MONTERREY, Mexico — The world leaders who have gathered here to discuss how to fight poverty do not always see eye to eye on what works best. But many now agree that the force they once saw as a near panacea — globalization — has come up short.
Globalization, or the fast-paced growth of trade and cross-border investment, has done far less to raise the incomes of the world's poorest people than the leaders had hoped, many officials here say. The vast majority of people living in Africa, Latin America, Central Asia and the Middle East are no better off today than they were in 1989, when the fall of the Berlin Wall allowed capitalism to spread worldwide at a rapid rate.
Rather than an unstoppable force for development, globalization now seems more like an economic temptress, promising riches but often not delivering, in the view of many of the leaders at the United Nations conference in this Mexican city, an industrial center.
"The thing about globalization is that if you blink, you miss it entirely," said Trevor Manuel, South Africa's finance minister. "It's not some kind of permanent phenomenon."
When Mr. Manuel and many other officials from around the world talk about economic integration, they tend to focus on why it has proved disappointing — why rich countries keep many trade barriers in place, why Wall Street is fickle when it comes to investing in emerging markets, why multinationals ignore even some poor countries that follow the right policies.
"You can subject South Africa's policies to the tests of salt water and fresh water economists, and we will pass those tests," Mr. Manuel said, speaking of his country's attempts to create a vibrant capitalist economy. "But that has not translated into a great flow of investment."
The perception that markets have failed to lift all boats fast and high is behind the sudden support for more foreign aid, as is the recent rockiness in the world economy. The threat that terrorists can take advantage of the poorest places as havens also motivates the increase.
President Bush, who will visit Monterrey beginning Thursday, has promised to increase America's foreign aid spending by 50 percent, to $15 billion by 2006, reversing declines during the so-called decade of globalization. European nations say they will also boost development assistance markedly.
No one predicts a return to the situation that prevailed before 1980, when governments accounted for the bulk of capital flowing from rich countries to poor ones. Foreign aid, at about $50 billion a year, is about a fourth of what companies now invest in developing countries each year, and an even smaller fraction of what developing countries earn from exports.
But even the leaders of industrial nations say their faith in globalization was at least partly misplaced.
President Jacques Chirac of France, speaking to reporters before attending the Monterrey meeting this week, took issue with the slogan "trade not aid," which he said characterized the 1990's view of development. Instead, Mr. Chirac said, industrial countries should spend more on "aid for trade."
"There's no creation of wealth without the necessary infrastructure — and that infrastructure demands outside aid," Mr. Chirac said.
Mr. Chirac and Lionel Jospin, the prime minister, who is his rival in forthcoming presidential elections, have detailed competing proposals to tax the profits of globalization to provide aid funds.
One of the few officials who still belittles the role of foreign aid is Treasury Secretary Paul H. O'Neill, who has doubted its effectiveness and extolled the benefits of the market. Speaking in Monterrey today, Mr. O'Neill said all aid doled out last year fell short of what China received in private foreign investment.
"If we are going to have real economic development in the world, most of that will come from capital coming into those countries to create jobs," Mr. O'Neill said. "We are not going to do it with welfare."
Yet Mr. O'Neill's skepticism did not prevent the Bush administration from backing the largest increase in aid in recent history. And some recent studies have found that China is something of an anomaly, one of the only developing countries whose love for the world market has been fully requited.
A World Bank survey released on the eve of the conference shows that after growing furiously through the early 1990's, annual private capital flows to the developing world fell from $300 billion in 1997 to just over half that level last year. Stock and bond markets went into reverse after the 1997 Asian financial crisis, drawing more money out of developing countries than they put in. Corporate foreign investment declined only modestly, but is still below its 1997 peak.
That has left some fallen stars among middle-income countries, like Turkey and Argentina, which are now begging for both private investment and official aid. Those that only tasted the fruits of globalization in the 1990's, like most of Africa and Central Asia, never got a second bite.
Perhaps aside from China, the only country that appears to have benefited unambiguously from the trend toward open markets worldwide is the United States, where a huge inflow of capital has helped allow Americans to spend more than they save, and to import more than they export.
"The trend of globalization is that surplus capital is moving from the periphery countries to the center, which is the United States," said George Soros, the financier and philanthropist who has become a leading critic of globalization.
Mr. Soros came to Monterrey to persuade leaders to back his idea of creating a $27 billion pool that poor countries could use to finance development, especially when private capital flows dry up. He said aid is needed to tame the market.
"The U.S. government view is that markets are always right," Mr. Soros said. "My view is that markets are almost always wrong, and they have to be made right."
Copyright 2002 The New York Times Company