Free Trade

No Poor Traders

Globalization debates

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According to the anti-globalization movement, the integration of the global economy is nothing more than a chance for the rich to fleece the poor. A recent working paper published by the National Bureau of Economic Research finds that almost precisely the opposite is true: The best way to keep poor nations poor is to segregate them from the world economy.

Economists Peter H. Lindert and Jeffrey G. Williamson examine data about world inequality, both within and between nations, from 1820 to the present. They chose 1820 as their starting point because it marked the emergence of what they contend is a truly global economy. "International commodity price convergence did not start until then," they write. "And [an] epochal move towards liberal policy (e.g., dismantling mercantilism) was manifested during that decade." Their analysis finds that "globalization favors all participants who liberalize, especially those who are newly industrializing, and penalizes those who choose not to liberalize, leaving them behind."

Lindert and Williamson concede that the research done so far cannot authoritatively isolate increased international trade (one of the defining characteristics of "globalization") from all other factors as the cause of rising incomes. But "though no one study can establish that trade openness has unambiguously helped the representative Third World economy," they write, "the preponderance of evidence supports this conclusion." They also note that no country that has been more protectionist in the 1990s than in the 1960s has simultaneously raised its standard of living.