Johan Norberg, Roger Bate and Thompson Ayodele : Protestors ignore benefits of free trade

Like some rock band groupies, the old socialists and young anti-capitalist activists who follow global economic meetings around the world are gathering in a few weeks for the big EU-Summit in Gothenburg, Sweden.Before then the business community will try and address the key problems of the developing world at the World Economic Forum in Durban, South Africa, June 6th – 8th.
Unfortunately in the dry world of international politics, the media are more interested in the antics outside these meetings than the discussion inside.And given that President Bush is attending the Gothenburg meeting, and many African Heads of State, the Durban meeting, demonstrations are likely to be significant.This is fortunate not only for the violent demonstrators, who are are eager to give the audience what they want.It also benefits their peaceful colleagues, armed with nothing but slogans.They get sympathy by claiming that their views are not being fairly represented and debated in the media.
All this mean that more people live longer than ever before. Perhaps we would expect the proportion of poor people in the population to have risen.But the opposite has happened.World poverty has decreased more in the past 50 years than in the previous 500, as United Nations Development (UNDP), has noticed. It is a trend that has continued in the 90s. In the beginning of the decade, about 29 per cent of the world population was living in extreme poverty, today the figure has decreased to 24 per cent.
This is a result of an economic and technological development that has been driven by countries that have chosen the free market system.Many countries are suffering from internal crisis, bad leadership and the economic policies pursued have made their economies closed to the outside world.It is a misnomer to portray free trade why growth is retarded in Cuba, Afghanistan, Sudan, Haiti, Iraq, Sierra-Leone, Nigeria, etc. It is no surprise that the developing countries in East Asia were the first to make the transition to the rich world. They chose export orientation, private enterprise, and did not interfere too much with markets and prices. Other Asian countries such as China, India and Vietnam have recently followed their example, with fast growth and reduced poverty as a consequence.
Most African countries, on the other hand, tried to rely on self sufficiency and government monopolies after independence. Africa South of Sahara still has the world’s least free and least globalized economies. Nigeria with abundance natural and human resources is at present in the league of the poorest.Zambia was almost twice as rich as South Korea in the 1960s. Today South Korea is 27 times as rich as Zambia.
It is true that capitalism has made the world more unequal, but only in the sense that countries that have tried the capitalist system have become rich, the remainder languishing in poverty.Yet, geography is largely irrelevant.There are countries in Africa that have chosen to liberalize their economies and trade policies.Countries such as Mauritius, Botswana, Uganda, and Ghana have seen steady growth rates and diminishing poverty.At the same time, Asian countries that have isolated themselves from globalization, Myanmar (Burma) and North Korea, are among the poorest in the world.
One of the decisive factors that explain development is trade. Trades allow specialization and international competition gives an incentive for a constant improvement of that specialization. In a World Bank study, David Dollar and Aart Kray have shown that developing countries that opened up to trade had growth rates of five per cent per year during the 1990s, while closed developing countries actually experienced negative growth.
Anti-globalists insist that anything big and market oriented is bad. Anti- liberalists contention also leaves one in utter bewilderment and outright perplexity with regard to what they are out to achieve.Do they want an increasing range of instructive regulation on businesses, revert to inefficient state monopolies, reestablish strict foreign exchange and import license regime of one airline dominating the local route or state should be sole supplier of social services? But the major problem in the Third World is lack of capital, knowledge and technology. The most efficient way to transfer this is through foreign investements.Having realized that the so-called foreign aids cannot kick-start developing countries economies, investors have transferred one trillion dollars to the developing countries in the last 10 years- more than all aid since the Second World War.
When foreign corporations set up a factory in a poor country, they bring new machinery and new ideas to the production.They are more productive, which means that the working force is of more value to them.Therefore, they can pay their workers more.If you work for a foreign company in one of the least developed countries, you receive twice the wage you would get from a local company within the same line of business.
When productivity starts to rise, the wages will start to climb as well. Since 1960, the average manufacturing wage in developing countries has gone from about 10 per cent of the manufacturing wage received by workers in the Unites States, to 30 per cent.Indisputably, better result could be achieved by widening the domain of market. Free trade, therefore, gives the people the liberty to strive for a better life. Without it only the politically powerful stay rich.
Johan Norberg is a fellow of the Swedish Timbro Institute in Stockholm
Roger Bate is a Director of the International Policy Network in London
Thompson Ayodele is of the Institute of Public Policy Analysis in Lagos


The Comet
Monday, June 11, 2001

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