CAPITALISM'S ACHILLES HEEL Dirty Money and How to

The Global Divide 233
volves natural resources associated with inequality, so more trade in these
goods raises inequality.” 42 An earlier study in 2001 supports this view, finding
that “The type of exports appears to matter, as primary export countries,
of which most are developing ones, are associated with an increase in inequality
. . .” 43
The picture seems to be different with manufactured goods. Easterly
suggests that “at higher levels of openness, trade may involve more laborintensive
manufactures and traded goods, so at higher levels, trade lowers
inequality.” 44 Garment manufacturing is an example of this, providing
employment to low and moderately skilled wage earners (leaving aside
the question of whether wages and employment conditions are fair). An
interesting globalization index is offered by A.T. Kearney and Foreign
Policy magazine, measuring economic integration, personal exchanges,
technology, and global political integration. The 2003 index found that
“technology transfers reduce inequality.” 45 Thus, the early stages of manufacturing
and export may, according to these works, be a moderating influence
on income disparities.
International financial deregulation has a more problematic impact. It
can bring money in and take money out with amazing speed, both what belongs
to citizens and to foreigners. When the money goes out of a country in
a banking crisis, such as has been experienced in Mexico, Thailand, Russia,
Argentina, and elsewhere, it usually leaves the poor holding the bag, worsening
income distribution, as even the World Bank admits.
The potentially beneficial forces of globalization and its corollaries, free
trade and financial liberalization, work well in the presence of the rule of
law, political integration, institutional stability, and domestic accord. Absent
these, the process can instead have a negative impact on growth and cohesion.
What globalization must not be is a license to plunder, disrupt, and
further weaken already fragile states.
Sixth and last question: Is there a linkage between poverty and terrorism?
The answer is yes, not because there is a direct link, but because there is
an intervening link that connects the two: global crime. Terrorists resort to
crime—drug smuggling, counterfeiting, arms trading, piracy, fraud, and
more—to finance their activities. These activities bring them into close
working relationships with criminal groups all over the world: in Pakistan,
Indonesia, Russia, Eastern Europe, Iraq, Gaza, Liberia, Congo, Colombia,
and elsewhere. Crime flourishes in weak states, those that have millions in