Question

Recently there have been violent protests against the World Bank and the World Trade Organization. The protesters argue that these institutions promote free trade and also encourage corporations in rich countries to invest in poor countries. The protesters contend that these practices make rich countries richer and poor countries poorer. How would economists feel about these protesters' views?
Select one:
a. They would disagree with the protesters about free trade and corporations, but would agree that these institutions are not necessary.
b. They would disagree with the protesters because these practices will help make both rich and poor countries richer.
c. They would disagree with the protesters about corporate investment, but would agree with the protesters about free trade.
d. They would disagree with the protesters about free trade, but would agree with the protesters about corporate investment.

Answer 1

Answer

Option b) is correct. They would disagree with the protesters because these practices will help make both rich and poor countries richer.

Reason:

Free trade and investment by corporations of rich countries in poor countries is beneficial for both the rich and the poor countries. Free trade helps the poor countries export thier agriculture produce (usually available in abundance in poor countries) to rich countries. Also, by investments done by rich countries, the poor countries receive employment, technological transfers and quality products.

Also, the market for the rich countries expands when they diversify into poor countries. Thus, both the rich and the poor countries are benefitted.