Does more international trade openness increase world poverty?

Abstract

There is no greater problem facing the world at the beginning of the 21st century than that of world poverty. Tremendous advances have been made by large segments of the world population in this age of globalisation. Globalisation can be summarised as the global circulation of goods, services and capital, but also of information, ideas and people. Yet there is a fear that globalisation is exacerbating inequality, and perhaps even worsening the lot of the poor by eroding their incomes, increasing their vulnerability, and adding to their disempowerment. Although this fear may not be universal, it does play a role in the public perception that cannot be ignored. It has been argued that globalisation has played an important catalytic role in accelerating growth and reducing poverty in developing countries. However the converse also holds true especially as a result of the fact that the impact on inequality is more complex. While some countries particularly the most populous have benefited, others have been left behind. 1 Distribution of wealth within the same country that has benefited from globalisation is very often unevenly distributed. Trade integration does not increase income volatility but financial integration can increase the propensity to develop crises which can have a severe detrimental impact on poor. This paper seeks to give a snapshot of how international trade openness may or may not increase world poverty. This is done by presenting the views of some typical writers as well as the author himself as examples of some typical arguments that can be made on this subject. The arguments presented are meant to stimulate further discussion. By no means do they claim that they are comprehensive on all the possible views that one can have on this subject matter.