Ruggiero's speeches, 1995-99
It is a pleasure and an honour to address you here today
at the London School of Economics as part of the
Reuters/Carnegie Public Policy Series, whose theme is the
"human face of globalization".
Few topics are as controversial as globalization. That is
hardly surprising. It is the defining feature of our
time. Bringing distant markets and people across the
world closer together is a huge change that affects
everyone, whether they are peasants in India, students in
London, or bankers in New York. Such an enormous upheaval
is unsettling, especially when it seems unpredictable and
uncontrollable. People tend to assume the worst: that
what they value most will be lost, and that what replaces
it can only be bad.
We need to reassure people that globalization is
generally a force for good. The last 20 years have seen a
dramatic rise in living standards for many countries
across the world. But those gains can be lost. Of course,
the Internet cannot be uninvented. But governments can,
and do, intervene to prevent products, money, people and
ideas from flowing freely across national borders. They
can slow or block progress. In the first half of the 20th
century, the globalization of the 19th century was rolled
back. We cannot rely on people's grudging acceptance of
the perceived inevitability of globalization. We must not
shrink from making our case.
Some people say that the problem with globalization is
that it lacks a "human face".
Perhaps they are trying to say that the benefits of
globalization mean little to ordinary people. After all,
no-one has ever manned a barricade demanding that
efficiency be maximized. But although the terminology may
not have a human face, the reality does. Inefficiency is
never a good thing: it means people are wasting their
talents and countries are squandering their scarce
resources. Maximizing efficiency means getting the most
out of what you've got. It means enabling people to
fulfil their potential and helping countries to make the
most of their resources and conserve their environment.
Those are truly noble aims.
The evidence of people doing better for themselves is
captured in economic statistics. There is overwhelming
evidence that trade boosts economic growth. Just compare
the protectionist nightmare of the 1930s with the long
boom in America and Europe as trade barriers fell in the
1950s and 1960s. Or read the famous study by Jeffrey
Sachs and Andrew Warner of Harvard University which finds
that developing countries with open economies grew by
4.5% a year in the 1970s and 1980s, while those with
closed economies grew by 0.7% a year. At that rate, open
economies double in size every 16 years, while closed
ones must wait a hundred. Or cast an eye on the countless
country studies that support their results.
When people say globalization lacks a human face, they
may also mean that it doesn't benefit ordinary people.
But that is simply not true.
It is not just Wall Street traders, management gurus and
international civil servants like myself who gain from
It is also everyone with a pension who enjoys a more
comfortable retirement because their savings are more
fruitfully invested abroad, as well as everyone abroad
who benefits from that foreign investment.
It is people in Britain who can talk on Finnish mobile
phones, use Japanese cameras, drive American cars, drink
Colombian coffee and wear clothes made in Asia.
It is poor people everywhere who can buy cheaper food and
clothes produced abroad.
It is Indian computer programmers who can sell their
services to American companies, and earn enough to give
their children a good education and decent healthcare.
And it is poor people in poor countries who are grasping
the opportunities provided by trade and technology to try
to better their lives. Mexican farm hands who pick fruit
in California, Bangladeshi seamstresses who make clothes
for Europeans, and South African phone-shop owners who
hawk time on mobile phones to their fellow township
dwellers. They and countless other real people everywhere
are the human face of globalization.
It is true that that in general living standards in poor
countries are not catching up with rich ones. It is a
tragedy that 1.2 billion peoplea quarter of the
world's populationsurvive on less than a dollar a
day and that a further 1.6 billionanother third of
the world's populationmake do with between one and
two dollars a day.
Reducing such extreme poverty must be a priority. Of
course, it is easier said than done. But we can learn
from the example of those developing countries that are
catching up with rich ones. Take South Korea. Thirty
years ago, it was as poor as Ghana; now, it is as rich as
Portugal. Or consider China, where 100 million people
have escaped from extreme poverty over the past decade.
What do these fortunate countries have in common?
Openness to trade. That is the main finding of a new
World Trade Organization study on trade and poverty by
Dan Ben-David of Tel Aviv University and Alan Winters of
Sussex University which will be launched on Monday.
The bottom line is this: the developing countries that
are catching up with rich ones are those that are open to
trade; and the more open they are, the faster they are
converging. That is particularly good news for China. The
liberalization that joining the WTO requires will give
another big boost to Chinese living standards.
Trade alone is not enough to eradicate poverty. For
instance, abolishing trade barriers will not help much if
countries are at war and farmers cannot get their crops
to market. But freer trade is essential if poor people
are to have any hope of a brighter future.
Even so, critics of free trade argue that poor people
within a country lose out when it liberalizes. Not so.
The new WTO study finds that the poor tend to benefit
from the faster economic growth that trade liberalization
brings. It concludes that "trade liberalization is
generally a strongly positive contributor to poverty
alleviationit allows people to exploit their
productive potential, assists economic growth, curtails
arbitrary policy interventions and helps to insulate
against shocks". This concurs with the finding of a
new study by David Dollar and Aart Kray of the World Bank
which, using data from 80 countries over four decades,
confirms that openness boosts economic growth and that
the incomes of the poor rise one-for-one with overall
Of course, in the short term some people do lose from
globalization. As trade barriers fall, foreign
competition forces domestic firms to specialize in what
they do best, rather than making goods which are more
efficiently produced elsewhere. Those who are no longer
gainfully employed have to find new jobs. Some are fat
cats grown rich from cozy deals with governments. But
others are poor farmers who lose their subsidies or
unskilled workers who lose their jobs and take time to
find another one.
Their plight must not be forgotten. But their hardship,
like that of anyone who loses their job, should be eased
with welfare benefits and job retraining, not by putting
a halt to liberalization. The temporary losses of a few
should not prevent a country from reaping the much
biggerand permanentgains from free trade.
After all, the interests of candle makers were not
allowed to stop the introduction of electricity. Nor are
governments scrambling to stop the Internet cutting out
middlemen. Freeing trade, like new technology, causes
change. That is how it boosts economic growth. Some of us
lose at first, but eventually we all gain.
Although the WTO is not a development organization, it
does a lot to alleviate poverty. After all, free trade is
not an end in itself. It helps to raise living standards,
which lifts people out of poverty.
Even so, the WTO could do more to help the poor. Poor
countries do not always make the most of the world
trading system, and sometimes their interests are
overlooked. That is why in my first speech as
director-general last September I called on WTO members
to do more to help the world's poorest countries reap
greater benefits from the world trading system. I am glad
to report that we have made progress on that front, with
a package that includes better access to rich-country
markets, increased technical assistance, and closer
co-operation between the WTO and other global
institutions that promote development, notably the World
These are important steps. But the surest way to do more
to help the poor is to continue to open markets. A new
round of multilateral trade negotiations would bring huge
benefits. As Kofi Annan, the Secretary General of the
United Nations, has said: "Whatever cause you
champion, the cure does not lie in protesting against
globalization itself. I believe the poor are poor not
because of too much globalization, but because of too
little." He is right. The poor as well as the rich