Globalization, Growth and Poverty David Dollar Development Economics World Bank

Globalization and Poverty …all the main parties support nonstop expansion in world trade and services although we all know it … makes rich people richer and poor people poorer… – Walter Schwarz, The Guardian

President Fox on Globalization We are convinced that globalization is good and its good when you do your homework… keep your fundamentals in line on the economy, build up high levels of education, respect rule of law… when you do your part, we are convinced that you get the benefit.

Zambia Egypt Nigeria Senegal Honduras Togo Kenya Pakistan Brazil India Thailand Bangladesh Malaysia Philippines Argentina Mexico China Percent change Change in trade/GDP, (selected countries)

Developing country exports have shifted toward manufactures Agriculture Minerals Manufactures Share

I ncrease in trade/GDP: 1970s to 1990s 0% 25% 50% 75% 100% Non-globalizersRich countriesGlobalizers -18% 71% 104%

Growth in globalizers accelerated as integration proceeded 1.4% 2.9% 3.5% 5.0% 0% 2% 4% 6% 1960s1970s1980s1990s

Convergence and divergence in the 1990s -1% 2% 5% 2% 4% 6% Less globalized countries Rich countriesMore globalized countries GDP per capita growth rates, 1990s (ppp) 0

Poverty reduction in Bangladesh, India, Uganda, Vietnam, and China closely related to growth Percent per annum, * BangladeshIndiaUgandaVietnamChina GDP per capita growth rate 2.1* 5.4** Poverty reduction * Bangladesh figures are for ** India figures are for

20% 30% 40% Per capita household consumption 1993 (log scale) Share of 6-15 year olds working Child labor and household consumption levels in Vietnam

Poor countries that globalized have seen the fastest growth in wages Less globalized countries Rich countriesMore globalized countries Wage growth between 1980s and 1990s (percent)

Maritime transport to the U.S. (East Coast): textiles MombasaBombayShanghaiBangkokKao Hsiung Costs as share of value of exports (8,452)(10,319) (11,222) (10,631) (8,360)

Quantifying bottlenecks: Days to clear imported inputs through customs India Korea Thailand India Shanghai Last time Longest 7.8 China

Uttar Pradesh West Bengal Kerala DelhiPunjab Tamil Nadu KarnatakaAndhra Pradesh GujaratMaharashtra Investment rate (percentage), Good Poor Investment climate by state Investment climate makes a big difference

,000 1,200 1,400 Number of people living on less than $1 per day (millions) Poverty has dropped by 200 million over past 20 years, despite world population increased of 1.6 billion. Number of very poor has fallen since 1980

Globalization: Agenda for Action Development round on market access Improving the investment climate Strengthening education, health and social protection More – and better – aid (including debt relief)