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. Last Updated: 07/27/2016

Study: Globalization Cuts Poverty

LONDON -- Far from creating poverty as critics claim, rapid globalization of the world economy has sliced the proportion of abject poor across the planet, according to a controversial new study released Monday.

It says that freer commerce, epitomized by the cutting of tariffs and the lifting of trade barriers, has boosted economic growth and lifted the incomes of rich and poor alike.

"The proportion of the world's population in absolute poverty is now lower than it has ever been,'' the study, written by a group of respected economists for the London-based Center for Economic Policy Research, says.

While accepting that there are costs to globalization that require robust policy making, the study seeks to refute the claims of anti-globalization campaigners that Western-dominated capitalism has damaged the world's poor in the name of profits for large, multinational and mainly U.S. companies.

It says that while there has been an increase in wealth inequality between the richest and poorest countries, this is primarily due to African economic stagnation, which may not be the result of globalization.

Income distribution between the rich and the poor within most countries is said to have become more equal, the report says.

Claims by those opposed to globalization that multinational firms exploit workers in developing countries with sweatshop pay are countered with the argument that such pay is usually higher than local standards and that real wages have risen.

The study uses 1992 data -- the latest that was available -- to make some of its key points, but one of its authors, Anthony Venables of the London School of Economics, said more recent post-publication research supported the trend.

The study has already brought a less-than-glowing response from the European Commission, the European Union's executive body that commissioned the report.

In a foreword that broadly endorses the report's conclusions, EC President Romano Prodi distances the commission from some parts of the report, saying it could not concur with all the study's analysis.

"In many respects, the findings will prove controversial, at least to those outside the circle of professional economists, contradicting as they do certain deeply held beliefs about the negative consequences of globalization,'' Prodi wrote.

The study accepts that the number of truly poor people in the world -- defined as those living on less than an inflation adjusted $1 a day -- has changed little in the last 50 years in actual numbers. But it says that the globalized economy has more than halved this number as a percentage of the world's growing population, from 55 percent in 1950 to 24 percent in 1992.

"Although too many people live in poverty, the problem has proportionately diminished during the recent era of rapid globalization,'' the study says.

Looking at the claim that the wealth divide is now greater between rich and poor countries, the study admits that average incomes are wider between the two than ever.

But it says this is mainly because Africa has stayed put while rich countries have grown. Other poorer countries such as India and China have grown rapidly, it says, and Africa's woes may not be related to globalization.

"Whether the disastrous African performance is due to insufficient globalization on the continent or whether Africa's weak governance, low education levels and fragmented civil society put the opportunities of globalization out of reach is almost impossible to tell,'' its says.