In Defense of Globalization
by Jagdish Bhagwati
Oxford University Press

By now it seems nearly everyone has staked an opinion, one way or the other, on globalization. At the April meetings of the World Bank and the International Monetary Fund, anti-globalization protestors ran the gamut of causes, from environmental protection ("Dam the World Bank, Not the World's Rivers") to women's rights ("Revolutionary Feminists for Reproductive Rights") and that all-encompassing protest against "global injustice" ("End Global Apartheid!" or, "Economic Policy for People, not for Profit"). Few people have offered a nuanced answer.

Enter Columbia University professor and renowned economist Jagdish Bhagwati. In his latest book, "In Defense of Globalization," Bhagwati attempts what few in his field have agreed to do — respond directly to the claims being leveled against globalization.

Bhagwati is a perfect choice for the task. A prolific pioneer in trade theory, Bhagwati, unlike many practitioners of the "dismal science," is an engaging writer. Who else could cite William Shakespeare, Lady Murasaki and Woody Allen alongside Karl Marx and John Maynard Keynes? His analysis, moreover, is accessible and even-handed. With "In Defense of Globalization," he seems genuinely eager to understand the anti-globalization side and address each concern in turn.

The thrust of Bhagwati's thesis is that globalization (and here Bhagwati is referring to the global economic integration that is the hallmark of globalization) is not without its faults, but it is overall beneficial. Dedicating a chapter to each allegation made against globalization — that it increases poverty, increases child labor, harms the environment, allows multinational corporations to exploit workers, or that it selectively deteriorates the status of women in developing countries — Bhagwati systematically provides evidence and reasoning against each one. "Reason and analysis," he concludes, "require that we abandon the conviction that globalization lacks a human face, an assertion that is tantamount to a false alarm, and embrace the view that it has one."

His arguments are convincing and substantiated by authoritative evidence. But there is a great deal they conveniently omit, particularly on two vital areas in the globalization debate — poverty and inequality.

The poverty argument is at the crux of many of Bhagwati's other claims. Here, he gives us the standard economistic two-step: Trade enhances growth, and growth reduces poverty.

The evidence has been relatively unanimous that increased (and freer) trade does enhance growth. Still, while free trade sounds good in theory, it becomes mired in politics in practice. The fact is that while the institutions of globalization — the World Bank, IMF and World Trade Organization — push developing countries to "open up" to trade, the governments of the United States and European Union continue to spend billions subsidizing their own (mostly wealthy) farmers and keeping out foreign (mostly poor) competitors. But the subsidies issue, though squarely on the table of global trade talks now in Geneva, does not appear in Bhagwati's discussion.

The second step — growth reduces poverty — is even more arguable. Recent evidence has certainly shown that aggregate poverty has fallen during the age of globalization, by about half from 1981 to 2001. But the majority of this progress was made in China, where the distribution of resources is centrally controlled and foreign trade is far from free. Outside of Asia, poverty has actually increased or stagnated. For example, while Latin American and Caribbean countries opened up to trade and grew an average 1.6 percent during the nineties, poverty in the region rose by 0.1 percent. But Bhagwati clearly prefers the aggregate figure.

There is also little consensus regarding the role of income inequality — the gap between the rich and the poor — in the interplay between poverty and growth. Bhagwati dedicates less than two pages to the hot-button topic, dismissing preoccupations with inequality as out of context and empirically discredited. Both assertions are half-truths.

On the first point, Bhagwati reasons that, "if a thousand people become millionaires, the inequality is less than if Bill Gates gets to make a billion all by himself." The logic goes that the thousand millionaires will spend most of their incomes on luxury goods, while Bill Gates would not be able to spend the billion and instead donate huge portions of it toward development causes. Thus, reasons Bhagwati, context matters.

Yes, context does matter. And the context of most developing countries is hardly that of the United States, where Bill Gates houses his billions. In most developing countries, billionaires like Gates keep their money in offshore accounts, avoiding taxes and ensuring the stability of their finances. Although developing countries have their share of ultra-rich, few have Gates Foundations.

To make his second point, that empirical evidence has shown that inequality has decreased with globalization, Bhagwati cites the recent work of Xavier Sala-i-Martin and Surjit Bhalla, both prominent economists who have shown as much. Though the studies are reputable and thorough, citing only them is an underhanded evasive maneuver. Equally reputable economists have conducted equally thorough studies that reach the opposite conclusions. And in a later chapter, Bhagwati himself paradoxically cites "increasing inequality among nations" as a factor in increasing migration flows.

If Bhagwati is overly thesis-driven in his evidence on poverty and inequality, he is nevertheless sensitive to the concerns of the poor and quick to admit that globalization is in need of better management. He recognizes, for example, that the Asian financial crisis of the late 1990s could have been avoided had financial liberalization been "less hasty" and had banking structures been strengthened. So Bhagwati outlines what he calls a "policy tripod" of critical objectives for the future management of globalizations: promoting international labor standards, defining appropriate governance (particularly through the growing network and influence of nongovernmental organizations) and managing transitions to globalization.

"In Defense of Globalization" is not merely the latest addition to that growing shelf of books on globalization. And in an increasingly polarizing debate, Bhagwati's book is also commendably levelheaded. As the globalization polemics swing sharply between the antis and the pros, it is reassuring to see a prominent scholar bring the pendulum closer to center.

— Noam Lupu (noam at flakmag dot com)