Rising Tide Lifts All Boats

Another pervasive illusion, held by the champions of globalization, is that remaining problems of extreme poverty will take care of themselves because economic development will spread everywhere. A rising tide lifts all boats, as the old expression puts it. If the rising tide is not lifting your boat, it is probably your own fault. The forces of globalization are sufficiently strong that everyone can benefit if they can just behave themselves.

In real geographical terms, the rising tide of globalization has lifted most economies that lie at the water's edge. Those societies are, quite literally, the places that have boats in the water. The free-trade zones that fueled the initial industrialization of Asia, for example, were all on the coastline. But a rising tide does not reach the mountaintops of the Andes or the interior of Asia or Africa. Market forces, as powerful as they are, have identifiable limitations, including those posed by adverse geography. Even worse, when economic progress does not reach a country, the economic conditions can worsen as population growth and capital depreciation (including the depreciation of natural capital) lead to falling ratios of capital per person.

Nature Red in Tooth and Claw

The last myth worthy of mention is the social Darwinist myth, often the modern economist's myth, which warns against soft-hearted liberalism on the grounds that "real life" is competition and struggle, of "nature red in tooth and claw" in Tennyson's evocative phrase. Social Darwinism holds that economic progress is the story of competition and survival of the fittest. Some groups dominate; other groups fall behind. In the end, life is a struggle, and the world today reflects the outcome of that struggle.

Despite the fact that much of free-market economic theory has championed this vision, economists from Adam Smith onward have recognized that competition and struggle are but one side of economic life, and that trust, cooperation, and collective action in the provision of public goods are the obverse side. Just as the communist attempt to banish competition from the economic scene via state ownership failed miserably, so too would an attempt to manage a modern economy on the basis of market forces alone. All successful economies are mixed economies, relying on both the public sector and the private sector for economic development. I have explained the underlying theoretical reasons why markets and competition alone will not provide efficient levels of infrastructure, knowledge, environmental management, and goods. Just as that is true at the national level, it is also true internationally. Without cooperation, a collection of national economies will not provide efficient levels of investment in cross-border infrastructure, knowledge, environmental management, or merit goods among the world's poor.

There is broad consensus on the case for public goods at the national level, even if there are heated debates on exactly where to draw the line between public and private activities. Even the most hard-nosed conservatives in the United States support public financing of education, medical research, and many kinds of health care. Public spending in the United States is around 30 percent of GDP when expenditures at the local, state, and federal level are combined, and there is no serious prospect of any real reduction in that proportion. Yet when it comes time for countries to spend on the international level, suddenly even 0.7 percent of GDP looks burdensome and highly controversial. The same arguments that have prevailed at the national level—making the case for a mixed economy—will sooner or later, and hopefully sooner, prevail in international relations as well.

Eliminating poverty at the global scale is a global responsibility that will have global benefits. No single country can do it on its own. The hardest part is for us to think globally, but that is what global society in the twenty-first century requires. The philosophy of the Millennium Development Compact, which was both developed and ratified globally, can serve as an underpinning to this international effort.

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