Does openness in trade and the free flow of capital promote growth for the poor? In this Working Paper, Nancy Birdsall discusses the inherent asymmetries in globalization, and the implications those inequalities have for poverty reduction. She suggests that global trading rules work less well for the people and households within poor countries. While modern capitalist and rich societies have mechanisms to manage their markets so that free trade and commerce more equally benefit all, poor countries cannot benefit from effective social contracts, progressive tax systems, and laws and regulations to manage asymmetries and market failures. This is also true at the global level, where poor countries are especially susceptible to the risks of free trade, and the vagaries of volatile capital flows.
This paper is updated from a paper presented at the 2002 G-20 Workshop on Globalization, Living Standards, and Inequality in Sydney, Australia. It is also forthcoming in a Jubilee Conference Volume of the World Institute for Development Economics Research.
Related CGD Publications
For more papers on the opportunities and challenges posed by free trade and open capital markets, see: