Developing countries benefit from globalisation

July 1, 2002

Free Market Foundation

Globalisation is an opportunity, not a threat, to developing countries, according to a recent paper published by the Institute of Economic Affairs.

Although removal of trade barriers must be coupled with institutions that secure the rule of law, and incentives to work and innovate, the worldwide trend toward globalisation has produced substantial economic benefits.

Competition in trade permits efficiency gains, and allows people and capital to move to countries with superior institutions.

The accompanying flow of ideas about politics and law makes repression difficult for oppressive regimes.

In the 19th century, countries like Japan became industrialised without tariff protection, contradicting claims that protection is necessary for development.

In today’s high-tech world, the most promising initial vehicle for industrialisation is often direct foreign investment by global producers.

While domestic protection merely leads to rent-seeking, developing countries that open themselves to global competition in trade, foreign investment and international capital flows should make the most economic progress.

Source: Charles W. Calomiris, A Globalist Manifesto for Public Policy, Institute of Economic Affairs, February 4, 2002, 2 Lord North Street, Westminster, London SW1P 3LB, (020) 7799-8900.

For text http://www.iea.org.uk/files/449.pdf
For more on Globalisation http://www.ncpa.org/iss/tra/

FMF Policy Bulletin\25 June 2002