This very good article argues that while the advantage of globalization is that it improves manufacturing efficiency and creates additional wealth for the global economy, it’s disadvantage – which the spread of Covid-19 has put into...
foreignaffairs.com/articles/2020-… via @ForeignAffairs
foreignaffairs.com/articles/2020-… via @ForeignAffairs
...sharp relief – is that it creates harmful kinds of global interdependence and undermines certain types of flexibility by eliminating slack within the system.
I would take it further. I think the belief that more globalization leads to more economic efficiency is mistaken...
I would take it further. I think the belief that more globalization leads to more economic efficiency is mistaken...
...It can, under certain conditions, but a highly globalized economy can actually be less efficient in a world in which nations can put policies into place that for political reasons distort production or the distribution of income. A highly globalized trade and capital regime...
...accommodates these policies by allowing countries to push the costs onto trade partners while retaining the benefits, and it prevents the recipient countries from absorbing these distortions except by implementing similar policies and forcing the cost elsewhere: this is...
...basically what beggar-thy-neighbor means.
One way in which this happens is when some countries choose to achieve “trade competitiveness” by lowering the wage share of total production, either directly by lowering wages or indirectly by devaluing the currency, repressing...
One way in which this happens is when some countries choose to achieve “trade competitiveness” by lowering the wage share of total production, either directly by lowering wages or indirectly by devaluing the currency, repressing...
...interest rates, suppressing worker’s rights, etc. The result is that as they gain in trade competitiveness, their trade partners must respond by taking similar steps. In that case globalization can actually reduce global welfare, and it is probably no coincidence at all...
...that historic periods of maximum “globalization” are also periods of soaring income inequality. Until countries raise frictional costs on trade or capital flows, they cannot implement policies that reduce domestic inequality without losing out in “competitiveness”.
