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THE THREE WORLDS OF GLOBALIZATION: MARKET INTEGRATION, ECONOMIC GROWTH AND THE DISTRIBUTION OF INCOME IN HIGH, MIDDLE AND LOW-INCOME COUNTRIES

Geoffrey Garrett UCLA February 2004

I would like to thank Nancy Brune for all her help over the years with respect to finding and compiling much of the data used in this paper. Conversations with my colleagues Ed Leamer, Ron Rogowski and GeorgeTsebelis have helped immensely to clarify, and sometimes to change, my thinking about the issues discussed here.

We've seen the result (of globalization). The spread of sweatshops. The resurgence of child labor, prison and forced labor. Three hundred million more in extreme poverty than 10 years ago. Countries that have lost ground. A boom in busts in which a generation of progress is erased in amonth of speculation. Workers everywhere trapped in a competitive race to the bottom. (AFL-CIO President John J. Sweeney at the International Confederation of Free Trade Unions Convention, April 4, 2000)1 … those who protest free trade are no friends of the poor. Those who protest free trade seek to deny them their best hope for escaping poverty. (President George W. Bush, July 18, 2001)2

1.Introduction
It is sometimes hard to remember that the debate over economic globalization dominated world politics from the end of the cold war until September 11, 2001. On one side stood the pro-globalization “Washington consensus” among the international economic institutions headquartered there and by the jet setting pilgrims to the World Economic Forum, “Davos man” according to the Economist.3Amassed against them were populist politicians, labor leaders, and myriad non-governmental organizations and activists who created their own anti-Davis (the World Social Forum) and organized protests in the streets wherever and whenever the agents of the Washington consensus met. Anti-globalization protest reached a crescendo in Genoa less than two months before September 11, 2001. This is how theGuardian introduced its coverage: As leaders of the G8 group of the world's richest nations began their talks behind their ring of steel, bloody clashes escalated during a day of running battles between 20,000 armed police and tens of thousands of protesters, many of them throwing firebombs and cobblestones dug up from the streets. The scale of the violence dwarfed even the first anti-capitalistconfrontation in Seattle 18 months ago.4

http://www.aflcio.org/publ/speech2000/sp0404.htm Los Angeles Times, July 18, 20001, page 1. 3 John Williamson, 1993, "Democracy and the 'Washington Consensus". World Development, 21: XX; Economist, February 1, 1997, p. 18. 4 “Day of mayhem forces G8 talks rethink”, The Guardian, July 21, 2001.
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The Genoa protests, like those in Seattle andelsewhere, revolved around one central issue: the distribution of the costs and benefits of globalization. According to the boosters, the international integration of markets (the economic face of globalization) is not only good for international business; it is also the best way to enrich and empower poor people and poor countries. Not so, retort the critics. For them, globalization lines thepockets of the global elite at the expense of labor, developing countries and the planet. The tsunami of September 11 pushed the globalization debate off the front pages. But the war on terrorism has by no means rendered it irrelevant. Islamic extremists share the protesters’ revulsion of the western elite and “its globalization”. Looking forward, few deny that reducing global inequalities wouldhelp reduce the deprivation and despair that are fertile terrain for terrorist recruiters. President Bush made this connection clear – as well as his belief that more globalization is the solution to it – on the first anniversary of the terrorist attacks: Poverty does not transform poor people into terrorists and murderers. Yet poverty, corruption and repression are a toxic combination in many...