World Bank economist examines globalization

Although globalization and its effects have been hotly debated this election year, the trend toward greater integration of the world’s economies has benefited many more people than it has hurt, said David Dollar, a World Bank economist, during a visit to USC Law last week.

Dollar delivered a lecture on the effect of globalization on developing countries to students in Adjunct Professor Debbie Shon’s International Trade class. Since 1995, he has overseen the World Bank’s research on macroeconomics and growth. In July, he begins a stint as the organization’s country director for China. His visit came as part of the World Bank’s outreach to Americans and coincided with President James Wolfensohn’s speech at USC.

According to Dollar, three factors have chiefly contributed to the rise of globalization since 1980: huge increases in the labor forces of developing countries, technological advances, and trade policy reforms that have spurred billions of dollars in foreign investments in countries such as China, India and much of Latin America.

The result, Dollar said, has been an annual net flow of private investments from rich countries to poor ones to the tune of approximately $200 billion. That has boosted the aggregate growth rate of the developing world, leading to better living standards, higher wages and less poverty.

For example, in Vietnam, incomes among factory workers have more than doubled from 1989 to 1995 as the country moved to a market economy.

“So it’s simply not true that inequality is going up in most countries” as a result of globalization, Dollar said.

But, the economist added, “the story of inequality is complex.”

While globalization has helped developing countries on the whole, some two billion people living in such places as the Middle East and Sub-Saharan Africa have not felt the benefits of international trade, he said.

“We have a lot of countries which are not involved in trade,” Dollar said. “Therefore, it’s hard to get benefits out of globalization. So that’s sobering.”

Nonetheless, prosperous countries such as the United States should continue to engage in free trade because the long-term benefits of globalization outweigh any short-term negative effects, he said.

“It’s very tempting to close the doors and keep everybody out,” Dollar said. “But I think it’s a losing strategy, and it will be bad for the developing countries.”