Assessing the Effects of Openness on Poverty - Are the Critics Right?

This study aims to contribute to the ongoing debate on whether and how globalization influences poverty. Starting out with a detailed discussion of the so-called anti-globalization movement, it shows that the name is somewhat of a misnomeras the movement is neither homogenous nor necessarily anti globalization per se. In a second step, a cross-country analysis is conducted for 80 developing nations to test the impact of globalization on poverty and human development. The results indicate a positive influence of openness on overall per capita incomes. In addition, it appears that there is a positive impact of institutional quality on human development, i.e. higher quality institutions can contribute to poverty alleviation. The findings further confirm a significant influence of openness on institutional quality, implying that by enhancing institutional quality openness contributes to poverty alleviation. Digging deeper, the following chapters explore India's development experience; a focus chosen as it is the country with the highest absolute number of poor people worldwide. The analysis first providesan overview of the dynamics leading to the decision to implement a policy of import-substitution which in part aimed at realizing political independence and sovereignty after decades of colonization, and in part was carried out in the conviction that it was the best policy to overcome mass poverty. A comparison of India's trade regimes before and after liberalization shows that since the initiation of economic reforms India was able to lift more people out of poverty than inthe first four decades of independence. The results also reveal, however, that additional factors are needed for the poor to fully participate in the growth process. In applying different methods and different levels of aggregation, the overall results indicate that poverty and income inequality do not result from globalization but from a lack of it; i.e. rather than globalization it is social exclusion that prevents progress for the poor.