Response

• Author: David Dollar and Aart Kraay

Kevin Watkins's article, "Making Globalization Work for the Poor," contains much that is consistent with our article in Finance & Development (September 2001), which was based on our working paper, "Trade, Growth, and Poverty." We agree with Watkins that globaphobia is unjustified and that international trade, rather than causing more poverty and inequality, can be a powerful catalyst for poverty reduction by providing poor countries with access to the markets, technologies, and ideas they need for faster and more equitable growth. And, although it is not the subject of our paper, we do agree with Watkins's emphasis on the costs for poor countries of rich country protectionism-a view also expressed in the World Bank's World Development Report 2000/2001: Attacking Poverty.

Although there is much that we agree on, naturally we do not agree with Watkins's claim that our work is based on "dubious economics and a highly selective interpretation of data." Our research on the links between trade, growth, and poverty reduction was partly stimulated by the globaphobes' claims that increased flows of foreign trade and investment were making poor countries and the poor people in them worse off. We took these popular claims-as well as academic critiques of the evidence on trade and growth-seriously. Contrary to what some critics have been saying, we found that integration of poor countries with the global economy is associated with faster growth and poverty reduction. This does not mean that we subscribe to the simplistic view that "a renewed commitment to liberalization holds the key to making globalization work for the poor," as Watkins suggests. Rather, our finding is that increased participation in world trade, together with good economic and social policies, has worked well for a diverse group of poor countries. To quote from our paper,

It would be naïve to assert that all of this improvement in growth should be attributed to the greater openness of these globalizing economies: all of them have been engaged in wide-ranging economic reforms. . . . China, Hungary, India, and Vietnam . . . strengthened property rights and carried out other reforms. . . . Virtually all of the Latin American countries included in the grouping stabilized high inflation and adjusted fiscally. . . ." (pp. 9-10)

Watkins criticizes our work on the grounds that our "implicit assumption is that trade liberalization is responsible for successful integration, with success in...