Nor is this all. During the same period of increased globalization, there has also been a significant reduction in the level of poverty, in absolute terms, worldwide.¹⁴ Sala-i-Martin’s study, for instance, indicates that during the last quarter-century, the number of people living below the international poverty line (currently standing at one dollar per day) dropped from 20 percent to 5 percent of the world’s population.¹⁵ The work of Indian economist Surjit Bhalla produced no less dramatic results: According to the modified economic model he used to measure worldwide poverty, the percentage of poor in the global population fell from 44 percent to 13 percent between 1980 and 2000.¹⁶

Why has this happened? A major reason has to do with the fact that during this “golden age of globalization,” developing nations grew at double the rate of developed countries (3.1 percent compared with 1.6 percent on average each year). This growth was especially beneficial for low wage earners: In China and India, which make up nearly 40 percent of the world’s population, a steep fall in the rate of poverty was accompanied by a substantial expansion of the middle class, from 1 percent of the population in 1989 to 22 percent ten years later. In absolute numbers, this translates into 450 million people worldwide who escaped the vise of poverty in the span of just a decade.¹⁷

Not all developing countries reaped the fruits of economic growth, however. Several of them chose, or were forced, to remain outside the global market. A large part of Africa, for example, is still mired in poverty. Yet most of the blame for this does not rest with the “exploitative” policies of the West, but rather with the political instability, rampant corruption, and severe inefficiency of local government.¹⁸ In countries such as North Korea, Syria, Iran, and Sudan, authorities adopted a policy of isolation from the outside world in order to keep foreign influences at bay. The price of this policy, as Jeffrey Sachs and Andrew Warner of Harvard University have shown, is that these countries lag far behind their peers: During the 1970s and 1980s, poor nations that opened their markets to international trade grew at six times the rate of those that did not. Whereas open economies double in size approximately every sixteen years, closed ones double in size only every hundred years.¹⁹

How do open economies attain such rapid growth? The case of South Korea provides an important example. In 1960, it was one of the poorest countries on earth, poorer even than North Korea and most African countries. Its dramatic turnaround resulted from the decision to integrate its economy into the international market. The contribution of exports to the national product rose steadily from 2.4 percent in 1962 to 23.7 percent in 1973. By 1999, that figure had risen to 42 percent of GDP. The government, for its part, stimulated the process by improving education and professional training, removing restrictions on the import of technology and raw materials, and giving aid to thriving companies. Today, South Korea is a major economic power: Its share of world trade grew from 0.04 percent in 1962 to 2.5 percent in 2000—more than a sixty-fold increase—all in less than 40 years.²⁰ Its communist neighbor to the north, by comparison, with its centralized economy, remains one of the poorest countries in the world. Indeed, the two Koreas are now at either extreme of the economic scale: In 2003, South Korea’s per-capita GNP stood at 17,800 dollars, compared with 1,300 dollars for North Korea.²¹

True, this success story was not without its setbacks. South Korea was one of the principal victims of the Asian financial crisis of 1997-1998, which began with the collapse of the currency in Thailand and quickly spread to other countries, including South Korea, Indonesia, Hong Kong, and the Philippines; even Russia, the United States, and Brazil did not emerge unscathed. Share prices plummeted around the world; foreign investors pulled their money from the region; Asian banks and businesses were unable to handle the enormous debts they had amassed; thousands of small and mid-sized businesses went bankrupt; and millions of people lost their jobs and their savings.²² The economies of East and Southeast Asia endured an economic earthquake; and yet, despite the bursting of the dot-com bubble in 1999 and the more recent SARS epidemic, forecasts for the region's economy have reverted to their former optimism.²³

The 1997-1998 crisis exposed serious defects in the economic management of the Asian “tigers.” These expanding economies had long based themselves on both state-sponsored corporatism and uncomfortably close links between politicians and businessmen. Governments in the region saw themselves as patrons of industry, but their policy of granting lavish loans (encouraged by the IMF’s similarly profligate lending policy) and the excessive credit they granted to large businesses exposed them to extreme fluctuations in the capital market and saddled them with enormous debts. The collapse, then, resulted not from a failure of the free-market system, but from the misguided application of its principles. Moreover, affected countries like South Korea, Taiwan, and Thailand learned the right lessons and adopted new policies curtailing the extent of government intervention in the economy.²⁴

Of course, the activists of the anti-globalization movement place little faith in the “invisible hand” of capitalism. Instead, they take aim at what they view as a twisted symbiotic relationship between multi-national corporations and developing countries. According to the popular “race to the bottom” model, which they unfailingly quote, the conglomerates’ drive towards profit maximization motivates them to shift their production base from their home countries to developing countries in order radically to cut costs.²⁵ This leads to the proliferation of sweatshops in which millions of destitute workers produce consumer goods for the wealthy West. Canadian journalist Naomi Klein devoted a long chapter in her international best-seller No Logo to describing the appalling conditions and meager salaries that are found in these “export production zones.”²⁶ A worker in a Chinese factory producing handbags for Wal-Mart, for example, earns between 20 and 35 cents per hour, while another factory producing Nike sneakers pays its workers 16 cents an hour—with a work week of 77 hours.²⁷ Naturally these facts hold considerable sway over public opinion in the West. As Klein writes:

Klein is, of course, right: It is wrong to close our eyes to the exploitation that takes place in many of these sweatshops. Businesses, international organizations, and Western governments all have a role to play in preventing the worst abuses. At the same time, however, Klein and other opponents of globalization ignore the positive side of the “race to the bottom.” And it turns out that the benevolent aspects are far greater than many people imagine.

First, it is misleading to look only at a comparison between the wages of sweatshop workers and their counterparts in the West. A far more important point of comparison is the prevailing wage level in that same developing market—that is, the amount of money the same workers would have been making had the foreign companies chosen to build their factories elsewhere. Economic research that is aimed at examining this question has shown, almost without exception, that the wages of unskilled workers in multi-national factories in Southeast Asia are higher than the pittance earned by those who found other employment in the same countries.²⁹ Linda Lim, an economist from the University of Michigan Business School, visited Vietnam in the summer of 2002 and discovered that while workers at the Nike factory in Vietnam earn only 670 dollars a year—a tiny sum by Western standards—the minimum annual wage in Vietnam at the same time, according to World Bank figures, was a mere 134 dollars. In other words, Nike workers in Vietnam were earning five times the minimum wage.³⁰ Furthermore, in most cases, the alternatives to sweatshops are much worse: Horrific working conditions in local factories, descent into crime, or prolonged unemployment and destitution.

More importantly, although it is the corporations which invariably gain the most from sweatshops, they also have a major beneficial impact on the host country. Foreign-owned factories usually bring with them an infusion of capital, advanced technologies, and managerial wisdom into the host country, as well as improving the quality of the local work force. This, in essence, was the source of the meteoric growth of the East Asian countries in the last half-century. It is to this that Jeffrey Sachs referred when he declared that, “My concern is not that there are too many sweatshops, but that there are too few.”³¹

Global capitalism is surely not an unmitigated good. But there is overwhelming evidence that the advantages of globalization to poor countries far outweigh its disadvantages—as hundreds of millions of people who have emerged from poverty in the last generation can attest. There is no merit in the jeremiads of the anti-globalists, who see free-market economy as a zero-sum game, in which one person’s gain always comes at another’s expense. The results of the last two decades of increased globalization have proven the reverse: That international trade benefits both the weak and the strong—both the corporate bosses in New York and Tokyo, and the hungry masses of Vietnam and Malaysia.