Surmounting the Challenges of Globalization

• Author: Eduardo Aninat
• Position: Deputy Managing Director of the IMF

Globalization-the process through which an increasingly free flow of ideas, people, goods, services, and capital leads to the integration of economies and societies-has brought rising prosperity to the countries that have participated. It has boosted incomes and helped raise living standards in many parts of the world, partly by making sophisticated technologies available to less advanced countries. Since 1960, for example, life expectancy in India has risen by more than 20 years, and illiteracy in Korea has gone from nearly 30 percent to almost zero. These improvements are due to a number of factors, but it is unlikely that they could have occurred without globalization. In addition, greater integration has promoted human freedom by spreading information and increasing choices.

But in recent years, concerns have grown about the negative aspects of globalization and especially about whether the world's poorest-the 1.2 billion people who still live on less than $1 a day-will share in its benefits. The beliefs that free trade favors only rich countries and that volatile capital markets hurt developing countries the most have led activists of many stripes to come together in an "antiglobalization" movement. The activists highlight the costs of rapid economic change, the loss of local control over economic policies and developments, the disappearance of old industries, and the related erosion of communities. They also criticize international organizations for moving too slowly in tackling these concerns.

The year 2001, however, saw the debate undergo a subtle but perhaps profound shift, with both sides seeming to step back from approaching it in terms of whether globalization was "good" or "bad"-an approach that seemed overly simplistic. This recognition gained momentum in the wake of the September 11 terrorist attacks in the United States, which exposed the vulnerability of globalization that stems in part-but only in part-from the sense of hopelessness present in some countries unwilling or unable to embrace it.

Both sides increasingly realized that the debate should center on how best to manage the process of globalization-at the national and international levels-so that the benefits are widely shared and the costs kept to a minimum. There is no question that greater integration into the world economy and more openness to other cultures offers all citizens of the global village a more hopeful future. Globalization, by offering a brighter future for all, provides perhaps the surest path to greater global security and world peace.

This understanding should attract support for the work needed to address the remaining challenges of globalization head-on. But there is an urgent need for a broad global debate on how these challenges can best be met and on who should play what role. This debate is under way through such initiatives as the United Nations Conference on Financing for Development being held March 18-22 in Monterrey, Mexico, and it will need to continue at many other venues. The IMF, along with the World Bank, has contributed significantly to the Monterrey conference by helping to focus the conference on global priorities, such as the Millennium Development Goals. The IMF, focusing on its mandate and areas of expertise, is also continuing to readapt itself to better help countries meet the challenges of globalization.

Globalization today

The world has experienced successive waves of what we now call globalization, going back as far as Marco Polo in the thirteenth century. These periods have all shared certain characteristics with our own: the expansion of trade, the diffusion of technology, extensive migration, and the cross-fertilization of diverse cultures-a mix that should give pause to those who perceive globalization narrowly, as a process nurtured strictly by economic forces.

By the end of the nineteenth century, the world was already highly...