Monday, January 6, 2003

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THE DEBATE ABOUT GLOBALIZATION AND INCOME DISTRIBUTION: Laura Secor at the Boston Globe has an outstanding article reviewing the various arguments about whether globalization leads to greater or lesser inequality between the developed and developing world. Basically, the declining-inequality argument relies on more comprehensive but shoddier World Bank data, while the increasing-inequality argument relies on better data but a more suspect time period. Then we get to the good part:

"By many accounts, even where inequality is increasing, poverty is on the decline. The 2002 UNDP Human Development report notes that the proportion of the world's people living in extreme poverty dropped from 29 percent in 1990 to 23 percent in 1999. Says [Harvard economist Benjamin] Friedman, 'If it's inequality you're worried about, the world is becoming a less good place. But if it's poverty you're worried about, while we still have a ways to go, the world is becoming a better place.'"

Other economists dispute this figure, for good reasons, but their arguments seem to me to reduce the magnitude but not the direction of the current trend. The whole piece is worth a read as an excellent (and all too rare) example of a lucid treatment of economics in the mainstream press.

UPDATE: Alan K. Henderson has some further thoughts about why poverty rather than income inequality should be the focus of the debate.

posted by Dan on 01.06.03 at 03:35 PM