I looked to the National Bureau of Economic Research, who recently published Globalization and Poverty. Here’s what I found out:
Some studies show that globalization has been associated with rising inequality, because the poor do not always share in the gains from trade. An example of this is the coffee trade. Coffee is the second most traded commodity in the world, yet most of its growers only make 10% of what it eventually sells for. However, when farmers have access to credit, technical know-how, and social safety nets such as income support, trade can benefit the world’s poor.
The book argues that export growth and incoming foreign investment have proven to reduce poverty. But, at the same time, trade and foreign investment alone are not enough to alleviate poverty. Increasing access to education and credit, as well as improved infrastructure, are necessary in order to see real progress. Echoing that idea, Harrison concludes that globalization can benefit people living in extreme poverty, but only if the appropriate complementary policies and institutions are in place.
