Re: Inequality and Globalisation

[Jim Devine <jdevine@xxxxxxxxxxxxxxx>]

the NBER writes:
> DOES GLOBALIZATION MAKE THE WORLD MORE UNEQUAL?
> In "Does Globalization Make the World More Unequal?"
> (http://papers.nber.org/papers/W8228), authors Peter Lindert and Jeffrey
> Williamson find that increasing globalization has probably mitigated the
> effects of inequality between nations that participate in global markets.

> "The nations that gained the most from globalization are those poor
> countries that changed their policies to exploit it, while the ones that
> gained the least did not, or were too isolated to effectively change
> economic and political policy... An integrated world economy would be less
> unequal than today's barrier-filled, partly globalized world economy."

this makes sense in that "inequality" is measured in terms of
market-oriented performance measures (like GDP). Those countries, such as
S. Korea, which had build up the basis for their economies beforehand
(through non-market means such as land reform and mass education), were
able to take advantage of the world economy (especially as the US was
willing to be the consumer of last resort). The problem is the fallacy of
composition: could every poor country in the world be successful at
export-led growth the way S. Korea did at the same time? This problem is
exacerbated by the US retreat from being consumer of last resort these days ...

> In analyzing economic data from 1820 to the present, the authors reach
> five conclusions. First, the dramatic widening of income gaps between
> nations probably has been reduced by globalization of commodity and factor
> markets, at least for countries that integrated into the world economy.

obviously, a poor country can gain by exporting people (a "factor"). The
mass migration to the US probably helped Europe. Further, given the
strength of the US (its non-dependency, its large size, its ripping off of
resources from the Indians, etc.) it could gain a lot from capital flows.
Of course, the US wasn't totally integrated into the world economy
(especially after 1860), since protectionism prevailed. But I wonder how
much of these authors' conclusions arise from the US and similar settler
colonies? It's a basic mistake -- made often by Rostow and his followers --
to generalize from the rich countries and their settler colonies to talk
about areas that were looted and/or made sites of forced-labor production
(like the US South before 1865).

> Second, within labor-abundant countries before 1914, opening up to
> international trade and factor movements lowered inequality. Third, within
> labor-scarce countries prior to 1914 opening up to international trade and
> factor movements raised inequality, a powerful effect where immigration
> was massive.

yes, immigration probably increased US inequality, all else constant.

> Fourth, all effects considered, more globalization has meant less world
> inequality.

how is "globalization" defined?

> Fifth, world incomes would still be unequal under a scenario of complete
> global integration, just as they are in any large integrated national
> economy, such as those of the United States or Japan. But, they would be
> less unequal in such an economy than they would be in one that is fully
> segmented.
>
> Citing huge integrated economies such as those found in the United States,
> Japan, and the European Union, the authors consider whether a
> corresponding huge world economy with only negligible barriers to trade,
> migration, and capital movements would make for a more unequal world
> economy. They conclude that such an integrated world economy would be less
> unequal than today's barrier-filled, partly globalized world economy.
>
> The authors acknowledge the fear that many have that such a globalized
> world would have vast regions with inferior education and chaotic legal
> institutions and would be more unequal than societies found in economies
> such as the United States or the European Union. However, the authors
> conclude that the source of that inequality would be poor government and
> non-democracy in the lagging countries, not the effects of globalization.

doesn't "globalization" (as currently practiced) thrive on poor government
and non-democracy (i.e., rule by capital)?

Jim Devine jdevine@xxxxxxx &  http://bellarmine.lmu.edu/~jdevine