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The Great Convergence International Economics Lara Caneda Romero 2ºGIB ARA
SUMMARYThe main idea Richard Baldwin wants to transmit in his book “The Great Convergence” is that the globalisation nature and impact have changed due to knowledge flows, not due to trade flows. As it happened in previous globalisation periods, where trade flows were the main motor of the process.In order to explain what happen if globalisation was about knowledge instead of trade, Baldwin analysis the different globalisation stages and the economic development along history. The 3 different globalisation periods are related with the fall of 3 different cost. These costs are trade cost, communication and face-to-face cost.In the Old Globalisation, the fall of trade cost allowed the separation between production and consumption. At this stage it became easier to consume products that were far away. Baldwin calls this stage “The Great Divergence”. During this period the great and innovative ideas that raised mainly in the G7 countries stayed in the G7 countries, because the high communication cost difficult the transportation of ideas and of the people that had these ideas.The ICT revolution produced the decrease of the communication cost, and a new globalisation period started. Cheaper communication made possible the transportation of complex activities from developed countries to other less evolve countries, that presented most of the times, wage advantages. However the principal effect of this revolution was that the offshoring of factors led to knowledge offshoring. The fall of communication cost allowed developed firms to coordinate complicated activities over long distance. They offshore knowhow along with the job. This knowledge flow changed the nature of globalisation. Richard calls this period the “Great Convergence”. Finally, the new tech revolution, that is about to arrive, will reduce the face-to-face cost. This will allow the virtual immigration to substitute the real one and it will also accelerate more the specialisation of global supply chains.
CRITICAL ESSAYIn Egyptian times, the population was located along the Nile because they depended on the rises of the river to water their fields. The transport across the river allowed them to communicate with