free trade and globalization

Globalization and the attendant concerns about poverty and inequality have become a focus of discussion in a way that few other topics, except for international terrorism or global warming, have. Most people  have a strong opinion on globalization, and all of them express an interest in the well-being of the world's poor. The financial press and influential international officials confidently assert that global free markets expand the horizons for the poor, whereas activist-protesters hold the opposite belief with equal intensity. Yet the strength of people's conviction is often in inverse proportion to the amount of robust factual evidence they have.

As is common in contentious public debates, different people mean different things by the same word. Some interpret globalization to mean the global reach of communications technology and capital movements, some think of the outsourcing by domestic companies in rich countries, and others see globalization as a byword for corporate capitalism or American cultural and economic hegemony. 

For the quarter century after World War II, most developing countries in Africa, Asia and Latin America insulated their economies from the rest of the world. Since then, though, most have opened their markets. For instance, between 1980 and 2000, trade in goods and services expanded from 23 to 46 percent of gross domestic product (GDP) in China and from 19 to 30 percent in India. Such changes have caused many hardships for the poor in developing countries but have also created opportunities that some nations utilize and others do not, largely depending on their domestic political and economic institutions. (The same is true for low-wage workers in the U.S., although the effects of globalization on rich countries are beyond the scope of this article.) The net outcome is often quite complex and almost always context-dependent, belying the glib pronouncements for or against globalization made in the opposing camps. Understanding the complexities is essential to taking effective action.