Free Trade Fuels Rising Poverty and Growing Rich-Poor Gap, EPI

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Thursday, October 11, 2001

Free Trade Fuels Rising Poverty and Growing Rich-Poor Gap: World Bank's Claims of Success are Challenged

Washington, D.C. -- Poverty is worsening in much of the world while the gap between rich and poor people and between rich and poor nations is growing more pronounced, the Economic Policy Institute reported today. This news, contained in a special focus report on globalization and poverty, directly contradicts claims made by the World Bank that unrestricted free trade improves the lot of the world s poor.

"Contrary to the rosy picture presented by the World Bank, the evidence is overwhelming that this current globalization agenda is a scourge on the poor," said Christian E. Weller, EPI economist and one of the authors of the EPI briefing paper, The Unremarkable Record of Liberalized Trade.

In Eastern Europe, Central Asia, sub-Saharan Africa and Latin America, poverty is widespread and growing, according to the most recent data available. In 1999, the world s poorest 400 million people lived on an average of just 78 cents a day or less. The same number of the world s poor had only 79 cents a day or less to live on in 1990, compared to only 72 cents per day in 1980. Once inflation is factored in, those numbers are even worse.

The Institute s new analysis also shows a widening gap between rich and poor within nations, as well as a growing gap between rich and poor nations. The report notes that in 1980 median income in the richest 10 percent of countries was 77 times greater than in the poorest 10 percent; by 1999 that income gap had grown to 122 times.

A major factor in fueling these trends is the policy of unrestricted global free trade and capital flows championed for the past two decades by the World Bank and the International Monetary Fund, the primary international agencies charged with addressing world poverty.

For two decades the World Bank and the IMF have promoted unregulated globalization generally construed as economic integration through liberalized international flows of capital and goods and deregulated labor markets as a panacea for poverty. Billions of dollars and countless technical advisers have been deployed to combat poverty and generate economic development around the world.

Now a new and widely circulated report by the World Bank goes to great pains to paint a world in which inequality and poverty are declining. Unfortunately, that portrait is a false one, constructed in a way that masks the harsh reality that in large parts of the world the lot of the poor continues to worsen.

The untrammeled globalization supported by the World Bank and IMF has proved a dismal failure. Liberalized trade and capital flows have led to more, not less, poverty and inequality in many parts of the world. That evidence and a detailed critique of the World Bank s flawed report are laid out in The Unremarkable Record of Liberalized Trade by Christian E. Weller, Robert E. Scott, and Adam S. Hersh. The paper is also available on the EPI website at

The Economic Policy Institute is a non-profit, non-partisan economic think tank founded in 1986. The Institute can be found on the web at