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Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized KENNETH REINERT KENNETH IAN GOLDIN Revised Edition Revised GLOB✡✬✩forZATION DEVELOPMENT GLOBALIZATIONfor DEVELOPMENT TRADE, FINANCE, AID, MIGRATION, AND POLICY REVISED EDITION IAN GOLDIN KENNETH REINERT A copublication of the World Bank and Palgrave Macmillan © 2007 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington, DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: [email protected] Revised Edition: April 2007 All rights reserved. 1 2 3 4 5 10 09 08 07 A copublication of The World Bank and Palgrave Macmillan. Palgrave Macmillan Houndmills, Basingstoke, Hampshire RG21 6XS and 175 Fifth Avenue, New York, N. Y. 10010 Companies and representatives throughout the world Palgrave Macmillan is the global academic imprint of the Palgrave Macmillan division of St. Martin’s Press, LLC and of Palgrave Macmillan Ltd. Macmillan® is a registered trademark in the United States, United Kingdom and other countries. Palgrave is a registered trademark in the European Union and other countries. This volume is a product of the staff of the International Bank for Reconstruction and Development / The World Bank. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgement on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The International Bank for Reconstruction and Development/The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750-8400; fax: 978-750-4470; Internet: www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: [email protected]. ISBN-10: 0-8213-6929-6 ISBN-13: 978-0-8213-6929-6 eISBN: 0-8213-6930-X eISBN-13: 978-0-8213-6930-2 DOI: 10.1596/978-0-8213-6929-6 Library of Congress Cataloging-in-Publications Data has been requested. Contents FOREWORD by François Bourguignon IX ACRONYMS AND ABBREVIATIONS XIII ACKNOWLEDGMENTS XVII ABOUT THE AUTHORS XIX 1 BACKGROUND AND CONTEXT 1 2 GLOBALIZATION AND POVERTY 21 3 TRADE 47 4 FINANCE 79 5 AID 113 6 MIGRATION 151 with Andrew L. Beath 7 IDEAS 193 8 TOWARD A POLICY AGENDA 227 REFERENCES 265 INDEX 285 v vi Contents Boxes 1.1 John Maynard Keynes on Globalization 7 1.2 International Agreements, Institutions, and Key Players 8 2.1 The Experience of Being Poor 27 2.2 Volatile Widgets in the 1990s 39 2.3 The Idea of Global Public Goods 42 3.1 Export Processing Zones 60 3.2 Textile and Clothing Protection 65 3.3 The Integrated Framework 71 4.1 Financial Crises 83 4.2 Targeting Poor People: Commercial Microfinance 90 4.3 Creating Links 95 4.4 The Nairobi Stock Exchange 101 5.1 Aid in Zaire 127 5.2 Millennium Development Goals 145 6.1 Migrant Dreams Become Nightmares 163 6.2 Musical Doctors 175 6.3 Migrant Labor Institutions of the Philippines 184 7.1 Mercantilism 196 Figures 1.1 Trade and Extreme Poverty in Historical Perspective 10 2.1 Per Capita Income by World Region 22 2.2 The Growth of World Population 24 2.3 Population Age Distributions 25 2.4 Relative Economic Strength of Developing Countries, Historical and Projected 26 2.5 The Historical Evolution of World Poverty 27 2.6 The Recent Evolution of World Poverty 28 2.7 Regional Incidence of Extreme Poverty 29 2.8 Life Expectancy by World Region 30 2.9 Infant Mortality 31 2.10 Female Youth Literacy Relative to Male Youth Literacy and Infant Mortality 32 2.11 Trade and FDI for Low- and Middle-Income Countries 34 2.12 Sectoral Composition of Developing Country Nominal Exports 35 Contents vii 2.13 Nominal Flows of Aid, FDI, Portfolio Investment, and Remittances to Developing Countries 38 2.14 Foreign Remittances Per Capita and as a Percentage of Per Capita GDP, 2003 40 2.15 Communication Access, 2004 44 3.1 Low- and High-Technology Manufactured Exports of Some Developing Countries, 2003 57 3.2 Some Characteristics of the Maquiladora Industry in Mexico 59 3.3 Tariff Escalation on Developing-Country Exports to Developed Countries 62 3.4 OECD Agricultural Subsidies 63 3.5 Primary Commodity Prices in the 20th Century 68 3.6 Arms Imports Per Capita, 2003 72 4.1 Net Private Capital Flows to Low-Income Countries, 1970–2004 82 4.2 Net Private Capital Flows to Middle-Income Countries, 1970–2004 84 4.3 Net Private Capital Flows to Low- and Middle-Income Countries as a Percentage of GDP, 1970–2004 86 4.4 Global Shares of Population, PPP GDP, and FDI, 2004 93 4.5 Net Inward Portfolio Equity Flows to Developing Countries, 1995–2004 100 4.6 Net Inward Debt Flows to Developing Countries, 1997–2004 103 4.7 Gross Inward Bank Lending, 1996–2004 105 4.8 Composition of Financial Development 107 5.1 Magnitude and Vintage of Major Aid Organizations 117 5.2 Inflows of Official Development Assistance by Region, 1960–2004 119 5.3 Foreign Aid Receipts as a Percentage of Low- and Middle-Income Country GDP, 1960–2004 123 5.4 Breakdown of Aid Flows to Sub-Saharan Africa (excluding Nigeria) 123 5.5 External Debt of Developing Countries 141 5.6 Aid and Support for Agriculture as a Share of GDP, 2002 146 6.1 Inflow of Migrants to the United States and Canada, 1820–2003 155 viii Contents 6.2 Rates of Emigration to the United States by Income, 1989–2000 169 6.3 Flows of Official Remittances to Regions of the Developing World, 1975–2006 178 Tables 5.1 Average Annual Aid Flows Per Person in Real 2000 US Dollars, 1960–2003 116 5.2 Developments in the History of Foreign Aid 118 5.3 Major Deployments of Foreign Assistance 120 5.4 ODA as a Share of GNI, 2005 and Estimated for 2006 122 5.5 Yields of Major Food Crops (kg/ha) in Developing Nations, 1970–2004 138 6.1 Historical Rates of Migration 154 6.2 Stock of International Migrants, 1990, 2000, and 2005 157 6.3 Major Channels of Modern International Migration 159 6.4 Economic Importance of Remittances, 2003 177 7.1 Potential Effects of Intellectual Property Protection on Poor People 205 7.2 Idea Changes in Development Thinking 212 8.1 Examples of Policies Affecting Globalization Processes and Outcomes 230 8.2 A Global Policy Checklist 260 Foreword lobalization has been taking place for centuries, moving from the Gcolonization of the inhabited parts of the world to the appearance of nations, from conquests to independent countries, from sailboats and cara- vans to steamboats, truck fleets and cargo planes, from trade in a few com- modities to global production and distribution networks and to the present explosion of international flows of services, capital, and information. Based on Maddison’s recent estimates on the world economy over the past millennium, it is possible to calculate that world merchandise exports amounted to approximately US$40 per capita—at today’s purchasing power—in 1870. This figure had tripled to US$120 by 1913. After a slowdown due to the two consecutive world wars it was then multiplied by almost 10 between 1950 and 2000, to reach approximately US$1,000 per capita today. Seventeen percent of world output is being exchanged today against less than 5 percent a century ago, and this figure is rising rapidly. The sheer size of today’s global economy is a testament to the speed of change: In 2005, world economic output total US$35 trillion—an amount likely to double by 2030, assuming modest continued growth. Faced with such a dramatic evolution, the issues that arise are whether it is good or bad for humankind, whether it must be encouraged or, on the contrary, curbed and, if so, by what means. Globalization may be judged by many criteria, but the most important one is undoubtedly development in all its forms and, in particular, poverty reduction. This is the theme of Ian Goldin and Kenneth Reinert’s fascinating book. We are today at a crucial point in the history of our fight against poverty in its various dimensions. Probably for the first time in history, the absolute number of people living on less than $1 a day in the world has dropped, from 1.5 billion in 1981 to 1.1 billion in 2002. It is true that the proportion of people living in extreme poverty in the world has been falling more or less ix x Foreword continuously since the beginning of the Industrial Revolution. But the pace accelerated considerably over the past 20 years. During that period, the global income poverty rate dropped by almost half.

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