Globalization, Liberalization and Sustainable Human Development: Progress and Challenges in Central American Countries (El Salvador, Guatemala, Honduras and Nicaragua)
Summary: The notion of integrating into the global economy is often understood exclusively in terms of liberalization of international economic transactions. Our view of global integration is broader and includes not only liberalization of trade and foreign direct investment (FDI) but also success in building new patterns of comparative advantage and in lessening dependence on traditional commodity exports. Long-term economic growth requires the creation of new skills and capabilities in people and in firms. And it is here that more sophisticated trade and investment policies and investments in people become essential. The liberalization of trade and FDI are necessary (albeit insufficient) components of this process, particularly in low-income and small developing economies. There is a growing body of literature that suggests that integration to the global economy may have a positive effect on economic growth (see, for example, Sachs and Warner, 1997). The reasons for this positive association are not hard to find. In the first place, export diversification involves learning to produce new things and acquiring new skills, both of which imply higher productivity. Second, for countries that diversify away from their major primary commodity exports, the world economy represents an unlimited market. Third, through exporting developing countries can earn the foreign exchange they need to import capital goods and new technology unavailable domestically. FDI can make an important contribution by opening up new markets and providing new technologies. SHD is more than economic growth and involves the broad-based improvement in living conditions and in the capabilities of the entire population (Agosin, 1999a). The acceleration of economic growth is undoubtedly a dimension of SHD, since growth makes it easier to achieve the multidimensional objectives of SHD. But, above all, SHD involves the broadening of peoples' capabilities to earn income and using Sen's felicitous phrase lead the lives they have reason to value. This encompasses, at a minimum, increasing the basic substantive freedoms of people: freedom from premature death, freedom from avoidable illness, freedom from ignorance through the attainment of basic literacy and numeracy, freedom from arbitrary discrimination, participatory democracy, and free speech (Sen, 1999, p. 36)
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International Institute for Trade and Developement : UNCTAD Collection
