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How Globalization Stabilizes Poor Countries

Globalization stands accused of generating economic instability in developing countries and greatly exacerbating poverty, at least in the short run--which is the longest period the world's poor can afford to care about. Critics point to the string of economic crises in Africa, Asia, and Latin America in recent years, often attributing them to multilateral lenders' demands for full liberalization of foreign trade and capital flows, privatization, and fiscal austerity.

But the raging debate over globalization often overlooks an increasingly important feature that makes life better and more stable for poor people in developing countries right now: the many millions of migrants who send money home. Data on families in developing countries that receive money from relatives working abroad directly demonstrate that at least one element of globalization--migration--increases economic stability in poor countries.

Migrants from struggling countries in Latin America, Southeast Asia, and other regions are increasingly securing jobs at wages that, while low by rich country standards, are far higher than they could dream of back home. In 2001, workers from low- and middle-income countries sent home a staggering $43 billion--more than double the level of a decade earlier and $5 billion more than that year's total official foreign aid to these countries.

Migrant workers may send money home for a variety of reasons: to maintain good family relations, to ensure an inheritance, or to re-pay a loan from elders. But whatever the reason, these so-called "remittances"--the cash workers send home to countries like Colombia, Haiti, Jamaica, Mexico, and Bangladesh--act as a safety net that their governments typically need but cannot afford to provide.