually be hurt byit under some circumstances. The risks and costs brought about byglobalization can be significant for fragile developing economies and theworld’s poor. The downside of globalization is most vividly illuminatedduring times of periodic global financial and economic crises. The costsof repeated financial crises fuelled by the globalization process, at leastuntil the present major recession, have been borne overwhelmingly by thedeveloping world and often disproportionately so by the poor who are themost vulnerable. On the other hand, the benefits from globalization duringboom times are often not equally shared within the global community.The fear that the poor have been bypassed, or actually hurt, by globalizationwas highlighted by the findings from a number of recent studies, whichpoint towards a continuing prevalence of high inequality in the worldincome distribution, and limited income convergence among participatingnational economies and across regions.The progress on poverty reduction has also been uneven. The share of thepopulation of developing countries living below US$1.25 per day declinedfrom 52 per cent to 25 per cent between 1981 and 2005, but this was

www.unu.eduAbout the AuthorsMachiko Nissanke isProfessor of Economics atthe School of Oriental andAfrican Studies, Universityof London. She previouslyworked at BirkbeckCollege, UniversityCollege London and theUniversity of Oxford.Erik Thorbecke is theH. E. Babock Professorof Economics, Emeritus,Graduate SchoolProfessor and formerDirector of the Programon Comparative EconomicDevelopment.mainly achieved by the substantialreduction of the poor in Asia, inparticular in China. Furthermore,over the period 1981–2005, thetotal number of people livingunder US$2 per day has actuallyincreased worldwide by about 2million to 2.53 billion in 2005. Thereis a clear disparity in regional trendsin poverty reduction. While EastAsia and the Pacific experiencedthe sharpest reduction in theproportion of poor living belowUS$1.25 per day from 78 per centto 17 per cent, between 1981 and2005, the poverty headcount ratioremained very high in sub-SaharanAfrica (around 52 per cent) and thenumber of poor almost doubledfrom 212 to 388 million.Though any observed trend inpoverty and income inequalitycannot be exclusively oreven mainly attributed to the‘globalization’ effect as such, thesevarious estimates cannot dismissthe concerns raised that theglobalization process may havehad adverse effects on incomedistribution and on povertyamong some segments of thepopulation. Indeed, while mostobjective observers would arguethat globalization is likely to havecontributed to poverty alleviationon a net basis, it is also known tohave created winners and losersat numerous levels throughoutmodern history. These concernshave generated a passionate debateworldwide as well as a powerfulanti-globalization movement.The extent of controversysurrounding this debate reflectsthe fact that globalization is not aprocess, proceeding neutrally in apolicy vacuum; rather, it is a policyinduced condition. Globalizationis not purely driven by newtechnological innovations andprogress or by ‘neutral’ market forcesand other inescapable sociopoliticalforces, as often depicted in popularwritings. In particular, the currentphase of globalization is, to a certainextent, an outcome emergingfrom the global acceptance anddiffusion of the economic policyparadigm, emphasizing benefits andpositive features of the liberalizedpolicy regime characterized by theWashington Consensus.As the process of economicintegration has intensified sincethe 1990s, the question of howglobalization affects the world’spoor has become one of the centralissues in international politicaleconomy and international relations.However, the precise nature ofthe various mechanisms throughwhich globalization has altered thepattern of income distribution andthe conditions facing the world’spoor are yet to be carefully analysed.This is because the globalization–poverty relationship is complex,non-linear, and heterogeneous,involving multifaceted channels.Besides the ‘growth’ effects ofglobalization on poverty (thatis, the effects of globalizationon poverty transmitted througheconomic growth), the integrationprocess is known to create winnersand losers directly through otherchannels, affecting both verticaland horizontal inequalities. Becausethese multifaceted channels interactdynamically over space and time,the net effects of globalization onthe poor can only be judged on thebasis of context-specific empiricalstudies. Cross-country studiesrequiring precise measurementsand definition of the two key2 Policy Brief

www.wider.unu.educoncepts—globalization andpoverty—tend to fail to give robustinsights into this critical nexus. Bothconcepts are multidimensional, andnot easily captured in a compositeindex that may be used in ameaningful manner in cross-countrycomparative studies or regressions.Building on earlier research projects,UNU-WIDER initiated a projecton ‘The Impact of Globalizationon the World’s Poor’ in 2004, todeepen our understanding of howconditions facing the world’s poorhave been evolving under the forcesof globalization with emphasis onthe economic manifestations ofthose forces. Various channels andtransmission mechanisms wereidentified and explored throughwhich the process of globalizationaffects different aspects anddimensions of poverty in thedeveloping world. This was the maintheme of the first methodologicaland conceptual conference heldunder the auspices of this project inHelsinki in 2004.Subsequently three regionalconferences focusing, respectively,on Asia (held in Tokyo), LatinAmerica (Rio de Janeiro), and Africa(Johannesburg) were organizedto help identify and illustrate thedifferential effects of globalizationon growth, inequality, andpoverty in the three continents.Approximately sixty specificcase studies were initiated andcompleted under the auspicesof this project. These studies areincorporated in the three publishedvolumes, three special issues ofjournals and other publicationsresulting from this project (thecomplete list of publications is givenat the end of this policy brief).Focusing on distinct manifestationsof globalization and channelsthrough which they affectpoverty, these case studiescover the spectrum from broadmacroeconomic regional andcountry analyses to micro-orientedvillage studies on each of the threecontinents. These case studiesillustrate clearly that the impactof globalization on poverty isextremely context-specific.Significant differences in initialconditions as well as distinctinternal dynamic processes ofinstitutional and sociopoliticalchange triggered by the forcesof economic integration haveinfluenced the poor in Asia,Latin America, and Africa inquite dissimilar ways. There aredistinctive characteristics, specificto each of the three developingregions, shaping the ways in whichglobalization has affected the poor.This merits a comparative analysisof each region’s experiences withglobalization and integration.Naturally, any attempt atestimating rigorously the impactof the globalization process onsocioeconomic performance (andmore specifically on poverty)faces the almost insurmountableobstacle of the lack of a plausiblecounterfactual scenario. In orderto derive robust inferences, onewould have to compare theperformance under the presentforces of globalization to analternative scenario of no or limitedglobalization. Within limits, thiscould be done very approximatelyand roughly within a computablegeneral equilibrium model for agiven country or region of a countrybut this task is clearly infeasible forcontinents as large and diverse asAsia, Latin America, and Africa.This Policy Brief is publishedwithin the UNU-WIDERresearch project ‘Impactof Globalization on theWorld’s Poor’ directed byErik Thorbecke and MachikoNissanke. More detailedfindings are set out in a seriesof working papers (available todownload free at:www.wider.unu.edu):Linking Globalization to Poverty in Asia, Latin America, and Africa 3

www.unu.eduInstead, we first attempt to describesome major recent socioeconomictrends on each of these continentsthat one can legitimately claim wereinfluenced by the globalizationprocess even if they were, in fact,the net consequences of a wholeseries of factors with some ofthem independent of the forces ofglobalization. Further, while thereare clear intercontinental differencesin the effects of globalization on thepoor, it is also true that significantdifferences can prevail within eachregional block as well. Hence, thegeneral picture we paint with abroad brush can usefully serve as abackdrop to the sixty specific casestudies generated by this project.The next section presents abrief summary of our analysis ofthe channels and transmissionmechanisms through which theprocess of globalization affectsdifferent aspects of poverty inthe developing world. Section 3provides a comparative analysisof the differential impact ofTransmission Channels: TheGlobalization-Openness-Growth-Distribution (Inequality)-Poverty NexusGlobalization Openness KuznetsTradeCapitalLaborTechnologyKnowledge++GrowthDistribution(Inequality)-Classical +Modern -+Povertyglobalization—operating throughthese channels—on the poorin the three different regions.Finally, Section 4 suggests apolicy framework that could makeglobalization more pro-poor.2 Channels Linking Globalizationto PovertyWhat are the transmissionmechanisms through which theprocess of globalization affectspoverty directly and indirectly?The first and foremost of thesemechanisms is the growthinequality-povertychannel. Figure.1 is our attempt to illustrateschematically the various criticallinks of the causal chain runningfrom globalization (openness)to poverty, focusing on the mostcritical links and abstracting fromsome feedback effects.Globalization, as defined in thisproject, means greater economicintegration manifested throughincreased openness via numeroustransmission mechanisms such astrade and investment liberalization,movements of capital, labourmigration across borders andwithin countries, the nature oftechnological change and diffusionof knowledge and technology,worldwide information flows, andinstitutional environments. Thesemechanisms, in turn, affect povertythrough two different paths: first,through their contribution to thegrowth channel (in the upper partof the diagram in Figure 1) and,second, through their impact onincome distribution (in the lowerpart of the diagram).The specific links shown in thisFigure are from openness togrowth, from openness to income4 Policy Brief

www.wider.unu.edudistribution (inequality), fromgrowth to income distributionand vice versa, from growthto poverty, and from incomedistribution to poverty, respectively.In turn, the two main channels ofglobalization—the ‘growth’ and‘distribution’ channels—furtherinteract dynamically over timeto produce a growth–inequality–poverty triangular relationship,which is captured by the righthand side triangle of the Figuredescribing the arithmetic-statisticalrelationship among growth,inequality, and poverty.Each subset of links embeddedin the globalization (openness)–growth–income distribution–povertynexus, schematically illustrated inthe Figure, can be contentiousand controversial. For example,the direction of causality in theopenness–growth link is still beingdebated (the consensus view isthat trade contributes to growthrather than vice versa) as well ashow trade and capital flows couldbe interlinked into a virtuous circle.In this context it can be argued thatthe positive openness–growth linkis neither automatically guaranteednor universally observable, as thegrowth-enhancing effects of tradeopenness depend critically on theway and extent to which a country isintegrated into the global economy.Indeed, a greater integration/openness process does notnecessarily ensure uninterruptedgrowth spells. Rather, it also entailsaccepting greater downside riskof the contagion effects of crises,as demonstrated by the globallysynchronized slowdown that hasengulfed all the economies in thedeveloping world sinceSeptember 2008.Further, relating the causal chainPublications from the Project‘Impact of Globalization on the World’s Poor’The Impact of Globalization on the World’s Poor: Tranmission MechanismsEdited by Machiko Nissanke and Erik ThorbeckeBasingtoke Palgrave Macmillan, 2006Chapter 1 OverviewMachiko Nissanke and Erik ThorbeckeChapter 2 Channels and Policy Debate in the Globalization–Inequality–PovertyNexusMachiko Nissanke and Erik ThorbeckeChapter 3 The Relationship between Income Inequality,Poverty and GlobalizationAlmas HeshmatiChapter 4 Globalization and Poverty Trends across Regions: The Roleof Variation in the Income and Inequality Elasticities of PovertyAdriaan Kalwij and Arjan VerschoorChapter 5 Looking Beyond Averages in the Trade and Poverty DebateMartin RavallionChapter 6 Globalization and Rural PovertyPranab BardhanChapter 7 Globalization, Production and PovertyRhys JenkinsChapter 8 The Role of Information in Technology Adoption under PovertyJinhua ZhaoChapter 9 Trade Openness and Vulnerability in Central and Eastern EuropePierluigi Montalbano, Alessandro Federici, Umberto Triulzi and Carlo PietrobelliChapter 10 Globalization, Poverty, Inequality and Insecurity: Some Insightsfrom the Economics of HappinessCarol GrahamChapter 11 Explaining Threshold Effects of Globalization on Poverty:An Institutional PerspectiveAlice SindzingreChapter 12 Globalization, Poverty and Inequality: What Is the Relationship?What Can Be Done?Kaushik BasuLinking Globalization to Poverty in Asia, Latin America, and Africa 5

www.unu.eduPublications from the Project‘Impact of Globalization on the World’s Poor’Globalization and the Poor in Asia: Can Shared Growth be Sustained?Edited by Machiko Nissanke and Erik ThorbeckeBasingstoke Palgrave Macmillan, 2008Chapter 1 Globalization and Poverty in Asia: Can SharedGrowth be Sustained?Machiko Nissanke and Erik ThorbeckeChapter 2 Pro-Poor Growth: The Asian ExperienceNanak Kakwani and Hyun H. SonChapter 3 How Does Vietnam’s Accession to the World Trade OrganizationChange the Spatial Incidence of Poverty?Tomoki Fujii and David Roland-HolstChapter 4 Trade, Migration, and Poverty Reduction in the GlobalizingEconomy: The Case of the PhilippinesYasuyuki Sawada and Jonna P. EstudilloChapter 5 Threshold Estimation on the Globalization-Poverty Nexus:Evidence from ChinaZhicheng LiangChapter 6 Economic Development Strategy, Openness and Rural Poverty:A Framework and China’s ExperiencesJustin Yifu Lin and Peilin LinChapter 7 Vulnerability to Globalization in India:Relative Rankings of States Using Fuzzy ModelsK. S. Kavi Kumar and Brinda ViswanathanChapter 8 Resource-Poor Farmers in South India:On the Margins or Frontiers of GlobalizationRimjhim M. AggarwalChapter 9 Credit Constraints as a Barrier to Technology Adoptionby the Poor: Lessons from South Indian Small-Scale FisheriesXavier Giné and Stephan KlonnerChapter 10 Trade Liberalization, Environment and Poverty:A Developing Country PerspectiveMahvash Saeed Qureshifrom income and wealth inequalityto growth (the ‘inequality–growth’link), there are two conflictingtheoretical strands: the traditional(classical) approach and the ‘new’political economy of developmenttheories (modern). Whilst the formeremphasizes the growth-enhancingeffects of income inequality andwealth inequality through thesaving-enhancing effects (the richsave proportionately more thanthe poor) as well as the existenceof investment indivisibilities andincentive effects, the latter linksgreater inequality to reducedgrowth through various conditions.These conditions include thediffusion of political and socialinstability leading to greateruncertainty and lower investment,unproductive rent-seekingactivities, high transaction costs,and increased insecurity of propertyrights. The Kuznets hypothesis ofthe inverted U-shaped relationshipbetween growth and inequalitythat examines the opposite causalflow (i.e., the ‘growth–inequality’link) is also challenged by a numberof recent studies. Thus, the newpolitical economy of developmentapproach suggests that growthpatterns yielding more inequalitywould, in turn, engender lowerfuture growth paths resulting inless of a growth-induced povertyreduction, as Figure 1 illustrates.Thus, we argued that whileglobalization-induced growthmay benefit the poor, the ultimatepoverty reduction effects dependon how the growth pattern affectsincome distribution, as inequalityacts as the filter between growthand poverty reduction. Effectivepoverty reduction requires somecombination of higher growth anda more pro-poor distribution of the6 Policy Brief

www.wider.unu.edugains from growth.In addition, several specific featuresassociated with the current phaseof globalization have contributedto possible adverse effects onthe poor. These include: (a) thenature of technical changes biasedin favour of capital and againstunskilled labour, the asymmetricalaccess to new technology andknowledge, and the unevenprocess of technology diffusion;(b) the often perverse pattern ofinternational migration which tendsto encourage a migration of skilledlabour from developing countriesto developed countries, whileunskilled labour migration tendsto be strictly controlled by legalabout the increased vulnerabilityof the poor to globalization forcesthat generate greater fluctuationsin income and expenditure causedby global shocks, such as thevarious financial crises that havehit Latin America and Asia in thelast two decades or the ongoingglobal financial crisis and food crisis.There is significant evidence thatthese repeated shocks have hurtthe poor disproportionately. Thus,while globalization can be a majorengine for growth, it is critical toput in place strong institutions thatmediate the various channels andmechanisms through which theglobalization process influencespoverty. Indeed, institutions act asGlobalization and pover ty, alongside climate change,epitomize two of the most pressing contemporar yinternational development issuesrestrictions in developed countries;(c) the perverse movements ofcapital, such as in the form ofcapital flight from developing oremerging market economies tosafe havens in the rich countries ordiversification finance characterizingportfolio capital flows conductedthrough asset swapping for riskhedging and shedding, whichresults in global macro imbalancesand periodical financial crises, and;(d) uneven, skewed foreign directinvestment (FDI) flows, which havenot necessarily guaranteed hostdeveloping countries access topotential benefits of managementand knowledge transfer. Thesefeatures have affected, in a numberof instances, the functional incomedistribution between labour andcapital against the former.Concerns are particularly stronga filter intensifying or hindering thepositive and negative pass-throughbetween globalization and povertyand can help explain the diversity,heterogeneity, and non-linearityof outcomes. Examples of suchinstitutions, operating as safety nets,are discussed in the comparativeanalysis that follows.3 How did Globalization Affectthe Poor in Asia, Latin America,and Africa?Emerging empirical evidenceon the recent increase in worldincome disparity between therich and the poor can at least bepartially attributed to the forcesshaping the current process ofglobalization. In particular, theobserved ‘big time’ divergence ininter-country income levels (wheneach country is weighted equally)Linking Globalization to Poverty in Asia, Latin America, and Africa

www.unu.educalls into question the validity ofthe openness-induced incomeconvergence thesis. The reality isthat the mere adoption of opentrade and investment regimesdoes not guarantee, or necessarilypromote, developing countries’entry into the ‘income convergenceclub’. It can be argued that theconundrum of the persistent‘non-convergence’ of world percapita income should be explicitlyaddressed in terms of structuralfeatures of the global economicrelationships as they evolvedover time and institutional andsociopolitical conditions found inparticipating countries. The incomeconvergence trend among nationhave not succeeded in reachingthe take-off point necessary forbenefiting from the positive forcesof globalization. Above all, countriesneed to have reached the take-offpoint, as the effects of internationaltrade on growth are criticallydependent on the structure ofgrowth and pattern of specializationand integration. In terms of theinter-sectoral growth pattern,evidence shows that in earlydevelopment stages the growth ofagriculture has a far greater impacton poverty than the growth of othersectors. For example, the bulk ofpoverty reduction in China occurredduring the phase of agriculturalde-collectivization and increasesThe risks and costs brought about by globalization can besignificant for fragile developing economiesstates, to the extent that it has beenobserved historically, is likely to beexplained more effectively by thespecific nature of the integrationand specialization process followedby subgroups of countries, ratherthan by the degree of openness ofthe trade and investment regimesper se, as often claimed.A theoretical study undertakenunder the auspices of the presentproject and based on a ‘humandevelopment trap model’ showedthat in the presence of multipleequilibria, development andunderdevelopment can coexist assteady states under globalization.This study concluded thatglobalization is a necessary, butnot a sufficient, condition forconvergence to development.Indeed, many poor countries thathave opened their economies sincethe 1980s have fallen behind, andin food prices procurement before1980, rather than in the subsequenttrade-opening phase. As will beseen in the comparative analysis,countries that went throughan early and smooth structuraltransformation, as in most of Asia,were much more successful ingenerating a shared-growth processbenefitting the poor than countriesthat delayed or failed their structuraltransformation process, as is typicalof SSA.In terms of patterns of specializationa country specializing in an industryendowed with a larger positiveexternality would experience afaster growth rate compared witha trading partner that specializes inan industry with weaker spillovereffects. Thus, the growth ratesof two trading countries coulddiffer considerably, dependingon the pattern of specialization. A8 Policy Brief

country with an initial comparativeadvantage in ‘non-dynamic’ sectorsmay end up in a low equilibriumtrap through the evolving patternsof production and trade. Similarly,the effects of FDI on host economiesdiverge enormously, depending onthe sectors into which transnationalcorporations (TNCs) are attractedto move in and invest. Low‐incomedeveloping countries tend toattract natural resource-based FDIin extracting mineral resources orFDI geared towards the lower endof TNCs’ vertical integrated globaloperations (their global valuechain) such as simple assemblyline operations. These sectors andactivities are characterized bylimited dynamic externalities, as wellas knowledge and skill spillovers.In general, globalizationexperiences in the South tend tobe very heterogeneous. In thiscontext, we argue that developingcountries have to undergosubstantial changes in their tradeand production structures, so asto be able to reap more benefitsfrom the dynamic forces unleashedby globalization and experienceincome convergence. Indeed, sharpdivergences have emerged in thedevelopment paths followed bydifferent countries in the South overrecent decades.These divergences can be explainedby the distinct internal patternsof economic growth and formsof integration adopted. As aconsequence some countries in theSouth were able to benefit fromvirtuous cycles of globalizationinducedgrowth, while others wereleft behind in vicious cycles ofglobalization-induced decline. Notonly did the growth rates divergePublications from the Project‘Impact of Globalization on the World’s Poor’The Poor Under Globalization in Asia, Latin America and AfricaEdited by Machiko Nissanke and Erik ThorbeckeOxford University Press, 2010Chapter 1 Comparative Analysis of the Globalization–Poverty Nexus in Asia,Latin America and AfricaMachiko Nissanke and Erik ThorbeckeChapter 2 Globalization and the Human Development TrapDavid Mayer-FoulkesChapter 3 Globalization, Literacy Levels and Economic DevelopmentAlok BhargavaChapter 4 Asia’s Labour-Driven Growth, Flying Geese Style: Types of Trade,FDI and Institutions Matter for the PoorTerutomo OzawaChapter 5 Globalization, Growth and Poverty in IndiaN. R. Bhanumurthy and Arup MitraChapter 6 Globalization and Rural Poverty: Perspectives from a SocialObservatory in the PhilippinesYujiro HayamiChapter 7 Globalization and the Urban Poor in ChinaYin Zhang and Guanghua WanChapter 8 Trade Liberalization, Employment Flows and WageInequality in BrazilFrancisco H. G. Ferreira, Phillippe G. Leite and Matthew Wai-PoiChapter 9 Globalization and the Urban PoorJanice E. PerlmanChapter 10 Globalization, Crop Choice and Property Rights in Rural Peru,1994-2004Alfred J. Field and Erica FieldChapter 11 Globalization, Growth, Inequality and Poverty in Africa:A Macroeconomic PerspectiveJeffrey I. RoundChapter 12 Globalization and Marginalization in Africa: Poverty, Risk,and Vulnerability in Rural EthiopiaStefan DerconChapter 13 Inequality and Poverty in Africa in an Era of Globalization:Looking Beyond Income to Health and EducationDavid E. Sahn and Stephen D. YoungerChapter 14 Post-Apartheid South Africa: Poverty and Distribution Trendsin an Era of GlobalizationServaas van der Berg, Ronelle Burger and Megan LouwLinking Globalization to Poverty in Asia, Latin America, and Africa 9

www.unu.eduwidely but there emerged amarked difference in the waysthe benefits of economic growthtrickled down to the poor asthese developing economieswere integrating into the globaleconomy. The sharp differentialimpact of the forces of globalizationon the poor in the developingworld can be analysed by focusingon the integration experiences ofthree broad regions (continents):Asia, Latin America, and Africa,respectively.3.1 Impact of Globalization onPoverty in Asiamost Asian countries. In particular,following aggressively an ‘outwardorienteddevelopment strategy’,most East Asian economies hadnot only managed the process ofintegration into the world economymuch earlier than other developingcountries, but also improved theirform of linkages to the globaleconomy in the years of their rapideconomic growth. Prior to thefinancial crisis of 1997–8, many ofthe East Asian economies registeredspectacular growth performancesaccompanied by a substantialreduction in poverty—throughGlobalization is not a process, proceeding neutrally in apolicy vacuum; rather, it is a policy induced conditionAsia is the region widely regardedas having benefited most from thedynamic growth effect of the recentwave of globalization, which hasalso resulted in a very substantialreduction in abject poverty inmany economies. Furthermore, thegrowth pattern achieved throughincreased trade and FDI in EastAsia in the 1960s and 1970s wasespecially seen as highly inclusive,and often viewed as a model of‘shared growth’. Yet, there is growingevidence that in the last threedecades, inequality has been risingas part and parcel of the integrationprocess in many parts of Asia.Hence, it is critically important toexamine the mechanisms at work inthe globalization–poverty nexus inAsia.First, there is very little disagreementover the powerful growthenhancing effects of opennessthrough trade and FDI in the case ofdynamically evolving changes intheir socioeconomic structures. Anumber of earlier studies attributedthis successful growth performanceto an appropriate set of economicpolicies and institutions well suitedto the conditions prevailing inEast Asia during that period. Therelatively quick turnaround of manyemerging economies in East Asiain the years following the severecrisis of 1997–8 is often attributedto their strong export performanceand renewed adaptability andflexibility in responding swiftlyto new opportunities offered byglobalization.Second, the structuraltransformation of most economiesin East Asia has been facilitatedconsiderably by the integration/globalization process. The catchupprocess and associated growthdynamism in Asia, as a whole,can be examined in terms of the‘flying geese paradigm’, wherein a10 Policy Brief

www.wider.unu.edusequence of staggered catch-upgrowth episodes has successivelytaken place in the region since theend of the Second World War. Morespecifically, poverty alleviation hasbeen occurring, in flying geesestyle (i.e., in tandem with growth)among these rapidly catching upAsian economies. The incidenceof poverty (based on the US$1.25poverty line) is estimated to havedramatically declined from 78 percent in 1981 to 17 per cent in 2005in East Asia including China, andfrom 60 per cent to 40 per cent inSouth Asia during the same period.maximize the benefits from dynamicexternalities. Their increasingspecialization in sectors with largespillovers and dynamic externalitieswas conducive to engendering apattern of equalizing growth.Third, in most of East Asia, the propoorpattern of public expenditurein favour of the rural poor at earlystages of development producedand sustained the ‘shared’ growthprocess at least until the 1970s.There were concerted effortson the part of governments tofacilitate building primary assets ofthe poor through such measuresGlobalization is likely to have contributed to pover tyalleviation on a net basisThus, the high growthperformance—accompaniedby a substantial reduction ofabject poverty—in East Asiacan be explained in terms of theregion‐wide comparative advantagerecycling in the productionand export of labour intensivegoods. The process involves astrong demand for unskilledand semi-skilled labour, drivenby exporting labour-intensivegoods and attracting pro-tradeFDI, bringing about effectivetechnology, knowledge, and skilltransfer. Most of the East andSouth-East Asian economies havesuccessfully gone through thestructural transformation of theirproduction and trade structureswith continuous upgrading oftheir human skill endowmentsand technology/knowledge base.By relying on their fast evolvingdynamic comparative advantagesthese countries were able toas an equitable distribution ofland (through appropriate landreforms), extensive public provisionof free and universal primaryeducation, promotion of small‐scaleenterprises and developmentof rural infrastructure—roads,irrigation, schools, agriculturalsupport outposts, health stations,and irrigation systems. In thiscontext, the observed pro-poornessof growth in East Asia is not purelya manifestation of market-drivengrowth effects.Fourth, notwithstanding theongoing urbanization process,the great majority of the poor inAsia continue to reside in ruralareas—63 per cent at last count.The accelerating rural to urbanmigration in response to the rapidexpansion of job opportunitieshas contributed both to economicgrowth in urban areas and to thealleviation of poverty in rural areasby (i) reducing surplus labour inLinking Globalization to Poverty in Asia, Latin America, and Africa 11

www.unu.eduPublications from the Project‘Impact of Globalizationon the World’s Poor’World Development34 (8) 2006, Special Issue‘The Impact of Globalizationon the World’s Poor’Guest Editors Machiko Nissankeand Erik ThorbeckeIntroduction: The Impact ofGlobalization on the World’s PoorErik Thorbecke and MachikoNissankeChannels and Policy Debatein the Globalization-Inequality-Poverty NexusMachiko Nissanke and ErikThorbeckeGlobalization, Povertyand Inequality: What is theRelationship? What can be done?Kaushik BasuLooking Beyond Averages in theTrade and Poverty DebateMartin RavallionGlobalization and Rural PovertyPranab BardhanGlobalization, Local Ecosystemsand the Rural PoorRimjhim M. AggarwalGlobalization’s Bystanders:Does Trade Liberalization HurtCountries that do not Participate?’Alan V. Deardorff and Robert M.SternAgricultural Biotechnologyand Poverty Reduction in Low-Income CountriesGregory Graff, David Roland-Holstand David ZilbermanPoverty and the WelfareCosts of Risk Associatedwith GlobalizationEthan Ligonagriculture, and (ii) through theremittances from migrant workersthat presently 10.65Indeed, despitethe sharp reduction in the incidenceof extreme poverty (less thanUS$1.25 a day), poverty remainshigh in many developing countriesin Asia if it is measured on the basisof the US$2 a day poverty line.It is estimated that the latterdeclined from 86 per cent in 1981to 73 per cent in 2005 in SouthAsia and from 92 per cent to 38per cent in East Asia (dominatedby China) over the same period.The reduction in this measure isremarkable (in particular in EastAsia), but poverty is still widespreadin Asia as a whole, and the challengefacing policymakers in the region inattacking poverty of this magnitudeis still daunting. The ‘inequalityincreasing’ effect of globalizationshould be attenuated by publicpolicy measures to ensure thatbenefits from globalization-inducedgrowth are shared more equally andequitably.In this context, it is worthremembering that the pattern ofshared growth from wealth‐sharingpolicy measures providedlegitimacy for governments topursue pro-growth and probusinesseconomic policy in theearly drive for rapid industrializationin East Asia. Sustaining the sharedgrowth process is hence criticalfor ensuring economic growthto continue under this era ofglobalization. Alternatively,growing inequalities canweaken social cohesion and riskreducing the momentum foreconomic growth and integrationin the region.3.2 Impact of Globalization on Poverty inLatin AmericaLatin America occupies anintermediate position in itsintegration experience comparedto the other two regions. Likecountries in sub-Saharan Africa,many economies in Latin Americahave been historically naturalresource-based in their linkageto the global economy throughprimary commodity exports.Though the economies in theregion are much more diversifiedin their production and tradestructures than those in SSA, theyhave been largely susceptible tothe ‘global development cycle’,dominated by external shocks.Many countries in the region wereexposed to a deterioration in their‘terms of trade’ caused by the sharpdrop in the prices of a number ofprimary commodities in the 1980s.In addition, as main recipientsof commercial loans based onabundant petrodollars in the 1970s,middle income countries in theregion suffered from the suddenhike in real interest rates at theend of the 1970s. Resulting fromthe ensued severe debt crisis, theregion had to endure a ‘lost decade’of economic growth in the 1980scharacterized by negative externalresource transfer and stagnantgrowth rates in per capita income.The annual average growth of GDPin the 1980s for the Latin Americanregion was barely above 2 per cent.After the belated market-based debtrestructuring under the Brady Planand the sweeping policy reformsof liberalization and deregulation,middle-income economies in theregion reintegrated into the globaleconomy as emerging marketeconomies in the early 1990s. Yet,the region’s economic integration,12 Policy Brief

www.wider.unu.eduspurred by the liberalization andprivatization drive and basedon the premise of large ‘growth’dividends from globalization,has not delivered the promisedbenefits of sustained economicgrowth to these economies. Theaverage annual growth of GDP inLatin America during the 1990swas only around 3 per cent. A wellknownLatin American specialistsummarizes the prevailing view onthe region’s performance over thelast two decades, by noting that‘Latin America has wholeheartedlyembraced the faith in open tradeand freer capital markets and yet,subsequent growth is well shortof expectation’. On the whole, theglobalization induced economicgrowth in the region has been muchmore precarious and fragile thanMultinational corporations inMexico and the Caribbean tendto specialize in low technologymanufactures, mainly operatingassembly plants with little potentialof technology and skill transfers.Thus, during the recent spell ofglobalization, there is evidence that‘South America has experiencedpremature deindustrialization, whileMexico and Central America avoidedthis trend by specializing in highimport intensive manufacturingexports, but with limited benefitsin terms of growth’. It remains to beseen if the growth spurt starting in2004 (yielding an annual growthrate of GDP of around 5 per centa year until 2008), largely fuelledby temporarily rising commodityprices, is sustainable. Clearly thegrowth transmission channel has, atleast until very recently, been muchEach subset of links embedded in the globalization(openness)–growth–income distribution–pover ty nexuscan be contentious and controversialthat recorded in Asia throughoutthe last three decades.Under the impetus of highly volatileportfolio capital flows, economicgrowth has been interrupted by theperiodic crises in capital accountsof balance of payments since themid 1990s. Much of the eagerlyanticipated increase in FDI took theform of asset acquisition of newlyprivatized public utilities rather thanthat of green field investment inproductive capital. Operating withinthe global production network,TNCs in the manufacturing sectorin the region have adopted newproduction technologies withlittle new employment created.too weak to play a significant role inreducing poverty in the region.In contrast to Asia, the LatinAmerican region has experienceda very low rate of formal jobcreation in the tradable sectorunder globalization. In some cases,economic growth was ‘jobless’, witha negative rate of creation of formaljobs. Keen observers have notedthe sharp disparities in performancebetween large (often operatedby TNCs) and small enterprises inthe region: large scale enterprisesrecorded high rates of productivitygrowth with a shrinking labourforce, while the number of smalland informal low-productivityenterprises continues to grow.Thus, labour markets in the regionLinking Globalization to Poverty in Asia, Latin America, and Africa 13

www.unu.eduare characterized by a high degreeof segmentation in parallel withan increasing ‘casualization’ of theworkforce.As firms operating in the formalsector are subject to increasedinternational competition asliberalization proceeds, the informalsector has expanded by absorbingnegative income shocks as workersin the formal sectors are laid off.This process has given rise to thefear of ‘social exclusion’ of theself-employed, operating almostentirely in the informal sector. Oneof our case studies notes that theself-employed now account forone-third of the labour force inthe Mexican economy and are oneof the most vulnerable groups.This process of ‘casualization’ andat the very top end of the worldinequality ranking according to theWorld Bank’s World DevelopmentIndicators (WDI) dataset—with amedian Gini coefficient of almost 57per cent and a mean of just under55 per cent. Between the mid-1990sand mid-2000s, inequality rose innine LAC countries, while it fell inonly two countries and remainedessentially the same in fourcountries. The lethal combination oflow growth and increased incomeinequality resulted in little overallpoverty reduction. While theheadcount ratio for the LAC regionas a whole (based on the US$1.25a day poverty line) fell from almost13 per cent in 1981 to 8 per cent in2005, the number of poor rose fromInstitutions act as a filter intensifying or hinderingthe positive and negative pass-through betweenglobalization and pover ty‘informalization’ of the workforcecan help explain the reduction inopen unemployment in Mexico andother Central American countriesduring the 1990s, while openunemployment was rising steadily inArgentina, Brazil, and Colombia, andother Latin American countries. Theshare of the informal sector in urbanemployment rose significantly inmost countries of the region.While the distribution of incomeand assets in this region is knownto have historically been the mostunequal in the developing world,many empirical studies confirm thatincome and asset inequality hascontinued to rise significantly duringthe integration process after 1980.In the second half of the 1990s,all Latin American and Caribbean(LAC) countries were grouped366 million to 550 million during thesame time span.Yet it is important to note that theaggregate statistics hide the goodperformance of some individualcountries. The best performerin terms of growth and povertyalleviation was Chile, where theUS$1.25 a day poverty has beenpractically eradicated, and Brazil andMexico succeeded in reducing bothinequality and poverty substantiallysince the mid-1990s despiteunspectacular growth, at least priorto 2004.The increased income inequality isoften explained by the wideningincome gaps between skilledand unskilled workers as well asbetween the formal and informalsectors reflecting the differences14 Policy Brief

www.wider.unu.eduin human capital endowments.Brazil’s experience since thelate 1980s provides a revealingcounterevidence marked by afalling wage inequality and incomeinequality (after 2000) as one ofour case studies makes clear—illustrating thereby the risk ofblanket generalizations.However, some economists havechallenged the power of theseexplanations of the pattern ofincome distribution, exclusive ofother factors, arguing that theeffects of globalization on incomedistribution in the region aremost pronounced at the extremeends of the income distribution.In other words, they argue thatLatin America is characterized byeffect of a modest growthperformance.Paradoxically, while the evidence ispersuasive that income inequalityis high and rising and contributingto perpetuate poverty in the region,much of the development literatureignores the fact that incomeinequality and income-basedpoverty are not necessarily the onlyor even best measures of economicand social well-being. Poverty andinequality are multidimensionalconcepts that can only beimperfectly reflected by moneymetricmeasures. In this context, andto further muddle the developmentperformance picture, one of ourstudies finds that during the 1980sand 1990s, inequality measured inAsia is a region regarded as having benefitedmost from the dynamic growth effect of the recentwave of globalizationa rising income polarization. Inturn, this polarization trend canbe explained by the way the LACeconomies have integrated into theglobal economy, as evidenced bythe Mexican case where the shareof wages fell from 40 per cent ofGDP in 1976 to just 19 per cent in2000. Wages in low technologymanufacturing sectors, in whichMexican ‘maquila’ enterprisesspecialize, stagnated, while largeproductivity gains were reflectedby a sharp rise in profit margins. Inshort, globalization, at least partiallythrough its technology transmissionchannel, appears to have shiftedthe functional income distributionagainst labour in the region andthe rising income inequality furtherdampened the poverty alleviationthe health and education dimensionfell in Latin America and that thisdecline contributed to a substantialimprovement in health andeducation indicators.This evidence of socioeconomicdevelopment in Latin Americawould have been missed througha narrow focus on money-metricmeasures alone.Poverty incidence is much higher inrural areas than in cities, althoughthere is an ongoing increasingurbanization of poverty trendsdue to rural-urban migration.While some major efforts havebeen in place in recent yearsto redress income inequalitythrough such schemes as theBrazilian Bolsas and the MexicanProgresa and OpportunidadesLinking Globalization to Poverty in Asia, Latin America, and Africa 15

www.unu.eduand notwithstanding the progressnoted above, inequality in nonincomemeasures such as education,nutrition, health, and access toutilities remains persistent. Thepoor are particularly disadvantagedin accessing these public goods.While a claim has been made thatincreasing international remittancescould become a massive resourcetransfer mechanism to reducepoverty levels by increasing theincome of poorer households,a study undertaken under theauspices of this project showsthat remittances are not goingto the poorest members of ruralcommunities in Mexico.During the 1990s, there weresome noticeable surges in socialexpenditures channelled throughpublic transfers and human capitalnot yet managed to redistributeincome to the poor significantly.Mitigating the negative effects ofglobalization on inequality and thepoor is of particular importance inthe LAC region, where there is todaywidespread dissatisfaction with thesocial injustice associated with highpoverty and inequality.A strong case can be made thathigh vulnerability to externalshocks—a direct consequenceof the way the LAC economieshave integrated into the globaleconomic system—has considerablyimpaired the institution-buildingprocess towards a more equitablesociety. Governments have facedserious constraints both on thefiscal front and monetary policychoices for sustaining publictransfer programmes or other socialThe process of integration of many Asian economiesinto the global economy has generated such a stronggrowth impact that the poor were not left outformation in many countries. Ina rigorous empirical analysis ofthe relationship between growthpatterns, poverty, and inequality inBrazil, one of our studies providesan important insight into the crucialrole of incomes derived from socialsecurity and other governmenttransfers in cushioning the effectsof macroeconomic shocks triggeredby the forces of globalization,specifically among the poorestsegments of Brazilian society duringthe period, 1995–2004. Anotherstudy examines the performanceof various public transfer schemesin eight countries in the region.It concludes that, on the whole,public transfers in the region havepolicies in order to address growinginequality and the unacceptableprevalence of poverty.The previously noted achievementsof Mexico and Brazil, as well asChile, contrast with an overallpicture of little progress in theprovision of safety nets to reducethe vulnerability of the poor toshocks in the LAC region. It is alsoclear that the inconsistent (stopand go) and populist economicand monetary policies followed bymany LAC regimes have contributedin no small measure to the mixedsocioeconomic performancedescribed above. There appears littledoubt that with sounder policiesand governance, the net and overall16 Policy Brief

www.wider.unu.eduimpact of globalization would havebeen more favourable to mostsegments of the population.3.3 Impact of globalization on the poor insub-Saharan AfricaFollowing largely an inwardorienteddevelopment strategyin the early decades of thepost-independence period, themajority of SSA countries failed totake advantage of the potentialprovided by the dynamic growthspurt that characterized theglobal economy starting in the1970s. The region was largelymarginalized and experiencedslow growth and stagnation.With growing recognition of theirdisadvantageous position, mosteconomies in SSA significantlyliberalized their trade andinvestment policy regimes as part ofStructural Adjustment Programmessince the mid 1980s. Today, SSAis not behind other developingregions in trade openness, asconventionally measured througha trade intensity index (imports andexports relative to GDP). In spiteof the increase in trade intensity,however, Africa’s share of total worldtrade has fallen over the last twodecades. Many countries in SSAhave also intensified their efforts toattract FDI with the help of variousfiscal and other incentive measures.However, FDI flows to the regionhave so far been largely limitedto the extraction of oil and othernatural resources.Thus, SSA presents a clear examplein support of the argument thatthe shift to an open policy regimealone is not sufficient to bring abouteconomic growth and consequentlypoverty reduction. After twoPublications from the Project‘Impact of Globalization on the World’s Poor’African Development Review, 20 (1) 2008Special Issue‘Globalization-Poverty Channels and Case Studies from sub-Saharan Africa’Edited by Machiko Nissanke and Erik ThorbeckeGlobalization–Poverty Channels and Case Studies from sub-Saharan AfricaMachiko Nissanke and Erik ThorbeckeGains from Trade: Implications for Labour Market Adjustment and PovertyReduction in AfricaAugustin Kwasi Fosu and Andrew MoldThe Effect of the Liberalization of Investment: Policies on Employmentand Investment of Multinational Corporations in AfricaElizabeth Asiedu and Kwabena Gyimah-BrempongGender Dimensions to the Incidence of Tariff LiberalizationReza C. DanielsMarket Participation and Rural Poverty in Ghana in the Era of GlobalizationAbena D. Oduro and Isaac Osei-AkotoDistributional Impact of Globalization-induced Migration: Evidencefrom a Nigerian VillageSteve Onyeiwu, Raluca Iorgulescu Polimeni and John M. PolimeniChanging Land Tenure Arrangements and Access to Primary Assetsunder Globalization: A Case Study of Two Villages in Anglophone CameroonFrancis Menjo BayeLinking Globalization to Poverty in Asia, Latin America, and Africa 17

www.unu.edudecades of reforms dominatedby liberalization, privatization,and deregulation, the economiesof SSA have not yet been able toescape from the ‘growth tragedy’syndrome—the term popularly usedin characterizing the region’s dismaleconomic performance in thecomparative growth literature. Therecent upturn in economic growthrecorded in many natural resourcericheconomies in SSA was closelyassociated with the temporary pricehike of oil and mineral commoditiesin world markets. The sustainabilityof these high growth rates appearsmost questionable in the light ofthe free fall of commodity pricesobserved immediately after theevents in September 2008 thatthat the beginning of the debtcrisis in many countries in SSA inthe late 1970s coincided exactlywith that of the ‘commodity crisis’.The demand management ofcommodity‐dependent economiesgoverned by external shocks shouldbe countercyclical to the commodityprice movements. Yet, at times ofan externally induced balance ofpayment crisis accompanied by asharp drop in domestic demand,these countries, in the absence ofalternative financial facilities, havebeen forced to adopt stabilizationpolicy measures that aim at a furthercontraction in aggregate domesticdemand. Effective and flexiblefacilities of contingency financing todeal with external shocks on an exIn contrast to Asia, the Latin American region hasexperienced at a very low rate of formal job creation andinformalization of the labour forcetriggered the global financial crisis.Highly competent macroeconomicmanagement over the commodityprice cycle is required to avoid the‘Dutch disease’ often associatedwith commodity booms. Otherwise,the foundation for long‐termeconomic development of thesenatural resource-rich economieswould remain fragile. Indeed,the high primary commoditydependence remains one of themost conspicuous characteristicsof the trade linkage of countriesin SSA with the rest of the world.Low‐income countries dependenton primary commodity exports anda natural resource-based structurecould be locked in an internationalpoverty trap through integration.It is not a mere historical accidentante basis have been largely absentin debt relief mechanisms includingthe Heavily Indebted Poor Countries(HIPCs) Initiative. The debt crisis ofHIPCs ended only when a near totaldebt cancellation was achievedunder the Multilateral Debt ReliefInitiative in 2005.The failure of SSA economies todiversify and undergo structuraltransformation, and hence, tobenefit from the technologydriven,highly dynamic aspects ofthe ongoing globalization processhas led to major drawbacks interms of low economic growth andpersistent poverty. The incidenceof poverty by some measures hasworsened in the region. Accordingto recent estimates, the numberof poor below the US$1.25 a day18 Policy Brief

www.wider.unu.edusystematically ignored (if notexploited) their agriculturalsectors—failing to undertake propoorpublic investment in ruralareas; rather, tending to extract asurplus from agriculture at an earlystage of development. It has alsobeen argued that divisive fiscalinstruments such as subsidies orpreferential credits were moreextensively used by politiciansin SSA than other regions as thefavoured mechanism to buypolitical support or to appeasevarious interest groups.Furthermore, with the advent ofthe debt crisis in the 1980s, fiscalretrenchment (hence reducedspending on rural infrastructure)has been consistently pursuedas part of the stabilization-cuminternationalpoverty line almostdoubled in SSA from about 212million in 1981 to 388 million in2005, while the proportion of poor(the headcount ratio) in SSA fellmarginally during this same periodfrom about 53 per cent to 51 percent—by far the highest relativeincidence among the major regionsin the world. Poverty in SSA is bothmost prevalent and severe in ruralareas.Countries in SSA display a relativelyhigh intra-country inequality.This can be seen as a puzzle asAfrica should be a low inequalitycontinent according to the Kuznetshypothesis because according toan authority on income distributionissues, ‘African countries are poorthe poor not only in terms of itsability to deliver the required (high)growth rate to ensure that thepoor could benefit from economicgrowth, but also in terms of itspattern. Economic growth in SSA,where it has occurred, has notbeen translated into significantpoverty reduction. Critically, thecombination of three factors, i.e., thenature and pattern of integrationof the SSA economies into theglobal economy, the slow rate ofstructural transformation and theneglect of the agricultural sector,has precluded the generation ofvirtuous cycles of globalizationinduced growth and povertyreduction.Governments in SSA haveMajor effor ts have been in place to redress incomeinequality through such schemes as the Brazilian Bolsasand the Mexican Progresa and Oppor tunidadesand agriculture-based, and alsobecause the main productiveasset—agricultural land—isrelatively evenly distributed inmost of SSA (except the region ofSouthern Africa) in part thanks tothe tradition of communal landholding’. Notwithstanding theseconditions the degree of incomeinequality in Africa has increasedsharply between the 1980sand the 1990s.While it has become almostuniversally accepted that sustainedpoverty reduction requireseconomic growth, the pattern ofgrowth, as discussed in Section 2,does significantly affect the rate ofpoverty reduction. In this context,it can be argued that Africa’sgrowth has been distinctly againstLinking Globalization to Poverty in Asia, Latin America, and Africa 19

www.unu.eduPublications from the Project ‘Impactof Globalization on the World’s Poor’World Development, 38 (6) June 2010Special Issue‘Globalization, Poverty and Inequality in Latin America’Edited by Machiko Nissanke and Erik ThorbeckeGlobalization, Poverty and Inequality in Latin America: Findingsfrom Case StudiesMachiko Nissanke and Erik ThorbeckeTrade Liberalization and the Self-Employed in MexicoGurleen K. PopliGlobalization and Smallholders: the Adoption, Diffusion and Welfare Impactof Non-traditional Export Crops in GuatemalaCalogero Carletto, Angeli Kirk, Paul Winters and Benjamin DavisRemittances and Vulnerability to Poverty in Rural MexicoAlejandro de la FuenteGlobalization and Formal Sector Migration in BrazilErnesto Aguayo-Tellez, Marc-Andreas Muendler and Jennifer Pamela PooleSeasonal Migration and Early Childhood DevelopmentKaren Macours and Renos VakisEarnings Mobility in Times of Growth and Decline: Argentinafrom 1996 to 2003Gary S. Fields and María Laura Sánchez PuertaLinkages between Pro-Poor Growth, Social Programmes and Labour Market:The Recent Brazilian ExperienceNanak Kakwani, Marcelo Côrtes Neri and Hyun H. SonGlobalization and the Role of Public Transfers in Redistributing Incomein Latin America and the CaribbeanEmmanuel Skoufias, Kathy Lindert and Joseph ShapiroMinimum Wages, Globalization, and Poverty in HondurasT. H. Gindling and Katherine Terrelladjustment policies. Governmentswere typically left with little capacityand resources to undertake publicinvestment on a sustained basis.Under such conditions, it is difficultto expect structural transformationto take place. The majority in ruralareas were de facto disenfranchisedfrom the developing process.Private agents and rural farmerswere likely to have refrained frommaking forward looking productiveinvestments. Today, many parts ofSSA remain isolated from globalmarkets and the global communityas the region’s access to informationand technology is limited.On the whole, while globalizationhas made some contribution toeconomic growth in SSA, it hasnot yet facilitated the process ofstructural transformation requiredfor countries to reach the take-offstage and accelerate theprocess of economic developmentand poverty reduction.Instead, the forces of globalizationhave increased intra-countryinequality and done very little toreduce poverty.Whilst the impact ofglobalization on poverty isextremely context-specific, thelimited scope of globalizationin SSA appears to be, generally,the result of a combination ofpoor initial conditions, such asfundamental disadvantagesof location (disease-pronetropical countries with a harshenvironment), inadequatepolitical institutions, poorgovernance, extremelyunderdeveloped physicalinfrastructure, and a related highrisk investment climate.Policies to Help Make20 Policy Brief

www.wider.unu.eduGlobalization more Pro-Poor4.1Strategic national policies towardsglobalizationThe empirical case studies fromthe three regions in this UNU-WIDER research project support thecontention laid out at the outsetthat the effects of globalization onpoverty are diverse, and in manyways, context specific. Indeed,our studies confirm the view thatthe forces of globalization assuch are not inherently beneficialor deleterious for developmentprospects. At the same time,our comparative analysis ofglobalization experiences acrossthe three developing regions showsthat the effects of globalization onprocess of poverty reduction inthe Asia and Pacific region hasfollowed closely the waves ofemployment creation for unskilledlabour and the poor in tandemwith the evolution and shifts ofcomparative advantages withinthe region in the ever‐acceleratingintegration process. In contrast,such a poverty reduction processthrough globalization could notbe achieved in SSA and ECLACregions, where liberalization of tradeand investment regimes failed toproduce either strong or significantemployment creating growth.Instead the pattern of growthhas resulted in ‘jobless’ growth,‘casualization’ of employment and‘informalization’ of their economies.This observation leads us to argueThe failure of SSA economies to diversify and undergostructural transformation has led to low economicgrowth and persistent pover tythe poor depend critically on thenature and pattern of the economicintegration process.In particular, our analysis suggeststhat globalization works best for thepoor through the ‘growth’ channelwhen globalization‐inducedeconomic growth generatessecure employment opportunitiescontinuously at a steady ratefor a growing population andlabour force. On the whole, theemployment creating effect ofgrowth has been and continuesto be pronounced in East Asia,where globalization has broughtabout a substantial reduction inpoverty due to vigorous growthdespite increasing inequality. Thethat the employment creation effectachieved through globalizationinducedeconomic growth is amost direct and powerful channelthrough which globalization canmake a noticeable dent in poverty.While the prospect of substantialpoverty reduction can be increasedconsiderably wherever globalizationbrings about job‐generatingeconomic growth, this potentialis realized only when economicgrowth is characterized by arelatively high ‘employmentelasticity’. However, such a growthoutcome cannot be necessarilyguaranteed whenever globalization/integration is embraced on its ownas a development strategy. Instead,Linking Globalization to Poverty in Asia, Latin America, and Africa 21

www.unu.eduthe dynamic integration experiencesin Asia point to the need for policiesof active strategic integration, notof passive integration or de-linkingfrom the global economy. Suchan active strategic stand should,first of all, aim at facilitating thetransformation of production andtrade structures from the narrowlybased commodity dependencethat is bound to increase theexposure of economies to externalshocks. In terms of sustainedeconomic growth, developingcountries that have successfullydiversified their exports structuresinto manufactured goods, inparticular, increasingly intomedium and high technologysectors, have systematicallysame time, there is no place foran old style, poorly designed andimplemented protection policy,which is mired in unproductiverent‐seeking activities, patron-clientrelationships between governmentsand private agents or consolidationof ‘vested’ interests of the protectedsectors. An import substitutionstrategy can work only whenprotection is granted to firms with aclearly specified ‘graduation’ clausein a performance-based system.That is, protection should alwaysbe seen as temporary and ‘timebound’by agents in return for betterperformances.In particular, national integrationstrategies should be designedin the light of the skewedEffects of globalization on pover ty are diverse, and inmany ways context specificoutperformed those dependent onprimary commodities, and naturalresource‐based processing goods.Thus, whether global market forcesestablish a virtuous circle or viciouscircle depends not only on the initialconditions at the time of exposurebut also crucially on the effectivedesign and implementation ofpolicies to manage the integrationprocess. The issue confrontingpolicymakers is not whether tointegrate into the global economybut how to integrate so as to havea stable foundation for sustainableand equitable growth.Clearly, an active strategic positiontowards globalization cannot beequated with a mere adoptionof liberal trade and investmentregimes, or a simple fine-tuningof the pace and sequence ofliberalization measures. At thenature of the ongoing processof globalization. First, dynamicexternalities and rent-rich activitiesare increasingly concentrated inhigh skill, knowledge‐intensivesectors. In short, the skill- andtechnology‐related divide hasbecome wider over recent decades.This trend is clearly reflected inthe continuously declining termsof trade of less skill intensivemanufactured goods relative to highskill and technology intensive goodsover recent decades. The marketsfor many labour‐intensive productshave come to resemble those forprimary products. The entry ofChina and India into global marketsfor these products has depressedand will continue to depress realwages and returns in these lowtechnologyand low‐skill sectors.Given the sheer size of large surplus22 Policy Brief

www.wider.unu.edulabour in rural areas, China and Indiaare likely to retain their comparativeadvantages in low‐skill-intensivesectors for some time to come whilegaining new capabilities in mediumtohigh-tech sectors. On theother hand, a number of primarycommodities experienced a sharplyupward phase in their commodityprice cycles of 2002-8, in the faceof the surge in demand for rawmaterials and other commoditiesfrom fast growing economies inAsia. Consequently, many naturalresource-based economies in SSAand Latin America did enjoy aperiod of ‘growth spurts’ associatedwith the ‘commodity’ boom.However, the subsequent sharp fallin commodity prices, as the worldless and less conducted at arm’slength relationships among firms.Rather, a growing share of worldtrade is accounted for by intra-firmtrade undertaken within TNCs.There has been a tremendousgrowth in offshore outsourcing andglobal division of labour, dictatedby TNCs’ globally integratedproduction and marketing strategy.TNCs’ activities are strategicallyorganized and integrated eitherhorizontally or vertically. Inparticular, with a sharp decline intransport and communication costover recent decades, TNCs havebeen aggressively organizing theiroperations vertically by slicing upthe production process finely intonumerous separate operations andGlobalization works best for the poor throughthe ‘growth’ channeleconomy entered into a severedownturn phase starting in thesecond half of 2008, has illustratedthe high vulnerability of theseeconomies to commodity priceshocks. This demonstrates onceagain the difficulties in sustainingeconomic growth that is capableof creating job opportunities fora rising labour force, exclusivelyon the basis of the primarycommodity boom. A broadly baseddevelopment pattern for theseeconomies would require a strategyof using resource rents and windfallsfor economic diversification.Second, intra-firm trade in parts,components and other intermediategoods, and intra-industry tradewith highly differentiated productsmake up a predominant shareof contemporary global trade. Inparticular, international trade islocating them in different parts ofthe world according to the costadvantage of each location.In this context, it should be notedthat considerable asymmetriesin market power and access toinformation, technology andother intangible knowledge assetsbetween TNCs, on the one hand,and local entrepreneurs, farmersand traders in developing countries,on the other, have resulted in ahugely skewed distribution of gainsfrom trade. This is reflected in theTNCs’ dominance in commodityand value chains of traded goods,as well as in frequently observedconditions such as the sharp declinein real wages in export processingzones. Under this condition,the benefits of productivityimprovements, instead of goingto the fragmented producers andPublications from the Project‘Impact of Globalizationon the World’s Poor’Erik Thorbecke and MachikoNissanke. ‘The Impact ofGlobalization on the Poor inLatin America.’ Economía 9.1(2009): 153-186.Machiko Nissanke and ErikThorbecke.‘Linking Globalizationto Poverty’, WIDER Policy BriefNo. 2 (2007)Linking Globalization to Poverty in Asia, Latin America, and Africa 23

www.unu.eduGlobalization offers newopportunities for acceleratingdevelopment and povertyreduction, but also poses newchallenges for policymakers. Andthere is much concern aboutthe distribution of benefits; inparticular whether the poor gainfrom globalization, and underwhat circumstances it mayactually hurt them. To meet thisimportant agenda, the projecton the ‘Impact of Globalizationon the World’s Poor’ aimed atproducing rigorous theoreticaland empirical analysis of thepoverty impact of globalization,thereby providing a frameworkupon which to build strategiesfor ‘pro-poor globalization’. Theproject has been particularlyinterested in understandingbetter the mechanisms throughwhich globalization ultimatelyaffects poverty. It has alsoevaluated how different poorgroups are affected in differentways by globalization (the ruralversus urban poor for example).The project has producedthematic papers as well ascountry and case studies ofglobalization’s poverty impactin Asia, sub-Saharan Africa andLatin America.farmers, are largely appropriated bythe TNCs and global supermarketchains. This uneven distribution ofmarket power points to the need toimprove the negotiating positionsof developing country governmentsvis-à-vis TNCs, aiming at a strategic,targeted approach to FDI, sothat FDI could facilitate skill andtechnology transfer and generatestrong positive productivityspillovers benefiting domestic firms.Generally, given the observedtrends towards inequality bothglobally and within many nations,developing countries have totake strategic steps to positionthemselves more favourably inthe globalization process in orderto derive greater benefits fromglobalization’s dynamic forces.They need a long‐term visionfor upgrading their comparativeadvantages towards high valueadded activities by climbingthe technology ladder rung byrung through ‘learning-by-doing’and adaptation. To succeed,developing country governmentsshould consciously engage inbuilding institutional capacities forintegration, including a capablenation state that is ready to take onthe enormous challenges posed byglobalization. The positive benefitsfrom globalization are neitherautomatic nor guaranteed, whilstpassive liberalization would riskperpetual marginalization.Furthermore, since opennesscould potentially benefit the poorin countries which have alreadyreached the take-off stage, it isvery critical that in addition toa long‐term vision for strategicintegration, low‐income countriesshould embark on the path towardsstructural transformation of theiragrarian economies, as a necessarycondition for successful integration.The importance of this critical stepin relation to the globalization–poverty nexus is underscored bythe fact that in many developingcountries the majority of the poorstill reside in rural areas. Further,there are critical thresholds thatneed to be reached before thepositive effects of globalizationon poverty reduction can berealized. The non-linear Laffer-typerelationship between globalizationand poverty shows that opennesshelps those with basic and highereducation, but reduces the incomeshare of those with no or littleeducation and it is only when basiceducation becomes the norm forthe poor that openness exerts anincome equalizing effect.The human development trapmodel also points to the possiblecoexistence of developmentand underdevelopment underglobalization, and henceunderscores the critical importanceof national policies to enhancehuman capital endowments anddevelop technological capabilities.Thus, sizable public investmentin skill upgrading, as a specificpro-poor measure, is the key forensuring positive benefits fromglobalization for the poor. Inconjunction with building assetsof the poor in their human capitalbase, there is a complementaryneed to invest in rural physical andsocial infrastructures and createmarket supporting institutions, sothat the poor can be connectedand networked beyond isolatedcommunities and villages. In termsof inter-sectoral flows, a continuinggross flow of resources shouldbe provided to agriculture—24 Policy Brief

www.wider.unu.eduirrigation, inputs, research, andcredit—to increase this sector’sproductivity and potential capacityof contributing an even larger returnflow to the rest of the economy andhence provide a net agriculturalsurplus to finance the subsequentdevelopment of the rest of theeconomy.Finally, our project case studiesunequivocally point to theneed for instituting safety netsand appropriate regulations toprotect the poor from the largedownside risks associated withglobalization. Clearly, globalizationhas significantly increased thevulnerability of the poor inall three developing regionsthrough channels such as: (i) theincreased scale and frequencyAll in all, our comparative analysisof the three regions suggeststhat governments of developingcountries need to pursue bothstrategic integration and an activedomestic development agenda toensure that the poor benefit fromglobalization while they are alsoadequately protected from negativeimpacts. What is called for is thatintegration be accompanied by acomprehensive policy package forenhancing the capability of the poorand instituting appropriate safetynets for people who could otherwiselose from the globalization process.This requirement is a tall orderfor any government, let alonefor a fragile state typically foundin most low-income developingcountries. Hence, in order to makePro-poor globalization can be definedas the inclusive process of globalizationof macroeconomic shocks, asmost vividly demonstrated by theglobal financial and economiccrisis of 2008-9; (ii) larger exposureto changes in the ecosystempotentially resulting from newtechnologies with often uncertainpay-offs and costs; and (iii)deteriorating working conditionsand weakening bargainingpowers for the unskilled andthe poor in global value chains.Thus, governments should takea pro-active and pro-poor stancein instituting various schemes ofpublic transfers and safety netsto shelter the poor from theseadverse conditions. Indeed, thedistributional issue raised in theglobalization debate should be seenas a strong case for pro-active publicprogrammes to protect the poor.globalization work for the poor,the first imperative is to strengthenthe capacity of the nation states, sothat an institutional environmentconducive to the design andimplementation of a pro-poorprogramme could be fostered.4.2 A quest for pro-poor globalizationOur comparative analysis of the‘globalization–poverty relationships’inevitably raises a critical questionwhether the present form ofglobalization/integration isconducive to a process of growthcum-structuraltransformationof developing economies thatis capable of engendering andsustaining pro-poor economicgrowth with favourabledistributional consequences. Withthe current wave of globalization,Linking Globalization to Poverty in Asia, Latin America, and Africa 25

www.unu.edu‘within country’ income inequalityhas been steadily rising. A numberof our project studies, focusingon specific settings, suggestthat globalization indeed canproduce adverse distributionalconsequences at both the nationaland global levels. As ‘global marketsare inherently disequalizing’,market driven globalization andgrowth tend to increase inequalityeverywhere. Asia is no exceptionto this trend. Hence, we shouldsearch for ways to influence theglobalization process so that it ismore effective in improving the lotof the poor—hence, our quest forforms of pro-poor globalization.Pro-poor globalization can bedefined as the inclusive processof globalization, wherein sharingopportunities for growth anddevelopment take place ex ante,encompassing the poorer segmentsof population on a global scale. Asthe tidal waves of global growthlift all boats, it should also lift thecanoes of the unskilled. Pro-poorglobalization could remain anelusive concept, if the processis left entirely to market forcesalone. In order to make pro-poorglobalization a realistic perspective,there is a need for instituting viablemechanisms to insure that the poorshare in the distribution of assetsand income generated by the forcesof globalization and are adequatelyprotected against the vagaries ofglobal shocks.Ideally, under pro-poorglobalization, it should be possibleto make equity and efficiencyinteract dynamically ex ante sothat a virtuous circle of growth andequity/equality could be created inthe process of globalization.Defined as above, our quest forpro-poor globalization leads usto revisit the debate concerningthe relationships between equity/inequality, on the one hand, andgrowth/efficiency on the other. Thetraditional view held by economistson the growth–inequality nexusemphasizes the existence of afundamental trade-off betweenthe objectives of productiveefficiency/growth and socialjustice represented by equity/equality considerations, often onthe grounds that too much equitywould discourage incentives toinnovate and reap the rewards ofsuccessful entrepreneurship. Incontrast, the alternative recentpolitical economy of developmentliterature suggests instead thatthere is a long‐run complementaritybetween the two within somerange that does not stifle incentives.If there is no clear trade-off oneconomic grounds, equitable andshared growth should be good forefficiency and future growth as well.Indeed, ‘if equality is conducive togrowth, it then becomes a meanstowards economic developmentand future poverty alleviation’,and hence, ‘the conflict betweenthe ethical objective (norm) ofegalitarianism and the economicconditions required for growthdisappears’. In this new paradigm,wealth redistribution (particularly ofhuman capital) to the less endowedis, on the whole, growth enhancing,because redistribution is the keyto creating a virtuous circle in thegrowth–equality nexus.Notwithstanding the long‐runcomplementarity between the twinobjectives, growth and equity, apractical policy choice exists overthe actual weight given to the‘equity’ consideration against the26 Policy Brief

www.wider.unu.edu‘efficiency’ consideration. Such apolicy choice would be ultimatelydetermined by the social normsprevailing in a society. However,we should bear in mind, inevaluating the optimal weightto be assigned to each of theseobjectives that market forcesalone would not lead even to aPareto efficient equilibrium in thepresence of imperfect informationand imperfect competition,as demonstrated by recentadvancement of economic theories.As Stiglitz infamously remarked, ‘aninvisible hand is not visible, becauseit does not exist’. Therefore, notonly is there a moral case on ethicalgrounds but also a strong rationaleconomic case on ‘efficiency’grounds for breaking away from theeffects of the immutable forcesof globalization. Hence, a form ofpassive integration into the globaleconomy through liberalization andderegulation cannot be viewed asa reliable substitute for a domesticdevelopment strategy. Indeed, itis now widely acknowledged thatthere is no universally applicable‘one-size‐fits‐all’ developmentmodel. Therefore, there should bemore room for open discussion anddebate on the merits of differentdevelopment models, not just onebased on following the dictates oftotally free and unregulated marketsand the Washington Consensus.Yet, it can be argued that underthe current wave of globalization,the feasible policy space relatedto development strategy hasA more effective globalization process requires a newsystem of global governancepresent mode of globalization.In making globalization moreinclusive and truly pro-poor,we should search for pro-activeways to create a more inclusivedevelopment path for the poorin the process of integration ofdeveloping countries. It is alsonecessary to restructure governancemechanisms over economic policiesat both national and global levels.Despite the ever-accelerating paceof globalization, the nation stateremains a critical political unitwithin which citizens can expressdemocratically their choices overeconomic policies and developmentstrategies. Hence, at the nationallevel, policymakers need todesign and implement an activedevelopment strategy not only tobenefit from globalization, but alsoto help counteract the negativebeen shrinking for developingcountries. In particular, the policyspace of nation states has beeneroded considerably in the nameof financial globalization. It isknown that policymakers in openeconomies face a macroeconomictrilemma (the ‘inconsistent trinity’thesis). The thesis stipulates thatwhilst policymakers typicallyhave three desirable objectives(exchange rate stability, freeinternational capital mobility, andmonetary policy independenceto engage domestic economicgoals), they are in practice forcedto give up one objective, sinceonly two out of the three can bemutually consistent. Financialglobalization has also led to a lossof fiscal autonomy under ‘fiscaltermites’, when financial opennessmakes it hard to tax internationallyPolicy Briefs are distributed freeof charge. Please address ordersand inquiries to:UNU-WIDER PublicationsKatajanokanlaituri 6BFI-00160 HelsinkiPublications@wider.unu.eduLinking Globalization to Poverty in Asia, Latin America, and Africa 27

www.unu.edufootloose capital relative to labourdue to the competition for foreignsavings through tax incentives andgeneral financial arbitrage by poorcountries. This often results in feweravailable resources to provide socialsafety nets to people adverselyaffected by globalization.Besides providing more policy spaceto allow developing countries tomanage the integration process atthe national level, it is necessaryto recognize that globalization hasalso given rise to a set of crossbordereconomic issues that can beaddressed only at the global level,since they cannot, by nature, bedealt with effectively by individualnation states in isolation. Theseinclude addressing global negativeexternalities such as greenhouseeffects leading to a dramatic climatechange, prevention of globalfinancial crises or preservation ofglobal security. They require aneffective system of internationalcoordination and cooperation, aswell as cross-border regulationsand enforcement mechanisms.A more effective globalizationprocess requires a new systemof global governance. Yet, overthe last three decades, economicglobalization and integration havelargely proceeded with increasingintensity, relying on the presumedself-regulatory capacity of marketswithout adequate structures andsystems in place to govern theprocess. This has placed enormousstrains on the internationaleconomic and financial system andmay eventually bring globalizationitself to a crossroads. In the last fewyears environmental challengesposed by climate change and theappearance of large cracks in theinternational financial systemthreaten the stability of the worldeconomy–as evidenced by the sharphike in primary commodity andfood prices, and the global financialcrisis.Soaring key commodity priceshit the world economy during asevere financial crisis, triggeredby the sub-prime mortgage crisisin the US with the background ofgrowing global macroeconomicimbalances, which spread to majorindustrial economies throughpoorly regulated global financialtransactions and systems. Therapidly increasing prices of basicgoods such as fuel and foodsparked off temporary socialand political disquiet and unrestacross the globe. The rising costof fuel and the shortages of foodhit particularly hard the livelihoodof the urban and rural poor indeveloping countries. The financialturmoil with a severe liquiditycrisis and the credit crunch at firstappeared to be confined mainly tofinancial markets and institutionsbased in the US and WesternEurope. The world economy, onthe whole, managed to maintainits momentum until mid-2008 onthe back of the buoyant economicgrowth posted by emerging marketeconomies as well as resourcerichdeveloping economies thatenjoyed a commodity boom.Bymid-September 2008, however, theevents that hit the major financialinstitutions in the US had alteredradically the fate and the course ofthe globalized economies. The fearof accelerating inflation and of fueland food shortages worldwide wasovertaken by a greater fear of globalrecession engulfing all economiesin the developing world. No countrycould afford to remain a merebystander in the fast evolving global28 Policy Brief

www.unu.eduUNU-WIDER Policy andResearch Briefs 2005-2010Ravi Kanbur and AnthonyJ. Venables. ‘Rising SpatialDisparities and Development’WIDER Policy BriefNo. 03 (2005)David Fielding. ‘What can theEuropean Central Bank learnfrom Africa?’ WIDER Policy BriefNo. 04 (2005)Tony Addison, Alan Roe,and Matthew Smith. ‘FiscalPolicy for Poverty Reduction,Reconstruction, and Growth’.WIDER Policy BriefNo. 5 (2006)Andrés Solimano. ‘MobilizingTalent for Global Development’.WIDER Policy BriefNo. 7 (2006)Machiko Nissanke andErik Thorbecke.‘LinkingGlobalization to Poverty’.WIDER Policy BriefNo. 2 (2007)David Clark and MarkMcGillivray. ‘Measuring HumanWell-being: Key Findings andPolicy Lessons’. WIDER PolicyBrief No. 03 (2007)Wim Naudé and MarianneMatthee. ‘The Significance ofTransport Costs in Africa’.WIDER Policy BriefNo. 5 (2007)Ha-Joon Chang. ‘Strangerthan Fiction? UnderstandingInstitutional Changes andEconomic Development’.WIDER Policy BriefNo. 6 (2007)the distributional consequencesof globalization, a set of muchmore effective redistributionalinstruments may be required atboth national and global levels.Globalization can bring aboutincreased volatility and insecurityfor many cohorts, particularly thosethat are not well positioned to takeadvantage of the opportunitiescreated by the opening of trade andcapital flows. Indeed, the relevanceof ‘global income inequality’ as avaluable concept for measuringtrends in world income distribution,should increase over time, as peoplemove from using national yardsticksto global ones when comparingtheir income with that of others.While globalization is a majorengine for growth in aggregate,globalization either introducesor exacerbates other trends thataffect people’s well-being as much,if not more, than income, forexample, through the increasingflow of information about the livingstandards of others, both withinand beyond country borders. Thisflow of information can result inchanging reference norms andincreased frustration with relativeincome differences as one of theproject studies demonstrates. Itmay be utopian at this stage torecommend that resource transfersfrom the developed world to thedeveloping world be more globallyprogressive. Yet such a movewould contribute to the forces ofglobalization becoming more propoor.The current system of foreignaid (the main existing form of globalresource transfers) is not the mostefficient and progressive way tomobilize and utilize resources asa redistributional instrument toaddress global income inequality.30 Policy Brief

www.wider.unu.eduGlobalization requires a set of newinnovative instruments for financingdevelopment as well as for provisionof global public goods. In thiscontext, the world community couldbe more open to evaluate variousradical proposals such as a globalsocial contract to finance equalopportunity investments benefitingthe weak and the disadvantaged;the creation of a new schemeof inter-country transfer usingper capita income of the bottomquintile of the population as ayardstick (as recommended byanother of the studies undertakenunder this project); or institutingglobal arrangements to minimizeasymmetric risks and costs ofglobal market failures. While theseproposals require further carefulstudies and critical scrutiny todetermine their intrinsic meritsand the political feasibility ofimplementation, it is clear thatthe world community shouldgive serious attention to moreenlightened global measuresbenefitting the poor than those thatprevail today. Indeed, we should beengaged in a fresh debate on howthe enormous potential benefitsof globalization can be steeredtowards a more equitable sharing ofthose benefits, while reducing thevulnerability of the poor to some ofthe adverse consequences of globalmarket forces.UNU-WIDER Policy andResearch Briefs 2005-2010Basudeb Guha Khasnobis. ‘CanWe Eradicate Hunger?’ WIDERPolicy Brief No. 1 (2008).Naudé Wim.‘Fragile States’,WIDER Research Brief No. 3(2008)Guanghua Wan. ‘PovertyReduction in China: Is HighGrowth Enough?’ WIDER PolicyBrief No. 4 (2008)Wim Naudé, Amelia U. Santos-Paulino, and Mark McGillivray.‘Poverty. ‘Vulnerability inDeveloping Countries’ WIDERResearch Brief No. 2 (2008)Wim Naudé ‘The GlobalEconomic Crisis after One Year:Is a New Paradigm for Recoveryin Developing CountriesEmerging? WIDER Policy BriefNo, 2 (2009)Augustin Kwasi Fosu and WimNaudé. ‘Policy Responses tothe Global Economic Crisis inAfrica’. WIDER Policy Brief No.3 (2009)Wim Naudé. ‘PromotingEntrepreneurship in DevelopingCountries: Policy Challenges.WIDER Policy BriefNo. 4 (2010)Linking Globalization to Poverty in Asia, Latin America, and Africa 31

www.unu.eduwww.wider.unu.eduThe World Institute for Development Economics Research (WIDER)was established by the United Nations University (UNU) as its fi rstresearch and training centre and started work in Helsinki, Finland in1985. The Institute undertakes applied research and policy analysis onstructural changes affecting the developing and transitional economies,provides a forum for the advocacy of policies leading to robust,equitable, and environmentally sustainable growth, and promotescapacity strengthening and training in the fi eld of economic and socialpolicy making. Work is carried out by staff researchers and visitingscholars in Helsinki and through networks of collaborating scholarsand institutions around the world.INSIDE:Policy Brief“LinkingGlobalization toPoverty in Asia, LatinAmerica and Africa”While globalization offers newopportunities for acceleratingdevelopment and povertyreduction it also poses newchallenges for policymakers; inparticular the extent to which thepoor gain from globalization, andunder what circumstances it mayactually hurt themUnited Nations Univeristy: WorldInstitute for Development EconomicsResearchof the United Nations UniversityKatajanokanlaituri 6 BFIN-00160 HelsinkiFinlandTel. +358-9-6159911info1@wider.unu.eduwww.wider.unu.edu