Acknowledgements Foreword Overview: Promoting Freedom, Security and Opportunity Chapter 1: Promoting Democratic Governance Chapter 2: Driving Economic Growth Chapter 3: Improving People's Health Chapter 4: Mitigating and Managing Conflict Chapter 5: Providing Humanitarian Aid Chapter 6: The Full Measure of Foreign Aid Tuesday, 07-Jan-2003 09:10:15 EST

Jump to Chapter 2 Sections:
>> New thinking on drivers of growth >> Income inequality is declining >> More trade and investment mean faster growth >> Increasing U.S. imports through the African Growth and Opportunity Act >> A microeconomic agenda for development >> How can the U.S. support growth in developing countries >> Background papers >> References

Success in the global economy comes to countries that maintain fiscal discipline, open their borders to trade, privatize inefficient state enterprises, deregulate their domestic markets and invest in the health and education of their people.
-U.S. President George W. Bush
January 2002

Globalization-the economic integration of the world’s countries-has been a defining force of the past decade. It offers unprecedented opportunities to direct resources toward development. During the 1990s the exports and imports of developing countries jumped from less than $1.9 trillion to nearly $4.6 trillion.12 Private capital flows grew even more dramatically, with net foreign direct investment in developing countries rising from $24 billion to $184 billion.13 Countries that have experienced growth in trade and investment have achieved correspondingly faster economic growth.

Yet globalization involves more than just increasing production. It also expands choices and creates opportunities for consumers and producers. As global competition pressures governments to reduce barriers and promote better economic and social conditions, globalization paves the way to reform. Governments realize that they must not only encourage trade and investment but also establish strong institutions that support markets and provide social assistance to people in need.

On balance, globalization and regional integration have benefited the countries involved regardless of their stage of development. These benefits have been identified in studies by the World Bank and other international organizations, U.S. government agencies, think tanks, and academics. Globalization has been a boon for countries willing and able to integrate with global markets particularly developing countries that have adjusted prevailing conditions and mindsets (figure 2.2).14 Countries resistant to globalization or lacking capacity to develop investment and trade have not fared as well. Contrary to widespread expectations, income gaps have shrunk among countries that have integrated with global markets. Moreover, global income equality has improved in recent years (figure 2.3).

In 1999 UN Secretary-General Kofi Annan noted that the main losers in today’s very unequal world are not those who are exposed to globalization, but those who have been left out. Similarly, the November 2001 World Trade Organization ministerial conference in Doha, Qatar, revealed that most developing countries want more globalization, not less. The challenge for developing countries left out is to enhance their capacity to participate in and benefit from the opportunities of the global market.

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