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The Globalization of Poverty

by Antonia JuhaszTikkun, November/December 2001

United States Trade Representative Robert Zoellick has begun to use the
horrific tragedies of September 11, 2001 as a rationale to push an
aggressive free trade agenda, arguing that we must "counter terrorism
with trade." An expansive economic globalization agenda is one of the
four policy priorities President Bush asked Congress to address
immediately following the attacks of September 11. The administration
is arguing that we will end terrorism through trade because economic
globalization is the solution to poverty. But all evidence shows the
contrary, that economic globalization is a cause of global poverty and
inequality, not a solution. Furthermore, this evidence is increasingly
coming from within the institutions of economic globalization itself.

For example, the Central Intelligence Agency itself warned in a
December 2000 report that economic globalization would increase
inequality and poverty, thereby fostering violence: "The rising tide of
the global economy will create many economic winners, but it will not
lift all boats. … [It will] spawn conflicts at home and abroad,
ensuring an even wider gap between regional winners and losers than
exists today…. [Globalization's] evolution will be rocky, marked by
chronic financial volatility and a widening economic divide. Regions,
countries, and groups feeling left behind will face deepening economic
stagnation, political instability, and cultural alienation. They will
foster political, ethnic, ideological, and religious extremism, along
with the violence that often accompanies it [emphasis added]." (Global
Trends 2015, United States Central Intelligence Agency, 2000).

The most reliable data available, predominantly from supporters of
economic globalization, demonstrate how economic globalization has
caused the most dramatic increase in global inequality and poverty in
modern history. Furthermore, this outcome is intrinsic to the economic
globalization model. Arguments that economic globalization allows
"fragile democracies" to "overcome poverty and create opportunity," as
Trade Representative Zoellick wrote in the Washington Post, are
seriously mistaken. If such policies are pursued, the world could find
itself in even worse circumstances in the future than those we find
ourselves in today.

The administration has already begun to move ahead with IMF loans to
Pakistan and Indonesia in the name of fighting terrorism. If we wish to
help these countries with their economic problems, why are we providing
loans instead of direct aid? Why are we using the IMF, an institution
that has failed miserably in this region (as former World Bank chief
economist Joseph Stiglitz wrote, "All the IMF did was make East Asia's
recessions deeper, longer, and harder.") instead of alternative funding
sources, such as the United Nations, that historically represent the
interests of developing countries? The answer may be that the U.S.
government can control the funds that go to a country through the IMF
by linking conditions to the loans. These conditions have historically
benefited corporate and elite interests over those of the populations
of the countries in question.

The CIA is not alone in its assessment of the catastrophic impact that
the policies of economic globalization have had around the world. For
example, the World Bank—one of economic globalization's leading
institutions—reports that "Globalization appears to increase poverty
and inequality… The costs of adjusting to greater openness are borne
exclusively by the poor, regardless of how long the adjustment takes."
(The Simultaneous Evolution of Growth and Inequality, The World Bank,

The United Nations echoes these words in its 1999 Human Development
Report, "The new rules of globalization—and the players writing
them—focus on integrating global markets, neglecting the needs of
people that markets cannot meet. The process is concentrating power and
marginalizing the poor, both countries and people…. The current
[globalization] debate is … too narrow … neglecting broader human
concerns such as persistent global poverty, growing inequality between
and within countries, exclusion of poor people and countries and
persistent human rights abuses."

The policies of economic globalization such as free trade, financial
liberalization, deregulation, reduced government spending, and
privatization concentrate wealth at the top, removing from governments
and communities the very tools needed to ensure equity and to protect
workers, social services, the environment, and sustainable livelihoods.
In this way, economic globalization and its institutions—including the
International Monetary Fund (IMF), the World Bank, the World Trade
Organization, and the North American Free Trade Agreement, have created
the most dramatic increase in global inequality—both within and between
nations—in modern history and have increased global poverty.

For example, the income gap between the fifth of the world's people
living in the richest countries and the fifth in the poorest doubled
from 1960 to 1990, from thirty to one to sixty to one. By 1998 it had
jumped again, with the gap widening to an astonishing seventy-eight to
one. Poverty trends have worsened as well; there are 100 million more
poor people in developing countries today than a decade ago. The assets
of the three richest people on earth are greater than the combined
Gross National Product of the forty-eight least developed countries.
Even in the United States, where median earnings of workers more than
doubled from 1947 and 1973, the past two decades have seen median
earnings fall by almost 15 percent, with the earnings for the poorest
20 percent of households falling the furthest behind. In fact, the only
segment of the U.S. population that has experienced large wealth gains
since 1983 is the richest 20 percent of households. The net worth of
the top 1 percent of U.S. households now exceeds that of the bottom 90

As Professor Robert Wade of the London School of Economics wrote in The
Economist, "Global inequality is worsening rapidly…. Technological
change and financial liberalization result in a disproportionately fast
increase in the number of households at the extreme rich end, without
shrinking the distribution at the poor end…. From 1988 to 1993, the
share of the world income going to the poorest 10 percent of the
world's population fell by over a quarter, whereas the share of the
richest 10 percent rose by 8 percent. The richest 10 percent pulled
away from the median, while the poorest 10 percent fell away from the
median, falling absolutely and by a large amount."

It is time to recognize that economic globalization does not serve the
poor, it serves the wealthy. It actually adds to the numbers of poor
while concentrating greater amounts of wealth among an ever-dwindling
number of people. As Thabo Mbeki, the president of South Africa, said,
"We believe consciousness is rising, including in the North, about the
inequality and insecurity globalization has brought about the plight of
poor countries."

For the U.S. Trade Representative to argue that expanding the World
Trade Organization, signing the Free Trade Area of the Americas, and
granting the President "Trade Promotion Authority" (formally Fast
Track) to side-step Congress in the creation of national legislation
will address the root problems of global instability is opportunistic,
disrespectful, and cynical. It is time to reject failed models and
embrace new alternatives. In future columns, we will discuss
alternative models to economic globalization that put environmental
protection and social and political equity above the interests of
corporations and elites.

Antonia Juhasz is the project director of the International Forum on
Globalization. Material for this article was drawn from "Does
Globalization Help the Poor?," a report by IFG available at