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In light of the global economic slowdown, do you still believe globalization is a cause for good?

Question submitted by Fagner Dantas, from Universidade Federal da Bahia, February 25, 2013

Answered by: Edward Alden, Bernard L. Schwartz Senior Fellow


Globalization refers to the increasing ease with which goods, services, capital and people can move across the world, which has been accelerated by advances in technology and government policies to reduce barriers. In terms of reducing poverty in as many countries as possible, there is no question that globalization continues to be beneficial, even after the 2008 financial crisis. Poverty continues to fall worldwide at a rapid rate, and countries most integrated into the world economy have seen the biggest reductions in poverty.

But it is also true that even before the crisis, the gains from globalization were not spread evenly. Though millions have been lifted out of poverty and everyone benefits from cheaper consumer goods and the opening of new export markets, there are still winners and losers. Even among the winners, some gain a great deal while some gain very little. There is evidence in wealthier countries that sectors of the economy more exposed to global trade are more vulnerable to wage depression and job loss. Nobel Prize–winning economist and CFR Distinguished Visiting Fellow A. Michael Spence found that between 1990 and 2008, the United States experienced no net growth in manufacturing employment, while government and health care—nontradable sectors of the economy—accounted for over 40 percent of all new jobs created.

The 2008 global economic downturn reinforced these trends, with income inequality within most countries rising as economic growth has slowed. With today's weak global demand, expected fiscal belt-tightening for years to come, and no widely accepted policy options for the winners to compensate the losers, the rift in gains between the rich and the poor is likely to widen.