MONTERREY, MexicoIs global capitalism making the poor even poorer, or is it in fact rescuing millions of people out of their misery?
I recently had the chance to participate in a series of debates here about this issue organized by Foreign Policy magazine and Letras Libres, a Mexican cultural publication. Nothing I heard at that meeting changed my conviction that the glass is half-full despite the doomsayers who predict horrific calamities.
Ever since the Industrial Revolution, poverty has been significantly reduced throughout the world. Two hundred years ago, the average income per person worldwide was the equivalent of less than $2 a day; the figure is $17 today. This fact is relevant to the current discussion on globalization because, even though the information technology revolution, biotechnology, the emergence of new world players and outsourcing may give us the impression that we are in the midst of something entirely new, we are simply witnessing a new phase in the process of innovation that is the market economyand this began a few hundred years ago.
The fact that 20 percent of the world's population is extremely poor should not make us forget that millions of lives have improved dramatically in the last three decades. Illiteracy has dropped from 44 percent to 18 percent, and only three countries out of a total of 102 included in the U.N.'s Human Development Index have seen their socioeconomic conditions deteriorate. China's economy used to represent one-26th of the average economy of the countries that comprise the Organization for Economic Cooperation and Development; today it represents one-sixth.
These are not arcane facts. They are widely available and easy to understand. Publications such as Indur Goklany's “The Improving State of the World,” David Dollar and Aart Kraay’s report on the global economy, and Francois Bourguignon and Christian Morrisson's “Inequality Among World Citizens”to mention but three among many recent studiesprovide overwhelming evidence that the world is better off thanks to the increased flow of capital, goods, services and ideas.
All of which falls on the face of those who predict that in the next few years we will see a massive concentration of wealth among a few winners who will leave millions of losers behind. While it is probably true that the gap between low-skilled workers and those who are better educated will mean that different people will be impacted in very different ways by the continuing evolution of the global economy, the reality is that even those on the bottom rungs stand to benefit from the worldwide embrace of globalization.
Poverty was the natural condition of all of humanity until the market economy opened up the possibility of ever-increasing productivity. By 2030, it is estimated that the average wealth of developing countries will be equivalent to that of the Czech Republic today ($22,000 per person). The World Bank's recent “Global Economic Prospects” report goes as far as to say that Mexico, Turkey and China will equal Spain’s current state of development, which is high.
At the recent meeting in Monterrey, those who were trying to justify their phobia against globalization pointed to Cuba and Venezuela as paradigms of development, and to Mexico’s poor in claiming that increased tradethrough the North American Free Trade Agreementshortchanges the masses.
In 1953, Cuba’s wealth was comparable to that of the state of Mississippi; today, the island’s exports total one-third of the sales of Bacardi rum products, the economic icon of the Cuban exile community. Venezuela’s economic system is a classic case of state capitalism based on oilexactly what made that nation’s per-capita income go from representing the equivalent of two-thirds of that of the United States in the 1950s to representing barely 15 percent today. And Mexico’s slums are not a factor of that country's increased trade with its North American neighbors, which has quadrupled in the last 15 years, but of the slow pace of reform.
The world was not rich and suddenly turned poor. The progress of the market economy that began to free the world of its shackles continues at an even faster pace today despite the many restrictions still faced by the people who create wealth and exchange it, and despite the fears that these momentous times understandably inspire in those who have difficulty adapting. What a heartening thought.
Alvaro Vargas Llosa
Alvaro Vargas Llosa is Senior Fellow of The Center on Global Prosperity at The Independent Institute. He is a native of Peru and received his B.S.C. in international history from the London School of Economics. His weekly column is syndicated worldwide by the Washington Post Writers Group, and his Independent Institute books include Lessons From the Poor: Triumph of the Entrepreneurial Spirit, The Che Guevara Myth and the Future of Liberty, and Liberty for Latin America.
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