Globalisation has been a double-edged sword. To those able and willing to seize the opportunities and manage globalisation on their own terms, it has provided the basis of unprecedented growth.

China and India, with a total of 2.4 billion people, have for more than a quarter of a century been growing at unprecedented rates, with hundreds of millions of people moving out of poverty. They have taken advantage of globalisation of knowledge and globalisation of markets.

China and India had the education, the technology and the resources to take advantage of the new technology, to close the gap between them and the advanced industrial countries.

But elsewhere, matters have not worked out so well. There is growing disparity between the richest and the poorest countries, as well as growing inequalities within most countries around the world, and globalisation, as it is managed, has played an important role in both of these disturbing trends.

The number of people in poverty in Africa has doubled in the past two decades and globalisation has contributed to these problems. Africa was left by its colonial legacy with neither the resources nor the education, for instance, to take advantage of the new technologies that make such a difference in India and China.

But making matters worse is the fact that the last trade agreement, the Uruguay Round, signed in Marrakesh in the spring of 1994, was so unfair that the poorest countries of the world, including sub-Saharan Africa as a region, were actually made poorer. The North insisted that the South remove its trade barriers, open up its markets to the goods produced in the North and eliminate its subsidies, but the North did not fully reciprocate.

Of particular concern is agriculture. Seventy per cent of the people in the developing world depend directly, or indirectly, on agriculture. The massive subsidies in the North serve to depress the incomes of those in the South and increase the poverty. For example, the US subsidises cotton to the tune of $3 billion (£1.5 billion) to $4 billion a year. Twenty-five thousand very rich cotton farmers divide that money, most of it going to about 5,000 of these farmers. But the consequence is that the US, which would not be exporting cotton at all, has become the world’s largest exporter and, as it exports more, global prices of cotton fall and ten million people in sub-Saharan Africa suffer as a result.

But it’s not only the US; Europe also is to blame. The average cow in Europe receives a subsidy of, by some estimates, more than $2 a day — a number that has considerable resonance because $2 a day is the World Bank’s definition of poverty. About 40 per cent of those in the developing world live on less than $2 a day. So, it is better to be a cow in Europe than to be an average person in the developing world.

In the North, global competition has helped to drive down wages of unskilled workers, exacerbating similar trends coming from changes in technology and the weakening of labour unions.

Economic theory never said that everyone would gain as a result of globalisation. In fact, it warned that there could be losers, that unskilled workers from the North would face competition from the South and that competition would have the effect of lowering wages.

To see this most clearly, think about a world in which there is perfect economic integration, in which barriers between developed and less developed countries were removed, in which goods and services flowed freely and in which markets worked perfectly. Of course, we are nowhere near that so-called ideal state.

But in that state, unskilled workers everywhere in the world would be exactly the same. Unskilled workers in the US and Europe would receive exactly the same wage as unskilled workers in India and China, and the level of those unskilled wages would be much closer to that prevailing in India and China today than that prevailing in the US and Europe today.

In the ideal state, the winners could compensate the losers — not that they would. And they haven’t. In fact, globalisation has often been used as an excuse for taking away social protections. When, last spring, young workers in France protested at their low wages and weakening job protections, they were told that globalisation demanded it.

But then they asked: “You told us that globalisation was going to make us better off. How can lower wages, and weakened job benefits, make us better off?” Occasionally, the response would come back: “In the long run, you’ll be better off.” But, then, the quip of Keynes comes to mind: “In the long run, we’re all dead.”

In the US, wages at the bottom have not only been stagnating, they’ve been falling. In fact, wages at the bottom are today about 30 per cent below what they were 30 years ago. More disturbing is that even in the middle, wages have begun to decline. Today, real income of the median American family is lower than it was five or six years ago.

It would be unfortunate if there was a backlash because we did not make globalisation work for more individuals. It would be unfortunate both for those in the developed and the developing countries. An alternative world is possible. Globalisation can be managed differently. In my recently published book, Making Globalisation Work, I explain not only what has gone wrong and why it has gone wrong but, on the basis of this diagnosis, I explain how globalisation can be made to work a lot better for a lot more people. The thrust of my book is that there are alternative ways of organising each of the major areas in which globalisation has intruded. There is, in fact, a rich agenda of reforms in trade that would make a difference to developing countries. For example, the tariff structures — the taxes that are imposed on imports of the developed countries.

They impose relatively low tariffs on raw materials, but higher taxes on processed goods, making it difficult for those in the developing countries to move up the value-added chain — an essential step if they are going to reduce their poverty and increase their incomes. This is only one example of what needs to be done to make globalisation work.

The problems of globalisation are not inevitable. They are the result of the way we have managed globalisation but it can be managed in a different way.

It is only if we make these changes that globalisation can live up to its potential of improving the living standards, not only for the rich and the richest in the world, but the rich and the poor in both the developing and the developed world.

Nobel winner

-Joseph Stiglitz’s views on globalisation have won him supporters and sceptics. In his podcast today the professor at Columbia University in New York argues that there could be a backlash against globalisation if it is not better managed.

-Professor Stiglitz, who grew up in Gary, Indiana, was a Fulbright Fellow at Cambridge and received a PhD from MIT in the 1960s. He was chairman of President Clinton’s Council of Economic Advisers from 1995 to 1997 and was chief economist of the World Bank from 1997 to 2000.

-He won the Nobel Prize for Economics in 2001.

-He is chairman of the Brooks World Poverty Institute at the University of Manchester.

(Tosin Sulaiman)

Explore Economics

• Pre-Budget Report 2008

• Budget 2009

• World Economic Forum

• The Times MPC

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts