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Globalisation has had an uneven impact on the world's poor countries, says a new study from the World Bank. Some developing countries have been able to exploit globalisation to reduce poverty. But the poorest countries remain marginalised.

Is the world at a turning point? After the events of September 11th, and with the global economy experiencing the worst downturn for nearly 30 years, many people hope-or fear-that the third great globalisation wave may be coming to an end.

The anti-globalisation protesters who have hijacked many international gatherings in the past couple of years would be delighted, of course, at such a vindication. They blame globalisation, specifically global capitalism, for world poverty, inequality and the homogenisation of cultures. But a timely new report from the World Bank, "Globalisation, growth and poverty", suggests that this analysis fails to take account of what has been happening over the past 20 years.

Principal target

No doubt die-hard opponents of globalisation will dismiss the bank's findings. After all, the World Bank itself is a principal target of the protesters, who see it as one of the international institutions responsible for propagating western capitalism, and who blame it for the persistence of poverty and the pursuit of policies inappropriate for many poor countries.

The Bank is not without blame. In the past, many of its fiercest critics have come from the ranks of those who broadly support its objectives. They argue not that its aims are wrong-the alleviation of poverty by encouraging economic development-but that it has been ineffective in achieving them, partly because of mistaken policies, and partly because of poor management.

Nevertheless, dismissing the bank's latest study would be a mistake. It sets out a persuasive and balanced case for re-thinking what globalisation has delivered so far, alongside proposals for extending the benefits to those who have so far missed out.

The Bank freely acknowledges that there have been winners and losers: 3 billion people live in developing countries that have seen their living standards rise sharply in the past 20 years, but another 2 billion are in countries which are getting poorer. It no longer makes sense, the report argues, to divide the world into rich countries and poor.

Now there are three groups of countries-the rich, the new "globalisers" in the developing world, and a third group of countries who are much less integrated into the world economy.

Marginalised

This third group is what worries the World Bank, since it comprises countries that are getting steadily poorer, both in absolute and relative terms, and that are increasingly marginalised.

The report also contains a stark reminder that globalisation is not inevitable. It points out that the first wave of globalisation, from 1870-1914 saw the share of world trade double to nearly 8% of world income: yet after two world wars, and the beggar-thy-neighbour trade policies of the 1930s Depression, world trade shrank back, as a proportion of world income, to its 1870 level by the late 1940s.

The second wave of globalisation, from 1945-1980, was confined largely to the rich industrial countries. There were few dramatic changes in the economic structure of poor countries, that continued to rely heavily on primary commodities for trade and economic output.

Radical shift

It is the most recent period of globalisation, from 1980, which has seen a radical shift in the fortunes of many of the world's poor.

For the first time, there has been a sustained fall in the number of people living in poverty-defined as people living on less than $1 a day. The 24 developing countries which the report classes as globalisers have seen per capita GDP grow more than twice as fast as the rich countries.

And developing countries as a whole have seen a spectacular surge in their exports of manufactured goods-up from 25% of their total exports in 1980, to over 80% in 1998.

China, India, Hungary, Vietnam, Uganda and Bangladesh-all very different from each other-have all benefited from greater integration into the world economy.

Close link

It is always difficult to identify causal links. But most research shows a close link between increasing trade and poverty reduction, even though causality has not been proven. And the countries that have fared worst in the past two decades now participate less in the world trading system than they once did.

Sub-saharan Africa, parts of the former Soviet Union and failed states such as Afghanistan and Congo, fall into this category.

The World Bank argues for international action to help these countries integrate more, by increasing aid, providing them with better access to rich-country markets and by helping them to introduce the domestic reforms that strengthen economic performance.

Top of the report's list of recommendations is a successful conclusion of the Doha round of trade negotiations, launched only last month.

Biggest responsibility

The biggest responsibility lies with the rich countries: protection of their markets by tariff barriers costs developing countries more than $100 billion a year, which is twice the amount of foreign aid rich countries give their poorer neighbours. But the report also points out that, as developing countries increasingly trade with each other as well as with rich countries, there are large potential benefits from tariff reductions by middle-income and poor countries themselves.

Protectionism in rich countries remains a problem, though, and history suggests it will get worse during the current downturn. Narrow, but powerful protectionist interests in the industrial countries will fight hard to resist further trade liberalisation.

That is because there are two kinds of winners and losers from globalisation, as the World Bank report points out. Some countries gain and some lose; but there are also groups of people within even the rich countries who lose out.

Effective action

Workers in industries which would not be able to survive without protection stand to lose in the short term; older workers are particularly vulnerable. Just as there are steps which can help national losers to start benefiting from globalisation, the report suggests it makes sense for appropriate policies to be introduced to help individual losers in both rich and poor countries cope with the changes brought about by trade liberalisation.

These might include one-off compensation payments, alongside well-designed unemployment-insurance schemes.

It would be difficult to argue with many of the World Bank's prescriptions. Anti-globalisation protesters might balk at agreeing with the bank's view that more globalisation, not less, is what poor countries need. But even they would back more foreign aid, debt relief, better access to health services and education for all, and more social protection for workers.

They would probably also endorse the Bank's call for effective action to tackle global warming and greenhouse gases. They might jib at the idea of creating a better climate for investment in many developing countries, though few others would.

A striking feature of the report's conclusions is that many of the same concerns for poor countries taken up by opponents of globalisation ought to be shared by those who want to make globalisation sustainable, for the benefit of everyone.

Right example

In the short term, though, the Bank's recommendations sound more like a wish list than a plan for immediate action.

To be fair, the report recognises the political obstacles to be overcome, especially in the rich countries who are most committed to, and who have benefited most from, globalisation. Much of the responsibility for transforming losers into winners lies ultimately with the countries themselves. But there is much the rich world can do to help them on their way by setting the right example.

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