growth and reducing poverty rates. modern economic analysis has confirmed much of what adam smith inferred from a far less impressive set of data. today's economists generally point to three important characteristics influencing growth : ( 1 ) the extent of a country's openness to trade and its integration with the rest of the world, ( 2 ) the quality of a country's institutional infrastructure, and ( 3 ) the success of its policymakers in implementing the measures necessary for macroeconomic stability. by openness and integration we generally mean the ability for goods and services, capital, and more broadly, the flow of information, people, technology, and ideas to move across the borders of a country. this freedom of movement may enhance growth by intensifying competitive pressures, increasing specialization, and allowing access to larger markets. free trade allows the more efficient use of resources which, in turn, raises both the productivity of the domestic workforce and the level of national income. adam smith cited comparative advantage. he observed : if a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry employed in a way in which we have some advantage. one recent study of the effects of openness on growth demonstrated that when countries are divided into two groups - - those with generally open economies and those with generally closed economies - open economies have experienced average growth that is 2 ½ percentage points higher than the growth of closed economies. furthermore, when developing economies are ranked according to their historical record of openness, economies such as hong kong, malaysia, singapore, and thailand are near the top of the list. these asian economies are some of the same ones that participated in the region's so - called growth miracle. for another example of a country that has benefited from free trade, we need look no further than mexico - - our host today. during the early 1980s, mexico's non - oil merchandise exports were running a bit below $ 10 billion a year, or about 5 percent of its gross domestic product. by 2001, however, mexico's exports of such goods had soared to more than $ 145 billion, or nearly 24 percent of gdp. the strength of exports has contributed importantly to the ongoing transformation of mexico's economy. a good portion of this export growth has occurred in the context of the north american free trade agreement, but the most important effects of nafta may be the increased openness of mexico '

that market incentives had been reduced and that we were losing the dividend of efficient uses of resources that such incentives provide. even those observers who derided the more unbridled forms of capitalism became increasingly aware that attempts to tame the market could be costly in terms of economic growth and the average living standards of a nation. over the past thirty years, as many countries have struggled to liberalize their economies and improve the quality of their policies, global per capita income has steadily risen. i recognize that poverty rates are notoriously hard to quantify, but according to a recent study, the share of the world's population living on less than $ 1 per day, a commonly used poverty threshold, has fallen dramatically over the past three decades - - from 17 percent in 1970 to 7 percent in 1998, representing a decline of 200 million people. in addition since 1970, the infant mortality rate has declined by more than half, school enrollment rates have risen steadily over the past thirty years, and literacy rates are up. smith ( 1776 ), vol ii, book iv, chapter v, p 43. world bank ( 2002 ) - - gdp per capita ( constant 1995 dollars ). sala - i - martin ( 2002 ). the $ 1 per day threshold is measured in 1985 dollars on a purchasing power parity basis. world bank ( 2002 ). while, from a global perspective, wealth and the overall quality of life have risen, that success has not been evenly distributed across regions or countries. the economies of east asia are often - repeated success stories. some, including china, malaysia, south korea, and thailand, stand out not only as growing very strongly, but also as having seen the greatest declines in poverty rates. overall, over the past three decades, asia's $ 1 per day poverty rate fell by one measure from 22 percent in 1970 to just 2 percent in 1998. moreover, asia was not alone. per capita incomes in latin america also expanded during the period, and poverty rates fell, although progress was somewhat slower. but, sadly, the story in africa has been quite different. levels of per capita income in that continent have actually fallen. the poverty rate, which in 1970 matched the rate in asia at the time, is estimated to have doubled to 40 percent by 1998. while africa's performance has clearly been subpar, some african countries have had some success. for example, botswana, lesotho, and more recently uganda have made some progress in raising per capita income