IMF says globalization might be bad for the poor

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"the wheel has been discovered!"

PR

> 
> 
> >IMF - no clear proof globalization helps the poor
> >Reuters, 03.17.03, 6:15 PM ET
> >
> >By Anna Willard
> >
> >WASHINGTON, March 17 (Reuters) - The International
> Monetary Fund sounded 
> >more like its critics on Monday when it admitted
> there is little evidence 
> >globalization is helping poor countries.
> >
> >The IMF, which has often been the target of violent
> anti-globalization 
> >protests, in a new study found economic integration
> may actually increase 
> >the risk of financial crisis in the developing world.
> >
> >"Theoretical models" show that financial integration
> can increase economic 
> >growth in developing countries, the research found,
> but in practice it is 
> >difficult to prove this link.
> >
> >"In other words, if financial integration has a
> positive effect on growth, 
> >there is as yet no clear and robust empirical proof
> that the effect is 
> >quantitatively significant," the new report said.
> >
> >An overview of the study, which was put together by
> four researchers 
> >including the fund's chief economist Kenneth Rogoff,
> describes the 
> >conclusions as "sobering".
> >
> >The IMF often recommends that poor countries open
> their economies to 
> >foreign investors and free-market policies. But
> critics say those policies 
> >damage vulnerable economies, raising poverty rates
> and destroying the 
> >environment.
> >
> >The fund's report found a small group of developing
> countries have picked 
> >up the "lion's share" of capital flows as financial
> links between 
> >countries have become more integrated. Nations with
> good economic policies 
> >are more likely to reap the most benefits and steer
> clear of financial crisis.
> >
> >HIGHER RISK OF CRISES
> >
> >International financial integration should also help
> countries to reduce 
> >economic volatility, the study said, but in reality
> this has not happened.
> >
> >"Indeed, the process of capital account
> liberalization appears to have 
> >been accompanied in some cases by increased
> vulnerability to crises," the 
> >report said.
> >
> >"Globalization has heightened these risks since
> cross-country financial 
> >linkages amplify the effects of various shocks and
> transmit them more 
> >quickly across national borders."
> >
> >In the last 10 years, developing countries from
> Thailand and Russia to 
> >Argentina, have seen their economies collapse, even
> though many of them 
> >were trying to follow IMF-prescribed open market
> policies.
> >
> >CAUTION NEEDED
> >
> >The paper concludes that countries must carefully
> balance integration in 
> >the world economy with strong economic policies and
> the building of strong 
> >institutions, including banks and regulatory systems.
> >
> >"The evidence presented in this paper suggests that
> financial integration 
> >should be approached cautiously, with good
> institutions and macroeconomic 
> >frameworks viewed as important," the IMF said.
> >
> >But the report was unable to come up with a "clear
> road map" for how this 
> >should be done. Such questions should be tackled on a
> case-by-case basis, 
> >the IMF concluded.
> 


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