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Rx for Global Poverty

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· Economic stability, keeping government budgets and inflation under control and avoiding a broad collapse in production.

· A willingness to "let markets allocate resources," meaning that governments didn't try to run industry.

Of course, qualifications abound. Some countries succeeded with high inflation rates of 15 to 30 percent. Led by Japan, Asian countries pursued export-led growth with undervalued exchange rates that favored some industries over others. Good government is relative; some fast-growing societies tolerated much corruption. Still, broad lessons are clear.

One is: Globalization works. Countries don't get rich by staying isolated. Those that embrace trade and foreign investment acquire know-how and technologies, can buy advanced products abroad, and are forced to improve their competitiveness. The transmission of new ideas and products is faster than ever. After its invention, the telegram took 90 years to spread to four-fifths of developing countries; for the cellphone, the comparable diffusion was 16 years.

A second is: Outside benevolence can't rescue countries from poverty. There is a role for foreign aid, technical assistance and charity in relieving global poverty. But it is a small role. It can improve health, alleviate suffering from natural disasters or wars, and provide some types of skills. But it cannot single-handedly stimulate the policies and habits that foster self-sustaining growth. Japan and China (to cite easy examples) have grown rapidly not because they received foreign aid but because they pursued pro-growth policies and embraced pro-growth values.

The hard question (which the panel ducks) is why all societies haven't adopted them. One reason is politics; some regimes are more interested in preserving their power and privileges than in promoting growth. But the larger answer, I think, is culture, as Lawrence Harrison of Tufts University argues. Traditional values, social systems or religious views are often hostile to risk-taking, wealth accumulation and economic growth. In his latest book, "The Central Liberal Truth," Harrison contends that politics can alter culture, but it isn't easy.

Globalization has moral as well as economic and political dimensions. The United States and other wealthy countries are experiencing an anti-globalization backlash. Americans and others are entitled to defend themselves from economic harm, but many of the allegations against globalization are wildly exaggerated. Today, for example, the biggest drag on the U.S. economy -- the housing crisis -- is mainly a domestic problem. By making globalization an all-purpose scapegoat for economic complaints, many "progressives" are actually undermining the most powerful force for eradicating global poverty.


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