When a high school student in New Jersey challenges you on a topic that used to be the province of specialists, you sit up and take notice. "I'm against free trade," said the student, in a class I taught this month, and I think I know why. Like many others among the idealistic young, he's convinced that free trade diminishes the standard of living of those in the developing world. On campuses throughout the U.S., that has become the conventional wisdom: free trade, which is the motor of globalization, drives down wages, promotes sweatshop and child labor and is, broadly speaking, a conspiracy on the part of rapacious corporate managers and wealthy shareholders to grind the faces of the poor.
Well, it's not. In December the World Bank published the most careful examination of the effects of globalization on poverty that I have ever read. Its conclusions were plain: those countries that have opened themselves up to world markets have seen dramatic reductions in poverty, with the number of their people who count among the very poor declining by 120 million in the 1990s alone. To be sure, there's plenty of room for improvement; as I've argued recently in this column, the rich world has been stingy in making good on its promises to liberalize trade in agricultural commodities and textiles--precisely the goods in which the poor countries of the world typically have a comparative advantage. A "development round" of world trade talks addressing that defect would further decrease poverty.
Still, free traders like me--and like most of the business and government leaders who will gather in New York City at the end of the month for the annual meeting of the World Economic Forum--shouldn't just trot out our beliefs as if they were some divine revelation. If we are honest, we need to confront two uncomfortable truths. The first is that globalization has losers as well as winners. When an economy first opens itself up to international competition through trade, those in protected industries and traditional occupations may indeed see declines in their income. Second, there's a time factor involved; globalization may reduce poverty in the long run, but the long run might be too long to bear. Children working in sweatshops today gain little by being told that in 20 years' time their daughters will not have to stitch garments in a stinking hovel. In a recent paper Jagdish Bhagwati of Columbia University (whose zeal for free trade makes mine look Episcopal) puts it this way: "There is legitimate impatience at the speed with which globalization will deliver social agendas. We want to go faster."
So the question is, How can we more quickly and evenly spread the wealth that comes from trade? One important point: this is not a question best answered in a fit of rich-world guilt. The World Bank reports, "More than 70% of the tariff burden faced by manufactured goods from developing countries is now imposed by other developing countries." It follows that one way in which wealth can be spread more equitably is for poor countries to help themselves by reducing trade barriers.