GLOBAL FINANCE

He did not foresee the improvements in agricultural methods that
transformed productivity, nor that Western population growth would
begin to slow. But are the LDCs living in a Malthusian world? LDC
populations are growing at about 1.7% annually, compared with
0.5% in industrial nations, which means that at the present rate LDC
populations will double every 41 years. Looking at the parlous state
of many LDC economies, it is daunting to contemplate such a massive
increase in their populations.

» Figure 2.1 in Chapter 2 shows that since the Industrial Revolution

the world's population has grown dramatically. Not much is known
about the possible consequences, but the fear is that LDCs will not
be able to support massive increases in the number of children. One
interesting approach to analyzing fertility patterns is to look at why
parents choose to have large or small families. Recent studies suggest
that parents in the developing world may be acting rationally when
they choose to have large families because children supply valuable
labor and are the only way to ensure financial support in old age.
If incomes rise or there are increased employment opportunities
for women, the opportunity cost of having a child increases (there
are better things to do) and birth rates may start to fall. Economic
development, therefore, may be the answer to reducing the rate of
population growth.

KEY LEARNING POINTS

» In 1999 a backlash against globalization began that has swept

around the world, focusing on the WTO as its chief target. In
2001 a senior WTO official remarked that the major problem
with WTO/GATT is not that countries are against free trade, but
that its implications have not been properly explained to the
public.

» The US, the EU, and the developing world have contending

objectives for the next trade round, with the developing world
wanting a stronger voice in negotiations. China is to join the
WTO for the first time as part of its continuing efforts to open
up to international business.