Globalization and Inequality

Rapid growth in China and India is reducing the number of the world's poor. But the world's poorest countries, in sub-Saharan Africa and elsewhere, are growing slowly, and the gap between the richest and poorest countries is widening. Inequality within many countries is also increasing. In a series of papers and in her 2005 WIDER (World Institute for Development Economics Research) lecture, The World is not Flat: Inequality and Injustice in our Global Economy, CGD president Nancy Birdsall has argued that the inherent asymmetries of a global economy pose new problems that require new thinking. Among today's global problems are the international costs of state failure, the risks of climate change, cross-border corruption and sex and drug trafficking, the missing Green Revolution in Africa, and the slow pace of international action to reduce world poverty. Each of these problems points to the potential benefits of more effective and more legitimate global institutions.

The United Nations and the international financial institutions--the IMF, World Bank and other multilateral development banks--are the major sources of financial and technical support for poor countries and exercise important influence over development. But their policies are largely determined by the major shareholders-- the rich countries that provide most of the capital--rather than by the developing countries that are the multilateral financial institutions' customers. The Center's research and analysis offers practical suggestions for making the global institutional framework more effective and more responsive to developing countries' needs.

A Better Globalization: Legitimacy, Governance, and Reform (2005), by Kemal Dervis, a former minister of economic affairs in Turkey and CGD visiting fellow who has since become the chief administrator of the United Nations Development Programme, is a reformist vision that argues for a renewed, more legitimate, and more effective United Nations at the center of an improved global governance framework.

In 2005, CGD released The Hardest Job in the World: Five Crucial Tasks for the New President of the World Bank, the first in what has become a series of working group reports on reform priorities for the multilateral financial institutions. The report, which offers bold but practical recommendations for restoring the Bank's legitimacy and increasing its effectiveness, was published with selected essays (by many of the world's most influential observers of the World Bank), as Rescuing the World Bank (2006). Also in 2006, CGD in partnership with the Latin American Shadow Financial Regulatory Committee released A New Era at the Inter-American Development Bank: Six Recommendations for the New President; and a CGD working group published Building Africa's Development Bank: Six Recommendations for the AfDB and its Shareholders. The three reports are helping to shape efforts to strengthen these important institutions.

Critics of the IMF argue that its macroeconomic programs unduly constrain health and other social expenditures, even when external financing is potentially available. They argue that measures such as moratoriums on public hiring and ceilings on government wage bills undermine efforts to strengthen the public health workforce. Visiting fellow David Goldsbrough, former deputy director of the IMF Independent Evaluation Office, is investigating whether the IMF's approach in low-income countries has unduly constrained governments' macroeconomic policies when billions of dollars in external financing are potentially available, for example, to deal with HIV/AIDS and other health problems.