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Globalization is not a panacea, but small-win policy changes affecting trade, capital flows, and migration can benefit Ethiopia's poor.
Economic globalization can be evaluated with reference to at least three dimensions: trade, private capital flows, and migration. For each of these dimensions, pathways through which economic globalization can alleviate or contribute to poverty can be identified. This paper makes a preliminary examination of globalization and poverty in Ethiopia, one of the world's poorest countries. Ethiopia's integration with the world economy has specific features: Ethiopia is highly dependent on the exports of a few goods, imports many armaments, is largely excluded from global foreign direct investment flows, benefits from large inflows of remittances, and derives few benefits from the evolving global regime of intellectual property. Despite a number of negative trends with regard to globalization and poverty, there is room for small-win policies that would enhance the role of globalization in supporting poverty alleviation.
Introduction
Economic globalization can be evaluated with reference to at least three dimensions: trade, private capital flows, and migration. For each of these dimensions, pathways through which economic globalization can help or hurt poor people can be identified. For example, exports of labor-intensive goods have the potential of supporting poor people's incomes, but imports of armaments can have disastrous impacts, especially for poor children. Capital inflows in the form of foreign direct investment (FDI) can enhance employment and technological learning, but unwise bond finance and commercial bank lending can precipitate crises with devastating effects for poor people.1 Sorting out the positive and negative impacts of increased globalization from the perspective of poor people is therefore of great importance. This paper attempts to do so using the circumstances of Ethiopia as a reference point.
A few papers have taken up issues related to Ethiopia's involvement in the process of globalization. These include Asefa and Lemi (2004), Bourguignon et al. (2004), Dercon (2003), Ramakrishna (2002), and Tessema (2003). This paper will try to place these studies in the wider context of the globalization-and-poverty research agenda. The economic challenges facing Ethiopia tend to lead observers to conclude that little can be done to improve Ethiopia's engagement with the global economic system. This paper will be somewhat more optimistic, suggesting that the strategy of a...