Here’s a great and beneficial irony: exploiting poverty helps the poor.

Many argue that increasing globalization enables wealthy countries to consume the world’s resources while exploiting poor countries’ cheap labor and trashing their environments. Well, here’s a resource we should be trying our utmost to deplete: poverty.

Yes, poverty is a resource, and one that should be “exploited.” For in exploiting poverty we use it up; those who were once poor, when exploited become richer.

Consider Japan. “Made in Japan” used to indicate cheap, low-quality products. Yet now Japan is a major player in financial services and a high-tech manufacturing center, producing plasma screen TVs and Lexuses. It has also become a significant source of investment in other countries. South Korea is undergoing a similar evolution, while China and India have started down this path.

Workers in poor countries generally have few skills, and earn correspondingly low wages. But as they are employed by cost-minimizing, technologically advanced multinational corporations, they become more skilled and productive. This leads to increased wealth and higher living standards.

Foreign direct investment (FDI) happens when companies build factories or acquire a management interest in businesses operating in other countries. The goal may be to gain access to foreign markets or cheaper production facilities. In the process, the receiving firm or host country gains new technologies and capital, more efficient production processes, and more effective management techniques.

Anti-globalists claim multinational corporations seek only cheap, easily abused labor and lax environmental standards. For example, Peoples’ Global Action states in its “manifesto”: “Capitalist accumulation has always fed on the blood and tears of the peoples of the world.... The effects of economic globalisation spread through the fabric of societies and communities of the world, integrating their peoples into a single gigantic system aimed at the extraction profit and the control of peoples and nature.”

Economists from Tufts and the University of Michigan tell quite a different story. In a 2002 discussion paper they surveyed scores of research articles on the effects of FDI on local workers. Their findings include:

• in Vietnam and Indonesia, workers in Nike contract factories earn more than enough to cover basic expenditures;

• “garment workers in Bangladesh earn 25 percent more than the country’s average per capita income”; and, in general,

• affiliates of U.S. multinational companies pay wage premiums up to twice the local average wage in poor countries.

They concluded that “there is virtually no careful and systematic evidence demonstrating that, as a generality, multinational firms adversely affect their workers, provide incentives to worsen working conditions, pay lower wages than in alternative employment, or repress worker rights. In fact, there is a very large body of empirical evidence indicating the opposite is the case.”

In a similar vein, Foreign Policy, in its 2005 globalization index (registration required), noted that “there is a strong positive relationship between globalization and political freedom. Globalization may also be one of the best ways of keeping politicians honest, as more globalized countries have far lower levels of perceived corruption.” The rising wealth brought about by economic openness reduces people’s dependency on their political superiors. This is one reason dictators and totalitarian regimes fear free trade. Further, prosperity promotes demands for more political freedom. With wealth comes independence and the capacity to use it.

Claims that multinational companies trash the environments of host countries merit examination. Research reported in the journal International Organization explored this claim. The authors found that “indicators of economic openness show positive effects on sustainability.”

And aid is no substitute for investment. A recent National Bureau of Economic Research study found that aid does not promote economic growth in poor countries. The researchers looked at different kinds of aid over various time periods from 1960 to 2000 and concluded that “regardless of the situation ... or the type of assistance, aid does not appear to stimulate growth over the short or long term.”

Thus, countries that “protect” their poor actually hinder progress from poverty. Trade, not aid, enriches the poor. Investment by multinational corporations exploits poverty and consumes it. Trade and investment, conjoined with secure property rights and the rule of law, foster prosperity. So far that’s the only key found that unlocks the chains of poverty.