Can Extreme Poverty Be Eliminated?: Globalization, Poverty and Foreign Aid


Average citizens in affluent nations often have many questions about the effects of economic globalization on rich and poor nations and about how developing countries spend the aid they receive. Here are a few brief answers:

Is globalization making the rich richer and the poor poorer?
Generally, the answer is no. Economic globalization is supporting very rapid advances of many impoverished economies, notably in Asia. International trade and foreign investment inflows have been major factors in China's remarkable economic growth during the past quarter century and in India's fast economic growth since the early 1990s. The poorest of the poor, notably in sub-Saharan Africa, are not held back by globalization; they are largely bypassed by it.

Is poverty the result of exploitation of the poor by the rich?
Affluent nations have repeatedly plundered and exploited poor countries through slavery, colonial rule and unfair trade practices. Yet it is perhaps more accurate to say that exploitation is the result of poverty (which leaves impoverished countries vulnerable to abuse) rather than the cause of it. Poverty is generally the result of low productivity per worker, which reflects poor health, lack of job-market skills, patchiness of infrastructure (roads, power plants, utility lines, shipping ports), chronic malnutrition and the like. Exploitation has played a role in producing some of these conditions, but deeper factors (geographic isolation, endemic disease, ecological destruction, challenging conditions for food production) have tended to be more important and difficult to overcome without external help.

Will higher incomes in poor countries mean lower incomes in rich countries?
By and large, economic development is a positive-sum process, meaning that all can partake in it without causing some to suffer. In the past 200 years, the world as a whole has achieved a massive increase in economic output rather than a shift in economic output to one region at the expense of another. To be sure, global environmental constraints are already starting to impose themselves. As today's poor countries develop, the climate, fisheries and forests are coming under increased strain. Overall global economic growth is compatible with sustainable management of the ecosystems on which all humans depend--indeed, wealth can be good for the environment--but only if public policy and technologies encourage sound practices and the necessary investments are made in environmental sustainability.

Do U.S. private contributions make up for the low levels of U.S. official aid?
Some have claimed that while the U.S. government budget provides relatively little assistance to the poorest countries, the private sector makes up the gap. In fact, the Organization for Economic Cooperation and Development has estimated that private foundations and nongovernmental organizations give roughly $6 billion a year in international assistance, or 0.05 percent of U.S. gross national product (GNP). In that case, total U.S. international aid is around 0.21 percent of GNP--still among the lowest ratios of all donor nations.

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