ABSTRACT
Increasing globalisation and liberalisation over the past 25 years have seen expanding flows of trade, technology, capital and foreign direct investment between countries in both the developed and the developing world. Concerns have been expressed that this increased openness leaves developing countries more vulnerable, and indeed may have an adverse impact on income distribution and poverty. Even if the impact of trade and technology on growth is positive, there is recent evidence from Latin America suggesting that they tend to increase inequality (Wood 1997), although ‘growth in household incomes, even if it is associated with increasing inequality, can nevertheless bring about poverty reduction.’ (McKay 1997: 672). In this chapter, concern is not directly with the links between globalisation, growth and poverty although this must be implicit in the discussion as poverty reduction is a primary (if not the primary) objective of foreign aid (see Chapter 9).
