Transcript Impact of Globalization on the Poor in Africa, Asia and

Impact of Globalization on the
Poor in Africa, Asia and Latin
America
Machiko Nissanke and Erik Thorbecke
Paper Presented at the 2008 World
Congress on National Accounts and
Economic Performance Measures for
Nations, May 12-17, 2008, Washington D.C.
Content of Presentation
► 1. Introduction
► 2. Channels Linking Globalization to Poverty
► 3. Regional Characteristics in GlobalizationPoverty Nexus
● Comparative Globalization Experiences:
Sub-Saharan Africa
Asia
Latin America
► 4. Strategic Policies for More Pro-Poor Process
► 5. Measurement Issues
1. Introduction
► Machiko Nissanke and Erik Thorbecke Co-directed a
Large Scale Research Project on “The Impact of
Globalization on the World’s Poor” under the Auspices of
UNU / WIDER, 2003-2007.
► Four Major Conferences: Helsinki, Tokyo,
Johannesburg, Rio de Janeiro Generating about 60
Studies that Have Been or Will Be Published in 3 Books
and 3 Special Issues of Journals.
► The Present Paper is Based on the Introduction to a
Forthcoming Comparative Volume.
1.What Is Globalization?
What Are its Manifestations?
Greater integration within the world economy
via increased openness to:
• International trade
• International capital and labor movements
• International flow of technology
• International flow of information, knowledge,
and ideas (Internet super-highway)
1.Questions Often Asked
• Whether the actual distribution of gains is fair? Whether
the poor benefit less than proportionately from
globalization – and under some circumstances might
actually be hurt by it ?
• The downside of globalization – Who bears most of the
costs? Are they borne disproportionately by the
developing world and the poor (often unskilled workers)
who are more vulnerable ?
• Whether changes in inequality (both ‘between- countries’
and ‘within-countries’) and the observed poverty
dynamics are related to globalization?
2.Transmission Channels through
which Globalization Affects Poverty
• Globalization affects poverty through many
different channels: growth, inequality,
international capital movements and labor
migration, technology, information, vulnerability
and institutions…
• The first and most important of the
mechanisms through which the process of
globalization affects poverty directly and
indirectly is the growth-inequality-poverty
channel.
2.The Globalization-Openness-GrowthDistribution (Inequality)-Poverty Nexus
Growth
-
+
Globalization
Openness
Kuznets
Classical
Modern
+
Trade
Capital
Labor
Technology
Knowledge
+
+
Distribution
(Inequality)
Poverty
2. Additional Channels through which
Globalization Impacts the Poor
• Growth is the Main Channel (filter) through which
Globalization Affects Income Inequality and Poverty
• Other Channels through which Globalization can
Produce Winners and Losers:
 Changes in Relative Factor and Good Prices;
 Differential Cross-border Factor (Capital and Labor)
Mobility;
 The Nature of Technical Progress and Technological
Diffusion Process
 Institutions
3. Comparative Globalization
Experiences
►Lack of an Appropriate Counterfactual Scenario
of No or Less Globalization
►Attempt to Describe Trends in LA Socioeconomic Performance that One Can
Legitimately Claim Were Influenced by the
Globalization Process
►General Picture is Painted with a Broad Brush to
Serve as a Backdrop to Case Studies that
Explore Specific Manifestations of Globalization
Global Comparisons of Trade
Openness and p.c. GDP
198084
198589
199094
199599
20004
Sub-Saharan Africa
55.4
53.0
54.8
60.1
65.3
Latin America and Caribbean
27.3
29.2
32.0
39.3
43.4
South Asia
19.2
17.8
22.4
27.5
32.6
East Asia
29.2
36.6
50.7
59.8
73.9
Sub-Saharan Africa
-1.2
-0.2
-2.0
0.8
1.5
Latin America and Caribbean
-0.8
0.3
1.7
0.9
0.8
South Asia
3.2
3.6
2.8
4.0
3.7
East Asia
5.7
6.2
7.7
5.4
6.5
Trade openness1: (X+M)/GDP
Growth of GDP per capita
(average annual)3
( .. not available)
Sources:
1. World Bank World Development Indicators, 2005 (calculated from current US$ estimates)
2. World Bank World Development Indicators, 2005 (own calculations)
3. World Bank World Development Indicators, 2005 (average annual %)
Poverty Trends
1981
1987
1993
1996
2001
41.6
46.8
44.1
45.6
46.4
9.7
10.9
11.3
10.7
9.5
South Asia
51.5
45.0
40.1
36.6
31.3
East Asia
57.7
28.0
24.9
16.6
14.9
Income poverty1
(Headcount)
Sub-Saharan Africa
Latin America and
Caribbean
Sources:
1. Chen & Ravallion (2004): Table 2; based on international poverty line ($1.08 1993 PPP)
3.1 Globalization→Poverty in SSA
► Africa is Ahead of LA and South Asia in Terms of
Trade Intensity and Represents a Clear Example
that Openness is not Sufficient to Generate
Economic Growth.
► Negative p.c. GDP Growth Rates in 80’s and
90’s Influenced by e. g. Poor Governance and
Institutions, Geography, Fragmentation.
► Also Natural Resource Curse and Massive
Exploitation of Agriculture and Dutch Disease.
3.1. Globalization→Poverty in SSA
► Essentially no Structural Transformation and
Diversification
► Increase in Relative and Absolute Poverty and
Income Inequality
► Growth Engine Failed and Greater Inequality
Further Worsened Poverty Incidence
3.2. Globalization→ Poverty in
Latin America
►Decade of the 1980’s: “Lost Decade”, Debt
Restructuring, Liberalization, Deregulation,
Privatization → Ave. Annual GDP Growth Rate
2%: Stagnation
►Decade of the 1990’s: (Re)-integration in World
Economy TNCs adopt new capital-intensive
technologies complementary to skilled labor and
substitute for unskilled labor→ Skilled/Unskilled
wage gap rises (except in Brazil).
►Increasing Income Inequality and Income
Polarity
3.2. Globalization→ Poverty in
Latin America
►Fall in Health and Education Indicators’
Inequality Reflecting Presumably the Impact of
Social Protection Schemes ( e.g. Oportunidades
in Mexico and Bolsa Familia in Brazil)
►Poverty ($2 a day) Rose from 29.6% in 1993 to
31.7% in 2002
► Informalization of Labor Force
3.2. Globalization→ Poverty in
Latin America
► The Combination of a Low Growth Transmission
Channel further Filtered down by Greater Income
Inequality and Polarization and a Technology Transfer
Channel not Conducive to Unskilled Labor Employment
Could not Play a Role in Reducing Poverty
► Inconsistent (Stop and Go) and Populist Economic and
Monetary Policies Followed by Many LA Regime
Contributed to Mixed Socio-economic Performance
► Recent Growth Spurt ( 2004-2007) 5% Growth of LA
GDP. Is it Sustainable??
3.3. Globalization→ Poverty in Asia
► Asia Benefited most from Dynamic
Growth Effects of Globalization.
► Dramatic Fall in Poverty throughout Asia
► Successful Structural Transformation
► Exploited Dynamic Comparative
Advantage. Labor-Intensive Exports and
Shared Growth. Flying Geese Paradigm
3.3. Globalization→ Poverty in Asia
► Pro-Poor Public Expenditures Pattern
► Large Rise in Within-Country Income
Inequality
► Growth Engine so Strong that it More
than Compensated Negative Effect of
Inequality on Poverty
3.4 Some Conclusions
► Impact of Globalization is Highly Context-Specific.
► Most Potentially Important Channel is Growth. Until very
recently Growth Engine Succeeded in Asia, Sputtered in
LA and Failed in SSA and was further Weakened in its
Impact on Poverty by Increased Inequality.
► Technology Transfer Channel Tended to Polarize
Further Income Gap between Skilled and Unskilled.
► Nonetheless Trade Liberalization Can be Potent
Instrument to Raise Growth (Efficiency) and Reduce
Inequality when Complemented by Safety Nets and
Social Protection Schemes.
4. Measurement Issues
►Poverty is a Multidimensional Concept (Following Sen’s
Capability and Functioning Approach) Consisting of
Income (Money-metric) and non-Income Variables.
Extremely Difficult to Define Scalar Concept Capturing
all Dimensions
► Imperfect but Best Proxy for now is Income
► A major Problem is that the Imputed Value of
Benefits Received by Households from Public
Goods and Services is Excluded from National
Accounts and Survey Data. Public Expenditure
Pattern can be Progressive or Regressive.
4. Measurement Issues
►Of the Large Number Inequality Measures
(Gini, Atkinson, Deciles, Polarization,..)
which are the most Representative?
►Need for Standardization and Fruitful
Dialogue between Statisticians and
Economists.