Bordo, Taylor and Williamson, Globalization in Interdisciplionary Perspective-A Panel

Bordo, Taylor and Williamson, Globalization in Interdisciplionary Perspective-A Panel

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Unformatted text preview: J :48 Bart“; liicheltgreen and Harold James the catah tic appronch ttl high leiels ot'access mttst presume suhstantinlius tilication” tlT\1li Ztltll t. Let me translate that t‘rom l'undspealt into ordinary linglish, 17p to now the committee is sat mg. otlicial tinancing has been re- garded as hest \th to catztly/e \roluntar} pi'itate-sector imoli‘ement in cri- sis resolution. ll‘ue limit ollicial linancing to “ortlinary” levels. can we ex- pect to catal) xe that sort ol‘inmlwment or \\ ill \xe lime to rely more heavily on other. “concerted” ways of inVol\ ing the private sector“? There is. to be sure little enthusiasm for lttrgevscale ot’lieinl financing partly because of coneern ahont moral hat/,ard. But there is less than littll agreement on the best on} to do without it. References l‘iichengrcen. Barr}. l‘ltto. ,l more Illi’l'ft’t t Mint/i" l'lni ham (it ('1 nit/mitt integration l€ss;t)s in lntet'nzttionttl l'iinance no. l‘lt‘s. Princeton l‘ni\t,‘i‘sity Department of lieonoinics. lnternational l-‘inanee Seetion liinancial Stahilitt l'iot‘nme :Wlilzl. lsstte paperot‘the 'l‘aslx l’oi‘ee on lmplcmentation ol‘Standardse l5 March, Basel. Suit/erland: l‘tnancial Stahilit} liorumr .Ztltltlh. Report olithe l’ollon—l 'p ( irotip on lnecntnes to l‘oster Implean- tation otiStantlards. Rl August. Basel Siiit/etlantl: Financial Stability Forum. lnternational Monetary Fund. Zttttl. t'ommnniotte ol. the lnternational Monetary and lJii'tancial (‘ommittee oi the Board oi (imernots 2‘} April, \\"2tsltiitgt0nt l).(‘.:l\1l§ l’\’cnenr l’cter lit WSW [Liv/twine .I'tttt't (Illt/ gin/at ttlttl'ttllllzt’t'lU/i, Manchester. UK: Manchester l'nncrsiti' l’ress, l’ndoafiehioppa ’liotnmaso. MRS 'l'he littropean \lonetar} S§stein: A long-term \ieti. ln 'l't’it’ linmpetm .l/ont'r in; Si mm, ed l‘. (ham/xi. S. Mieossi. and M Miller: 3o) 84.. Cambridge: (‘anthrttlgel nitersitjt l’t'ess. Globalization in Intet'diseiplinary Perspective A 3anel (‘lne Crook Gerardo della l’aolera \iztll l'iei'guson \nne (i). lii'tteger Ronald Rogouslx’i Clive Crook Ir , History has shonn us that ilohalixation is tC\CI‘SiblC. it was in tact cata— strophically reret‘sed alter l Hi and the earlier trend toward international economic integration was not then reestablished until alter 1945. Two world wars and n (ireat l_)epression in hetween thankfully an extreme scenario. What histor} does not tell us \ery elearly is whether something less than a catachsm ot‘ that magnitude is capath of reVersing globalization in particular. whether glohali/ation might he interrupted tind set inch by the action otdemoeratic politics. at a time ot‘comparative peace and pros— pent}: Certainly Technologi ‘1 there is more to it than that. hecztuse integration tends to undermine certain kinds ol‘eeonontic ret ttlationt ln linanco which has globalized as much as anyindustry one ean hink oll technology and deregulation (sometimes re— luctant deregulation) ll21\C created at s‘lti—reintorcing mechanism pushing strongly in that direction. lntegration se‘ms in many ways a natu ‘al eco— ‘ oeess. \\'l]lCll can only he rexersed. il‘at all. when policies are delile ti: lohttli/tttion has a powerful economic momentum ot~ 'ts own, l progress. left to its own devices; promotes integration. And M {L4 nomtc pr stately framed to that end But pt litical support l‘oriust such policies is on the rise. The ant’glohal— ization protests in Seattle, marked a dramatic CSCLilZillOllr But \\ hat is most Striking and most \\ttl't'_\ ingr ahout that protest and the others that haVe lol— lOWed it is the measure ol‘tacit support that the protesters command among ordinary citizens. The \ iew that glohnlixation httrts workers and keeps poor Cliie (,‘roolt as depth; Ctllltl: at lilt' [.2 uni/mist mm..mwmm~_w_mm 55h C‘liie (rook countries poor is nideh shared. Opinion polls on globalization and on trade agreements stich as the .\orth ,~\ineriean liree 'l‘rade ,Ikgi‘eeittent (N.>\l5T/\l shon lukewarm support. at best. .\nd politicians. even those Stip- posedh committed to liberal trade. are beginning to respond to Voters” anx— ieties: Bill (‘linton said he named to see the Seattle protesters inside the meet. ing. not out on the street. .\t the .-\pril Jottl Summit ot‘ihe ,IXntcricas meet~ ing in Quebec ( it}. ('ieorge litish. making his lirst appearance on the world stage. said that “Our commitment to open trade must be matched by at strong commitment to protecting our einii‘onment and improving labor standards.” Lori \V’allach ot‘ l’tiblic (.‘iti/en. an antiglobalist group. said. “You could ha\c dialed ‘)l l nhen l heard \that Bush said. I needed to be re- suscitated. \Vhen ne started organi/ing and educating on trade in the early '90s. no one but a handltil ot progressire Democrats understood what we nere talking about. And non comes .\’t r. 'l'rade—ubetuallcs Bush sayingwe need to respect labor and einimnmental concerns. it shows the political shitt. .\o\\ ne‘te got to see the polic) sltit‘t" t l’aul lilustein. “Protests a Suc- cess ol‘Sorts: Labor. lim ironment on l eadcrs Agenda.” lliis/iiizgmn Port, :2 .-\pril Ztltll. p. .»\l ll. it it comes. it nill be because gowrnmcnts ha\c responded so inade- globalization. most ot~ them ahead} touched on in earlier remarks, liirst is tlte fear that wages ol‘ lon‘skill norkers n‘ill tall in markets that l‘aee cheap imports. Sec- ond. that economic insccurit} nill increase tor ah tost everyone: As eco' quately to \oters' tears. l count se\en main norries about it nomic change speeds up. nohoth has a job tor lit‘e. "bird. that patterns of existing income support and other lttt'ltls ot‘suhsidt nill become more ex- plicit. and therclore harder to sustain tiarin support in the European Union nould be one example). l‘ourth. that powrts in dewloping countries gets i noise because {it"‘tinbalanced gron th." l‘it‘th. that social spet ding t‘alls un~ der pressure ol‘“international competitneness." Sixth. another kind ot‘race to the bottom. that en\ ironmental standards come under pressure. Seventh. that much international trade is "unl‘air hecausc it is based on exploin tion. To \arVing degrees. tears tour through seien are inisconceived. on my i h ‘ CViththC _\e . tar l‘rom saring so. gorerninents and interna- reading ol‘t t tioital institutions either endorse them or. at heist. ignore them, What Pres- . l idcnt Bush said in Que ice (,‘it_\ or instance. endorses the View that global- ization. unless caret‘tilly managed. poses a threat to the CttVll‘OtthItl. That is Wit} \‘i’allach nas right to be pleased. l-‘ears one through three. on the other hand. haxe some basis in reality ln these cases. the right response t‘rom gmernments nould be policies aimed at mitigating the problems: b€t~ ter training policies. sci}. more generous nage-insuranee policies. or mech- anisms t‘or buying out interest groups that h:i\ e acquired a kind ot‘ property right o\cr subsidy None ot‘this gets much attention. M tilobah/ation in lnterdisciplinar} Perspectitc 551 Politicalh this is the \\ttl‘sl ot‘all norlds. Governments holster rather than repudiate the l‘alse antiglobalization arguments. and tail to respond to the ones that hare some three. ;\nd il‘all that were not bad enough. they also de« ploy t‘alse arguments ot‘ their onn to support the case in floor t‘or in» stance. the argument that trade liberalization createsiobs. People are sus— picious otthat argument. and the} are right to be. ot‘course. because it is wrong. Really there can be \ery little ll]}SlL’l'}' about \i'eak popular support for globalization. lion tar. it‘ at all. does globalization require our big social goals to be traded otl‘against each other? Dani Rod rik has argued that the question can be seen as in\'ol\ ing it "trilemmaf‘ somewhat like the \i’ell—knon n exchange rate trilemma. Just as countries must choose only two t‘rom capital mobil’ it}; exchange rate stabilit). and monetary independence. so they are cons strained to choose just tno l‘roin economic integration. the social contract (meaning high lc\c’ls of social spending). and national sovereignty lt‘you choose national smereignt} and hi 1it social spending. }ou must take steps to impede integration tothernise. or instance. tax competition kicks in). This is the antiglobalists‘ choice. it} oii choose sotereignty and intem‘ation. t. .r, you must scale don it your ambitions t‘or soeial p 'mision. Judging hy their own policy announcements. this is a choice hit man} \r‘t'estern goVern— ments have often made. l'inall}. it‘ too choose integration and high social spending. avoiding the race to the bottom requires you to embark on closer international economic cooperation llC\L‘.l playiig fields oi labor—market regulation tax harmonization in litirope. and soon). thus inhibiting your soi‘ereignti. I base said. though. the “race to the botto n" argument is flawed and just plain wrong \then applied to social SDCltdlt‘. This plausible— seeming trilemma is much more about perceived wolitiezi constraints than economic constraints. Integration and sowreignty can he ppil} coexist With high levels ot‘social spending as indeed they do. Come to Europe. High— income countries can choose and sustain high eve ot‘social protection. re- (1' distribution. and regulation it they wish to. Tax eompeti ion. even on cor— porate taxes tnhereyut might expect it to be i itense). has: hat only limited etl‘ects. The European model ol‘social prorision is ioi. so Var as one can tell. being crushed under the pressure ol‘global competition. Despite this. the trilemma seems to sum tip he ’30llllCt l op ions. at least as implied bi n hat goternments tell their \oters. T te argumen tor political integration nithin Europe is put to Clli/CttS as though tie tr’lemma were true. You could argue that the case ~or bringi ig labor and environmental standards within the jurisdiction ot~ the World Trade Organization (a case that President Bush. at any rate. is nilling to en ertain) po'nts t ie same way. And the recent \‘ogue tor treevtrade areas site i as FTA n as; also one something to the. idea that a balance itt\t3l\ ing ess sovereignty {or less intec gration’?) is nee led to detciid the rich countries' economic sett ement. 552 Gerardo dell-a l’aolera Cilttbali/ation. on this y iew. poses diliicult choices choices perhaps best ayoided altogether. This View is \y rong. on the ct idcnce. but goyernments are tailing to say so. The case tor integration is strong. but nobody is mak- ing it. 'l‘he case against integration is weak. but leaders are implicitly con~ ceding it. (in en all this. the possibility is surely real that opposition to true gration might one day succeed in slowing or eyen reyersing globalization. despite its extraordinary benetits twer the past til‘ty years. Gerardo delta I’aolera This conlcrence otl‘ered a wonderl‘ul menu ot‘ papers written by“ the best minds in economic history and economics to tackle a perennial. but still un- resolycd. isstie: globalization, .I\ "dream team” was assembled to take up the challenge ot‘ grasping the issues ot‘ globzili/ation: its causes. historical roots. and well‘are consequences. 'l’o use Woody Allen's expression. eyery- thing you always wanted to know about globalization and history. but did not dare to ask. cotild be lound in this conlcrence. Or almost eyerything. Maybe. you thought you would leay‘e the confer- ence with a dclinitiyc handbook on globali/ation. but you ended up with still more qttcstions and a yast agenda tor l‘uture research. l belieye most of us are thankt‘ul l‘or standing on the shoulders ot‘leil‘rey \‘y‘illiamson’s (W96) pathbreaking work on globalization and history. which he began long he tore, globalization became a bit/[wont this and subset ttent works have L lobalization process it heterogeneous ac- opened tip new directions to our understanding ol‘the {l and its impact on the w‘ell‘arc and attitudes ol‘ the ma tors that participate in the world economy. Before iumping to some rcllcctions on the \ iew ot‘g'ohali/ation lrom my own yicwpoint in a persistently peripheral country. ,\rgcntina. let me re— L. lrame some or the main questions that were asked lier‘ ~ Are globalization and conycrgence connected.7 ilobal economy, and how strong are their interrelationships‘.’ lior cxa nple. the move- ment otigoods and sery ices (purchasing power parity or arbitrage con~ ~ What are the transmission mechanisms that spur a l w r ditions are a long~run "must" in an integrated world economy). money (interest rate parity). and people and capital. technology. geography. and so on? 0 ln support oi‘ the conyergcncc and glohali/ation process. which insti~ tutions take center stage. ant which are in the wings‘.l Here I oll‘er sortie retlections on these questions. as in as l could distill answers l‘rom the output ol‘this impressiye cont‘erencc. (ici‘ardo della l’aolera is president .tttd pzotcsmr olt tics :it the. , .t‘Itn lthCl‘Sll)‘ t‘ld’dl'htititl\t\tlttt51.lclltt\\ at lilll‘ttltit'lttlt Pent is: liiit'izos \iies. x\‘f_‘t,'!'t'ttl‘.éi. (ilobali/ation in lntcrdisciplinary Pcrspectiyc 553 First. taking the may long yiew. it looks as it‘ conyergence and hence globalization is a temporary though recurrent phenomcnoi. This tran- spires clearly trom the l)eLongsl)owrick and Eichengrcen—.lames papers. ll‘ this is the case. it is particularly important for the dey‘eloping a id emerging market countries. some ot‘ which are eternal candidates to join the ranks ot the "truly" integrated nations. To explain the noninonotonic aspects ol‘this process. pure and simple economic models are not sufficient. Ce ‘tainly it is al— ways the case that a deyelopin economic ethos can unleash strong forces: g Under grotesqu ‘ economic distortions ex en slight improvements will set in motion dynamics for more integration and growth. Still. how ong will this process last'.> The existence ol‘drainatic rcycrsals ol‘l‘ortune in historical expe— rience. most spectacularly the diyergcnce oil-\rgentina. is a phenomenon that calls for more than what contentional unadorned neoclassica models can olier. Forexainplc. the historical and institutional l‘acts presented by Eichen» green and .lames tor interwar lfiurope are crucial to our understanding ol‘the contemporary tensions between the deyeloped and the dey'eloping world. Second. an important aspect in explaining divergences and reversals is to relate the globalization process to the transition economies. l was very stir» prised by Anne Kruegers statement that globalization and transition are two entirely dillerent issues: They are not l‘or a deyeloping society. Transi— tion economies are generally classitied relatiy’c to a benchmark that uses as a reference the set otiinstitutions and policies adopted by the core societies. in this perspectiye. to understand deyeloping countries" stop-and—go cycles in the conyetgence process (tor example. thejttmps in income distribution described in the \Villiatnson-l.indert paper) will require much c oser atten— tion to the degree ol‘ institutional th\Clt'tplthlll and the politic: l—economy process. To giye an example. in the \cry good textbook on transition economies by Roland 0000). l was surprised to see that. eyen hough the author is dealing almost entirely with open economies. the wort g/o/iu/isa» (lull is not quoted in the index. Scholars should talk to each other.I Third. we must recognize the importance ol‘truncated politica —economy‘ relormsww'hich many times will produce true and perceiyed reyersals in the globalization cost~benetit calculus for a peripheral economy: in dy— namic terms this is precisely a manifestation ot‘ the second—hes theorem: When an economy is trapped with one or more big distortions alter a while the remaining Pareto improyentents are not attainable. and under stress they may become less and less desirable. Thus. it‘you cannot engii eera well— behay'ed take-oil‘toward integration with the world economy. the engines ot‘ modernization might stop and crash. and a reyersal is likely to occur. Ar- gentina is themost remarkable and tor me. most sad 7 historical and con~ temporaneous example. Fourth. it the lrequency oil stopsantl—go cycles in the integration of emerging—market societies is yery high. wherein t‘ailttre is the norm. the cit— izenry may finally adopt more credible foreign institutions. Ar ‘ Yentina again i321 good case in point. the most notable example being the A 'gentines~ de— rp i l Ferguson inand tor an American institution. hi tlien' dc lacto til'iiot yet deiureladop- tion oliilie dollar. now almost the onh lllfllic‘} o1 use alter successive goiernments ahuscd the inflation tax. 'l‘his i‘ettlit}. where a group or sub. group can start importing institutions (again we might lllllih ol‘responscs 7\' the "losers" and "\\iltltc‘1‘.\iul is a striking new element that deiii' 11d$dl~ entioii in an} analysis oliglohali/atioii and how it can ultimately constrain the \oracio oi politicians and rciit~seelters ’l‘heretorc. 1 think we take away trom this conierence an extraodinary ianorziina ot‘ \\ hat happened to the world econoiii} in the last two or more centuries It is now w ell understood thatt at the end ot‘ the day. an enlarge ment oi glohal integration was a \torldmellare-imprm ing derelopnent‘ nit thent how can we account for all those llic‘i’c‘till‘ilc‘ sttip»;iiid—go stages? One explanation. a la Pairiclt O‘Brien. might chntuall} he constructed around a \ei‘§ diliicult metanarratise. engaging a \ai‘iet} ol‘ l‘acto S from npocrist to incompetence. llowcx er. the introduction oi the dynamics of institutions as causing particular economic outcomes seems essential. The unbalanced speed of ret‘orms among those who want to ioin the "conver- gence chili" is the main cause lttl‘ ttttllllCt’tl'CL‘Oitttm} design l‘ailures. The na- iure ol‘ human capital. and its speciticity tllsti raises the question as to how one can cope with or undo such social or human capital ohsolescence, To sum up. I hasicall) came to em isage the intima e linkages that l have ,T M t: :7 c Q 9‘ (D :3" m a Cu 5 -1 . discussed here hecause the} came to it e tore durin inc the conference. thanl\s to the esti'aordinar} crowd o1 scholars that only lie ‘1‘. Mile and Alan could ha\ e gathered here in globalized Santa Baroara. References ' a", . Roland (ici‘ard Ztitiit, Ira/Ninth i’liitI/<’(Uiifl1}i;’t,\ l’m’izitt Hair/tits, (Ultl/IHM. Cam- hridge: \11’1‘ Press, _ _ \Vllli‘diils‘tiii. .lell‘i’m (i. l‘J‘lo (iiohali/atioir CUlMCi‘gUH’c’C‘ and history Journal of lico/in/iin‘ Ilitniri‘ 5o (31: 377 ill). Niall Ferguson tilohalization in liitcrdisciplinar} Perspectii'c 555 In many wins, the conl‘erence that produced this Volume was itselt‘ a metaphor tor globalization. V»\ majorit} ot‘ the participants (i5 perccntrr were employed ht :XIitL‘i‘iCtlll institutions, though l suspect that not much more than halt were ,'\iiitl'lcttll'bttl‘fl, (This could be taken as eridence ei- therthat the glohal market for intellectual capital is not i erl‘ectly integrated and that some "home hias“ operated in the selection ot‘contrihutors, or that flows of intellectual capital hoth inherited and acquired. have for some time been disproportionately toward the United States.) As one ofthe ini— nority ot non—American participants i found it very easy. in the space of just a l‘ew days to traiel lirom ()xtord to Santa Barbara and hack again: a journey which. it my great grandt‘atlier had made it a hundred years ago would lime hecn once—inva—liletiine and one-way. David Lodges satire of academic globalization Sum/7 lt’or/r/ was published in 1984. That world is even smaller today On the second day ol‘ our conference. I was able to readwin the international edition ol‘the London Financial 77mm~ this ex- emplary vignette: man thought to he the eldest son and heir—apparent 01‘ Kim .longvil. the North Korean leader. arrived in China yesterday at er hav— ing been deported irom Tolcto for trying to enter Japan on a take passport to visit Disnetland, . . . His companions carried Louis Vuitton suitcases" (Gillian Tett. “Japan Deports North Korean Leader's Son to Chi ta.” Fi— nancial Tamar, 5/6 Ma} Zttttl 1‘ The l‘act that globalization applies to politics aswell as economics is one otithe messages: otitable l. which oli‘erst simple schema of glohali/atioir The first column lists what can be regarded as “gii'eiis” about the globe we inhabit: the second lists those things that can flow around that glohe; the third lists the mechanisms that tacilitz te such flows: the fourth lists the policies that allow those mechanisms: to o Derate. lhat'e highlighted in hold type the aspects; oiglohalization that with a few exceptions. the main chapters in this \‘OltimC neglect Econom'sts and lekl Globalization: An Own it)“ Given (more or less) 1‘ tons Mechanism Polic) “M Wsofphtsics' i'axit}; (iootls transport technolog} rice trade V second law ottherino- What, would a unnersal society he like which would haVC 110 Pamcumr Q'namtt-‘Sts’tct country which would he neither l’rcnch 1101‘ linglish. 1101' German. nor Human biolog) t‘apital (‘ommunicationstechnolog) liree capitai tlows Spanish. nor Pt‘irtueuesc. nor ltalian, nor Russian. nor Tartar. nor Turk- (Emit “1W linmmm marmwnd ish. nor Persian. nor liidiaii nor (‘hinesei nor American. or ratherwhich ‘t Under what similar l FICC migration institutions Yopogmph} icciinolog} \ttl‘igtt‘vcil‘llinlc‘liiill i i i ‘ I“ “'*ii"‘it‘itili\\: would he all ol these societies at the same ti tic. 11cc I ioiiiitit it s ‘ l . . . rulet under what single law \\otild this socieo exist? lir'ineois René Vi- oi‘gani/ations - t t . c . 1 1‘4] ' Rtsource endowment Sei'i ices (ioiernment The rule ot'law CtimlC W C hillCilUb] Hm» t ) institutions Monetary standards is now ledge Fiscal trans iai’eiicV t, l , V _ _ ,y g, 1. crises (‘ocrcion \iitli t‘ergusoiiisprol'essoi ot'politicalanil1tiiiincialliistoi} Litlesttsl “Hills-1 “MYWW “mm (mu W“ l ()\lord i _ t » i t l>1\‘c‘£i_\‘c’ l.i‘)tltilC<i hi l-mma Rothscmld t i‘NVt tll Ferguson economic historians alike tend to locus their attention on (lows ol‘eomn modities. capital. and labor \\ hen tr) iiig quantil} and periodize the process ol‘globaliztition. llott'eter. there are other lloit s that are susceptible to glob- ali7iation: l‘lotts ol‘technologt and sert ices hate been discussed. though in less detail. bttt relatitel} little has been said about lion's ot‘disease. institu- tions. knoitledge. cu ture, and "crises" (the process tiliereby a particular etent like a retolution or a linaneial crisis is transmitted by a kind ol‘ntime- sis around the \torld , 'l’he ltistor} ot‘ the lottrteenth century would be in- comprehensible \\illttttll the globali/ation ol‘the bubonic plagueiust as the conquest ol‘ the .v\me ‘icas b} l€uropeans would not hate happened so etis~ ih Without the cspor oi inl‘ectiotts diseases. \\ hieh decimated native popu~ laitions. As \\ ell as in \eetions. the conttuistadors and colonists brought in- stittttions and ideas: the (lunch and (.‘ltristianitt in the tirst place (witness the old Spanish Mission at Santa Barbara. \\ hieh existed to convert the in digenous C'liumash ieople). later the idea ol~ rcpresentatitt.‘ government arid detnocract. Slott and erratic though it has been. the process of global democratization since the l77lls illustrates the was both institutions and ideas can be spread i itcrnationalh as readi _t as goods can be traded across borders or monet intested abroad. ,i\nd the phenomenon ol‘contagit’m. fa- miliar o students ttl‘illlCl‘llll‘tlt‘lltll moire} and capital markets. has its polit- ical counterpart in tie international I'C\ttlttllt>ltitt’§ itates a let l789. l848. Ml"; and WW. lico totnic historians also tend to pa} more attention to the ways govern ment can lacilitate globalization by \arious kinds olderegt lation (the first liour items in the last column ol‘the tablet than to the oats it can promote globalization tnore aetitel}. lt is onl}. relatitel} recentl} that tie have come io unterstand the importance ol political institutions he rule ol laW. ci'edib e monetan s\ stems. and transparent liscal ststetns in encouraging cross—border capital llou‘s. Little nork. b_\ contrast. has been done on the nut globalization can be imposed ht the rise ol‘ loree. "lint tire” is the eon- cept tl at seems to lurk bettteen the lines ol‘a number ol the precedingcharr ters. \tltich lt£t\C perhaps discussed the economic globaliza ton ol the eigh- teenth centuries \\lllt too little regard (or the remarkable tti teentlt and nine . V li' on brought about b) the lzuropean empires in the same political globa [1 period. I Belore discussing these issues t‘urthei' l nould like to sketch the method ological problems that seem to me to arise ‘i\ hen \\C attempt to historictzea modern concept like globalization. ‘l‘here is something Very alluring about the story implied by the “U” shape \ isible in some charts depicting long-run letels ot‘ capital mobility. hi this narratite. \\‘c‘ tind ourseltes at the right- hand side olithe l ittltere international capital tlotts hate resumed a rela- 2, hot it itscltil introduction to me tiitttt'conottitc latcts «it 3.3t‘l1illl/7ttll(tll sec llcld cl a (twin. (ilobali/ation in lntet‘disciplinar} l’erspeetit‘c 557 the importance not seen since the lt)()()s, The notion captured by the [,5 r that there hate tlteret‘ore been two eras ol‘globalization makes sense Mine are interested onl} in llott's of commodities. people. and capital. But it makes much less sense il‘ne are talking about (lows ol‘ "ulture or disease: A further question is \t hether or not We regard our model ot‘globalization as “closed,” Are certain things exogenous (or examplei wars. so olten cari— ’ttgcntttls shocks"? Within the model. what is the direction ot causation? Does it run (tom trade to capital flows or mi— gration. limit the dewlopment ot‘the lina ieial system to industrialization. or from globalization to international no tetary systems? eatured b} economists as "ex A simpler question to ask might be: How mttch distance does a (low have to cover to qualil} as global? Or does it _lt st have to cross an international border? ll‘so. we. must ask ourseb es \\ h_\' that particula ‘ criterion has been chosen. git'en the enormous \ariety in the sizes and longevity ol‘ nation~ states. And in a similar \ein. \t by prit ilege ransoceanic (lows ol‘goods. cap— ital. and labor"? Was the trans-Siberian ra ln'ay not as t ueh a part ot‘nine— teenth-centurt globalization as: the transa lantc steamship routes? A further set ol‘ questions relates to the hat ire of' t to (tows themselves, Are long~term lions: more important that short-term t‘ on's‘? The question is usually asked \\lllt respect to capital lion's. nit one eottld also pose the question about motements ot‘ people: ls tourism less 'i iportant than per— manent migration.7 A re \\C more interestet in g "oss (lows t tan net (ions.> As Obstt‘eld and Ta} lor sltott in chapter 3 in this volume. tiis can make a big dillerenee to our assessment ol the scale ol‘ recent (in; need globalization. which looks much less itnpressite when tel t‘ows are tteasttt‘ed. Does it matter il‘globali/ation is eten or uneteit‘.’ An it tportan di ‘i‘erenee between the world or l‘)()l and the \iorld ot‘thll is thz t a muct h'ghci proportion of commodity trade and capital (low l l economies. to the exclusion ot~ the rest o i [at oes on \\'l hin t ie deve oped ie world, A on id (>3 percent of foreign direct investment in l0l3 \tent to time oping countries. whereas in l996 the proportion \tas‘iust 38 percent (Baldwin and Martin 1999. :0). ln many respects. it appears. modern globalizatit.)n is not re: lly global at all. Finally. does competition matter? ()t: to put it ditl‘erently. are we mainly in— terested in the extent to which market lorees are l‘ree‘.7 This is an important s (‘1 H z question to address. since the advance guard otiglobaliza ion in the eighs teenth centurt Was made up oliai like the East lndia Compant til 4 ’I gres‘site monopolistic trading companies ereas in the twentieth ee ttury the Soviet system had considerable success in continentalizing. il‘ not globalizing. the system ofthe planned ecottottt) iii the greater part ot‘tt’hat tsed to be called the “Eurasian land mass.” .4 Each pair ot‘authors has giten a ditl‘erent implicit answer to these cities. tions. To my mind hottex er. our most serious? omission is that there is no 3.8eeD1aniond t l‘NU 558 .\ ia l Ferguson chapter in this boo about "political globali/iuion." with the partial excep- tion ol~ liic tcngrecn and .lanies's chapter on glohal linancial architecture. That there a poli ieal dimension to the phenomenon is clear li‘om almost exerx‘ contribution (‘ral‘ts and \'enahles suggest that. giVCIt the geographi— cal uneien iess ol‘ ’ndustrial and urban dexelopment. there may still be a ll‘s in modern polic}: ('hiswick and llatton emphasize the im- l‘orced migration (sltnerx )aud immigration restrictions in long- run trends in come 'gence and diiergence' lindert and Williamson point to the importance ot bad goxernment in limiting the benign ell‘ects of eco- role tor tari portanee ol nomic globalization: and Rousseau and S} lla demtmstrate the linkage from warfare to inaneia intimation. l'ixen ltordo and l‘landreau‘s idea ot"orig- inal sin“ the lack ol‘which allows a countr} to issue bonds in its own cur- rency alludes iin ilicith to the enduring importance ol‘ political events. since most historic “sins” ol‘ currencx depreciation were consequences of unsuccessl‘ul w‘arl‘are. There is a general assumption that. in the pcriodiza- tion o1 e obaliyatiou. the \ear WM was a watershed. a da e whose signifi- cance is. ieedless to stt). primaril} political. Yet on what seems to me the most important aspect oi political globali/ation the role of empiresw there is a i uneasy silence. apart l‘rom an aside in (‘lark ttltt Feenstra to the etleet tha their role is not 'mportant compared with the unsterious "factor C" that accounts tor dill‘erences in total lactor productn it}: That e npires did not ta id do nott matter in glohali/atio i seems implau‘ i 'ikine political lact ahout the per od from around sib e. Per taps the most :1 lin unt'l 193‘.) was that 2 small number at linropean cot ntries gox‘erned an inordinately large amount otthe rest olithe world. On the ere otthe First World War. (ireat Britai i. lirance. Belgium. llolland. and Germanyfi— which be ween them accounted tor around Hf) percent ot he worlds land surlace a id ":5 percent ol‘its population ruled in the region old} percent olithe res olithe w orld's a "ea and 2" percent oli its people (Townsend l94l. l9). All o ~.t\ustralasia. nearl} all ol Pol} nesia. 0!) percent ot‘Africa. and 56 percent o ‘Asia were under some lin‘m otiliuropean rule. And although only 37 percent olithe American continent mainh ('anada rl‘ound itselfinthc same condition. nearl} all the rest had been ruled trom liurope at one time ith centuries. or another in the sexenteenth and eighte ‘i The economic. implications hardh need to be spelled out. The historyol the integration ol‘ international commodit) markets in the seventeenth and eighteenth centuries is inseparable limit the process oli imperial competis tion hetween Portugal. Spain. I'lolland. lirance. and (ireat Britain. The spread ol~ li‘ee trade and the. internalionali/ution ol‘capital markets in the nineteenth century are both inseparable trom the expansion of British im- perial. and especiall} na\al. power. is it reall} coneehahle that there would have been so much migration as well as capital export t‘rom Western Europe to the less de\eloped economies ot~ the world and hence so much global comergence het‘ore WM i\ithtitit the encouragements and reassurances (nobalt/ation in interdisciplinar) PCI’SPCCUVC 559 ol‘empire‘.’ By the same token. the eclipse ot‘globalizat’on in the middle ol‘ tl e twentieth centur} was in large measure a consequence ol‘the inincnselx’ costly and destructn e challenge to British hegemony mounted bx Germani' between 19H and 1‘) l R. Nothingdid moret tan the Firs World War to pro- mote alternatne models ol‘economie organization to hat of ti interna- tional tree market. \\'ar was ttCti\'Cl}‘ waged agains seahorne trat e. Yet. ac- cording to ’liax'lor‘s earlier ligures. the years l9 4 to l9l9 also saw the tire—limos peak ol~ international capital flows met suret by the ol‘cur- rent account deticits and surpluses in relation to gross domestic product (GDP) (Tax lor WW»). In the same w a}. it was the Vttl‘lOttS wartime CXpCFi‘ ments with the control ol‘trade and foreign excha ige. tie centra ized allo— cation ol~ raw materials. and the rationing ot‘consump ion. that provided the inspiration for later theories oticconomic plan ting i i the Sov'et Union and elsewhere Trying to L‘OHCCi\C ot‘ the histor} ol‘empire as a chapter in the historv ol‘ globalization raises some fascinating questions. Tie Br'tish Empire inithe nineteenth centur). tor example. can he understom in part as an agencv for imposing tree trade and the rule ol‘ law directly on about a quarter oi the worlds land surtace and indirectly on a great in; in o her places. to sav nothing ot‘tlie worlds oceans. ll‘ we beliex'e that eco iomic openness is good. then. by extension. one might hax'e expected some global benelit to result hour this immense undertaking. tlntirestingly. this is not the wav most British economic historians lttt\L’ tended to approach the question: ’lihe de~ hate has almost always been about the costs and the benefits ol‘the empire to Great Britain.) Yet there is a paradox. lndia. more than any other major economy. had tree trade and Western commercial norms imposed upon it. Yet the result w as deindustriali/ation and economic stagnation, The United States. by contrast. threw oll‘ British rule and adopted tie kind of protec- tionist taritt rates averaging 44 percent on imported manufactures ~that we would now condemn in a developing economy (Bairoeh l989). The re— sult? By the end ot‘ the nineteenth century the United S ates overtook the United Kingdom b} most measures ol‘ economic performance (see fig. l). Clark‘s ligures tor lahor productiVity in the cotton industry are eVen more Startling: ln H44 an American textile worker could dot ‘606 spindles per hour. compared with 354 tor a British worker and just l24 l‘or an Indian. Conversely. the globalization ol‘ warfare in the twentieth century must bear a large share ol‘ the responsibility tor the breakdown ol‘ international trade. capital llows. and migration, The wars of the eigiteenth and nine— teenth centuries had alread} ranged o\'er a huge area. ol‘course: Think onlv of the global character ot‘ the Sexen Years \Var. But these imperial wars were circumscribed b_\r the mailable military technology 2 nd the limited cos crcive powers ot‘goxernment. x'\t most. even the French Revolutionary and Napoleonic wars put together accounted l‘or the lives ol‘t).3 percent of the world‘s population. It was mil} in the twentieth century 1 tat it became pos- Unittxt Kingdom D United . 4900 r Itiota tDGQ ' lti‘ltt t/lit: lit/h Fig. 1 Per capita (it)? in (ircat Britain. \nierica. and india. l(w(lll~l9l3(l99{lin~ ternational dollars) \‘om’t‘ia Maddtson tittttL p. 2M. ta'olc llrli‘i sihle to mobilize men and ltill men. \\Ull1C11. and children in millions. The total death toll ot‘ the Second \‘iorld \\'ar was in the region 015? mil- lion. around 1.4 percent ot‘ the, worlds population.“ More c1 eering. though no less remarluthle. has heen the globalization of democrac} as a political institution. According to sortie estimates. more than halt the worlds countries \iere democracies in the 1990s. for the first time in histor} {see lig. 3). in part. democrati/ation has heen a consequence ol decoloni/ation. hut it is also the Eitllllliltlettl ot‘ "that irresistible rei'oltt~ ln ‘l'octtum ille detected alreadV in the 1830s. "which has ad- tion.” which t c \anccd lior centuries in spite olieiers obstacle and \\lllCi1 is still adVancing in the midst otthe ruins it has caused" t’de Toctiueiille { 18.15] 1045. 3. 7). What is the relationship hctiteen the glohali/ation ol‘democracy and the glohali/ation ot‘the market"? There are those who would like to think Qlthe t\\'o procc ‘ses as sell—re ous. To citeiust one example. one phenomenon associated with (and per~ haps lomentcd in) democratization has heen political lragmentation. AS democrac} has spread, so the num‘oer oi recognized states has risen from 74 in 1946 to 1‘): lit‘ty scars later. According to .Nlesina. Spolaore. and inl‘orcing. Yet the e\ idencc on this point is ambigu- \r\";_tc/.iarg ( l‘l‘fll. this process ma} impose some costs in terms ol‘economic inellicienc); ( l. 33). It certainh imposes costs il‘ secession is accompanied. as it often has been. h} ci\il oar. A striking paradox. in short. is that J. .\l) out; caicislatlors: tor details secl‘ergiisont.:l‘15t..ippe:iiti\ li (llohali/ation in 1titerdisciplinary PerspectiVe 561 0.2 ‘ 0 fine, . _ . , 18001810182018301840 ‘850 18 v t870 i830 taen i900 tQtO 1920 i930 17940 17950 1950 1970 teat) 17990 Fig. 2 Proportion (ifstatcs in the “Grid “it?! a Polity III score of between 7 and lil out of 10. 18804996 .S‘aitric Kristian S. (ileditseh and \lichaei 1). Ward (adapted from the l’olit} lll database) nineteenth—centurs globalization coincided Witt political centralization. Whereas today it scents to coincide \\ ith political fragmentation The evidence that economic openness raises living standards ---or would. it the iiot'ld economy were truly globa ized looks compelling. cren it globalization will always hare its losers. as hitherto pririleged or protected social groups are exposed to international competition. But the principal barriers to an optimal allocation ol‘laaor. capital. and goods in the world are again in large measure political: On the one hand. civil wars ant corrupt g pernments. which together (as Li tdert and \‘v’illiamson ar» gue) have condemned so many countries in sub-Saharan Africa and parts olAsia to decades ol‘ immiserization: on the otter. the reluctance ol‘ the Un' ed States and her allies to dc\ote more that a trilling share 01‘ their vast resources to programs or economic aid. ell‘ective peacemaking. and the volicing ol “rogue” states. It is \iorth recalling that. at the time this con erence took place, the conventional wisdon was that the new Re— puh ican administration should cut hack x’\merica's military presence abroad.5 Tie erents ol~ 1 1 Septem her Zillll put paid to such isolationist daydreams bydemonstrating that political violence also has the potential to be global— ized It is a sobering thought that the very same planes that carried this boo contrihutors to their conl‘erence in May could hare been used as Weapons ot‘ mass llllll‘tlc‘l‘ltlsl l‘our months later. The dangers ot‘ neglecting the 3olitical dimensions ol‘ globali/ation have. regrettably. become much clearer since \\C met. SSeeUl‘lanlon1:111)!t. “MW—M mt: 562 Anne 0. Krueuer References ;\lesitta. Alberto. linrico Spolaore. and Romain \\ac/iarg. WW. ltconomic inte gration and political disintegration. .\ llliR working Paper no. {as}. Cambridge. .\’lass.: National llureatt olil't'ottomte Research. Bairoclt. l’. littnipean trade polic}. le.‘ ltllt-l, l‘lk‘tl. in HM t‘z/Iiz/ii'l'llizt' (’(WHU/Nlt‘ nit/ort' or“ [L‘Hl'ttl/lt”. Vol. X. ed. 1’. \latitras and S, Pollard. l loll, (iaiiibt‘itlge1Ctttttv bridge Linnersit} l’i’ess. Baldwin. Richard li and l’hiltppc Martin, l‘l‘N. lino waws oliglobalization: Su- perlicial similarities. fundamental dttiet'cnccs. \lil‘ilt \\'orl\ing Paper no. 6904. Cambridge. Mass: National Bureau ot‘liconoinic Research. lanuar}; Diamond. .lared. W97. (it/Ht. ecrmt. rim/t/w/ gt t/tm'l i’ut/«ttjt‘ot’rit'wii'bodt'flirt/relax! /.i,()/i/I‘>rmr_\. l ondon: .lonathan (Tape, U l‘iergttson. \iai .Illtll. [Tlt’ HM jtltlt). New York: Basic lloolts, lleld. l)a\id. .r\nthon} .\lc(ire\\. l)a\id (ioldblatt. and Jonathan l’erraton. 1999. (it’oiw/ fi'tt’llw'flJI'illtr'lltllM.‘ l’o/irn t. M two/nit .x. aim" ctr/inn; Cambridge. UK; Polity Press. Lodge. Datid. MM. slim/V nor/ti ,rl/i JItt/t/t’H/lt )é/illz/lltt’. l ontion: Seeker & War- bur lint/ct mat/in ‘s'ta the Him/UH? ll‘(l/‘/(/, 1700 l r .\'laddison. ,Xitgus. :(ltll. l'fn limit/u «rum/it: ,l iii/iix’t'titirt/i’/t<'t‘\/rtit'ttt‘t’, \‘t'ashington. DC: Organi/ation Tor lic‘ttlltttttte(ittttttci'tllltitt and l,>c\c|opineitt. (Tl lanlon. \lichael. Ztltll, (ionic pai‘tl}. home ,r\n‘:ei ica’ llow to downsi7e 0.5. de— ploymcnts abroad. Hire/git Jll'lh’l/CV t Marc? . t‘t'll t‘ ‘. Rothschild. limnta. WW. (ilobali/ation and the return ot' history l‘lll't’lfli? Pit/(ct (Summer): lot» It». Taylor. .v\lan. two. international capital mobtht} in history The savings intesttnent relationship. \Bl‘ZR \\'orktng Paper no. Til}. (iambridgc. Mass Na- tional Bureau ot" Economic Research. Tocqueville. :\le.\is de. 1945. Memorial t' m .‘llllt'i'lttl, cd. l’hillips llowen. tet. by Francis Bowen. trans. llenr} Rccxc. Vol. I, New \orlt: Vintage Rooks. Townsend. .\lar_\ live-hit. ltMl. [film/trait (vi/wind int/who'mi time 187]. Chicago: .l. l). Tippincott (‘ompany Anne 0. Krueger There is a natural unease among economists and others about the current backlash against globaliration. .\ large part otithat unease originates from ottr understanding ol the elliects ot‘globali/ation: ln large measure. we be- liC\'C that, the C\lthtth‘ shows that the “ascent ol man” has at a minimum been accelerated by. and at a maximum been enabled by. the phenomena that are now called "globali/ation" and that are under attack. But part olit stems l‘roin litilure to recognize that there haxc alwa}s been opponents of change. and that there hate always been opponents ol‘ the phenomena as sociated with globalization. .\~l_\ comparatit‘e adtantage lies in interpretinU l trade policy and in list deputt titan; I director otitite littetnattonai \lonetar} Fund and a research associate olithc \zittonal lltzi in or l cottomtc Research tilobali/ation in lnterdisciplinary Perspectne 563 poterty reduction in deteloping countries. The change in tone in trade pol- icy discussions. and the reactions ol‘internationalists to it. probably reflects our lailtti'e to recogni/e the sources ol‘change. and i will address that first. Tltereal‘ter. i will tttrn to the ellects oli globalization on deVeloping coun— tries‘ prospects for imprm ed welhbeing. an instance where those protesting globalization seem to be largel} ignorant ol‘the l‘acts. Any economic historian can tell us that protectionist pressures. and re- sistance to treer trade. are not new. But those pressures have changed markedly oter time. both in their political ellectit'eness and in their inten— sity. In the case ot‘the lfnited States. on which I s tall concentrate. LES. Tor- eign trade polic} was largel} determined by Cold War considerations in the post \‘v'orld War II era. supported b} a coat ition ol‘huntanita "ians. The “re— alists" - that is. the (‘old \\'arriors wanted opet trade and t‘oreigi aid in order to build alliances and support allies i t the ("old War. T to humanitar— ians wanted open trade and loi'eigii aid because t te)‘ wanted econo nic de- velopment in poor countries. This alliance between the realis s and he ide— alists prot idcd a t‘airlt strong political sup wort base tor those polices that we would today associate with proglobalization. This included support for the international linancial institutions tle) and he regiona development banks. the (,ieneral ,~r\grcement on Taritls a id Trade (now the Work Trade Organization). bilateral lbreign aid. and successive rounds ol‘t‘ery success— l‘ul multilateral trade liberalization. The d'lTeren motivatio is ol‘ t re two groups led to a need Tor enormous politica skills in forging a 1112th ‘ity tor internationalist obiecthes. as cwidenccd by the itcreasing constraints on loreign aid as \‘arious special interests acl icved amendmen s reqt 'ring a multitude of actions. What changed recentl} was the end ol‘ the Cold War as a driVing ‘orce in international economic polic‘} in the United States (and in other court ries as well), That remoted an important constituency lrom the pro-tree trade coalition. It is not that most tormer Cold Warriors turned protectionist: it is that they failed to support trade liberalization with the same Vigor as before. At the same titne. howetcr. the humanitarians seem to lt'dVC decided (er— roneously. based on available et'idence) that globalization is hurting poor countries. Thet hate. some genuine issues. and it is certainly true that glob— alization. or increasing economic integration with the rest ol‘ the world. is not a seamless process in which all benefit incrementally at the same rate. Addressing these issues is certainl} important. But there is also an irrational element. Part ofthat has always been there. as the quotation l‘rom (ioternor Clinton's letter made clear. There were warnings that train traVel in excess ol‘ lil‘teen miles per hour would be haz— ardous to health: and that w as resistance to change. In some cases. the con- cerns hate a \ttlltl basis, such as with the emironment. because as we get richer we can allin’d to address some otithe side echcts ol‘hat‘ing gotten there. But in the present circumstances. l think there are some causes for con- cern, The. tirst. alreadt implicitly stated. is that those who pcrceiVe global— v is: u 564 Anne 0. Is rueger ization to he harming the poor are in tact largely misinlormed. Secondly. many ol those people hate tormed nongtwernmental organizations (NGOs) that haye heen \ery \ocal in disproportion to their membership; those NGOs are not accotrntahle as gmcrnmcnts are and yet they demand Voices at the tahle alongside < oy‘crnments. This is dan ycrous tor a number ol‘ reasons. hut since many o i the \( itls are focused t n glohalization. the giyc those issues“ to the N603. re- sulting international paralysis re» ’14 4 r; politicians scent to hayc heen willing to "y gardless ol‘ the merits ol‘ the case. The re \ sues associated with glohalization strikes me as potentially dangerous. Let me turn now to policy with respect to deyeloping countries, When most dey'eloping countries were Very poor and almost entirely rural. the hu— manitarians could support giving them greater access to developed coun- tries" markets and liew special interests (including lahor’) in developed coun— tries were concerned. At the same time. the examples ol‘ liast x\sia clearly showed that very rapid deyelopment could he achie\ ed with appropriate economic policies and open economies. Simultaneously. hoch er. the newly industrial izing countries (as they were then called) were gaining economic muscle. and it is olten l‘orgotten how very poor people were irt countries such as Korea. With the competitiye ahility ol‘ the liast :\.\ltlll economics. and later 0 hers, greatly enhanced. protectionist pressures increased, Yet that runs the risk ol‘ V tion in those countries that are now attempting economic policy re ‘orm. FA en il‘goy ernrnents in those countries are ahle to do the politically neces- sary (which is otten paint‘ul and requires lighting \ested interests tiere). ains anywhere nearly as quickly as they could with less eir products in dcyelopetl countries. To he sure. they greath impairing the prospects tor economic growth and poyerty reduc~ they cannot ucliieyet protection against tl can still achieye much more satisl'aetory results with appropriate p0 ieies. htrt giy en the depths ol po\ crty and the degree ol‘catcltaip needed. less mar- l (L4 .4 ket access sur’ y reduces the l‘easihlc rate ol‘ceonomie growth. Let me linally tr rn to something more to the direct interest ot‘economic historians. .r\houtl i il‘teen years ago, l was asked to grye a paper at a conler~ ’ r ence ol‘economic 'rstorians. The question that l was asked to address was "what is ditl‘ercnt ahotrt twentictlpcentury glohalization from nineteenth“ century globalization. or in the catch—tip process. to use the economic his- torians term?” So I did sortie research. ()n that basis. I was confident that one could say that. at least lor the liatst .'\>ltttl countries that hegan their pro cess ol‘opening up in the late ltlftls and Wins. the tuiportunity to exporter}- ahled them to grow much more rapidly than they could haye done had they had to rely on the domestic market. as nineteenth-century growth did. The dill‘erence in the twentieth century was that those who wanted to Change policy regimes had achieyed much higger hcnelits than a similar policy switch could lune done in the nineteenth century. This was partly due to (ilohali/atron in Interdisciplinary l’erspectiye 565 lower transport and communications costs. hut also partly due to lower tarill and other trade harricrs. ()nc statistic illustrates this: South Korea‘s per capita income growth in percentage terms over any single decade he» tween tom and NOS was greater than British per capita income growth over the entire nineteenth eentury.’ There are reasons tor this more rapid growth: a largely unskilled labor three (in the l‘Jotls) could he employ ed to produce unskilled labor intensiye goods without encountering rapidly diminishing returns; competition from foreign producers is a magior spur in countries with small domestic markets (as they necessarily are when pcop care Very“ poor). There is also a role l‘or importing technology and ideas. al hough in my judgment that is more im— portant once countries hate attained "middle income" status than it is for very poor countries. And growth. and maintaining a tpropriate economic policies. is politi— cally easier when growth is rapid: Losers lose less. and there are more new opportunities to shilt into new and protitahle actiyities. ll‘ one tries to iden- lily those who lost absolutely in Ko ‘ea in the l960s or 1970s. there were rel— atively t‘ew l‘aetory closings. and the losers were largely older peasants. and even then their otl‘spring olten sent remittances from their urban johsr so that rural liying standards were risi tg rapidly. Lirhan employment grew l0 percent per year. while real wages were growing an average 8 percent. In those circumstances. there are l‘ew t hsolute losers. {yen alter 1997. all Ko— reans would agree that ll\ ing stant ards had skyrocketed since the l%()s. That is not the same process as in the nineteenth century: Opportunities and liying standards tor the poor rose much more rapidly in the late twenti— eth century. The countries that haye not yet achie\ed the transition to more open economies. with their attendant supporting domestic policies. are haVing a hard time doing so. Political opposition is a major factor. and that gets in» tensitie l hotli hy slower growth and hy the rhetoric and reality ol‘protection in dereloped countries. How to get the antiglohalizcrs to recognize that the policies they advo- cate by and l tgc achieye ‘esults opposite to those intended seems to me to t ,.. . , a . bea mayor cha lenge tor the international economic policy community. Ronald Rogowski lhate taken seriously the hriel‘ to try to identity the cost and benefits. the Winners and the losers. from easier trade in goods. l‘actors. and services from what is commonly called "glohalization." That's ohyiously related to Ronald Rogowsk: is pr‘otiessor orpoltttcal science at the liniycrsrty ttli(it!lll401'lllil lcos .r\n~ gelcs. he question that (‘liye Crook raised. “\‘y ill this kind ol‘globalization con- tinue?” What are the odds that. exactly as happened in the waning nine- eenth century. globalization w ill stall out or sellldestruct because the costs are too high tor too many people? On one leyel we haye a standard story ol‘generalizcd benetits and local- i/ed costs. The benelits are clear tor the world at large. and indeed for each ndiyidual country in what Dowriek and Delong called. in their paper for his conterenee. "the conyergence ciubf' l’rotn that standpoint. what we iced is more globalization. not less: and we need to think more about the :eniaining barriers. Anna .l. Schwart/ raised the issue oT migration. and lieres a strong case to be made Tor much greater and possibly unlimited mi— gration. As Niall l'ierguson pointed out. increasing political fragmentation also a concern. particularly in the light ol‘an irnpo. tant literaturcwwhich somehow has hardly b .{yen with relatiyely open policies. political tiragnientation can significantly 'mpede exchange ol‘goods, sery ices. and lactor‘s. oli ecn mentioned here about how high borders are. The cos globalimtion get less discussion. btit they are crucial. Foln ‘owing Wi tmson and l.,indcrt's paper here. I'll discuss them under two readings: nil/1m countries and fie/new; countries. Roth raise moral issues we haycirt talked about and possibly are not well equipped to talk about. ts llit But in the crassest sense these costs ha e political consequences. That is most obyiously the case nit/rm countries. particularly in powerful. ad- \ anced countries that could cause liree trade to “stall out.“ Well. who are the losers within those adyanced countries? The standard theory identifies them. and Lant l’ritchett spoke eloquently about them in our discussions here: the unskilled workers. linskilled workers in today‘s deyeloped countries are the counterpart of the European landowners and Tanners ol' the nineteenth century”. tlte ones who see themselyes as most threatened by i tore open trade an< are likeliest to turn against it. Just consider the aspect that is best documented. namely the growing firearm/[rt between the skilled and unskilled in the developed countries. The premium to a college education in lil‘etime eartings. which was below 40 percent as recently as the liltitls. is now hoyering right around 7t) percent. We haye absolutely declining real wages; or. w he'e wages are kept aboye markehelearing leyels by restrictions on labor supply. as in much of Europe. high leyels ot‘ unemployment And we haye growing insecurity. maybe alleeting everybody. but surely most strongly atl‘ectiig unskilled workers. Now to be sure. some ol~ this loss. may be a lot ol‘it. is due to technologi~ cal change: but l‘ our standard theories mean anything. globa izationcan- i - not be helping. lndeed. it should be harming unskille l worke in at least Tour ways: ' through classic SlttlDEF—Stiltltlclsfllt etlccts. gnen that unskilled laboris the scarce lactor within each olithe adyanced countries: tilol’iali/ation in lnterdisciplinary "erspeetiye 567 s by migration. which we know histori ‘ally from .lelliV‘y'illiainson's work has eyen more powerlul ell‘eets (an important addendum is the finding irom llatton and (.‘ltisw icks paper here that. among the i/lcga/ immi— grants. we lind oyerw helniingly unskilled people. The reason for that clear once stated. namely that the unskilled aren‘t as easy to detect: but it also suggests that any attempt to crack down is going to l‘ail most si nitieantly among the unskilled t: - the possibility ol‘ capital flight. raised most notoriously in the Ross Perot line about tl u- C,‘ re “giant sticking sound from Mexico (this olicourse is the ink to the between-countries story. the possibility that capital will moye from the adyanced to the less developed countries. entailing a further decline in adya iced~country real wages. In fact. we’ve seen almos no capital llight: t ie big question remains the one Lucas add a decade ago: why doesnt capital tlow t‘rom rich to poor countries‘.); and v0 * greate ‘ exposure to exoge ions shocks. The poli ical elliects oligrowing inequality. some ol‘ it caused by global- ization. some by technologiea change. seetn to me already apparent. The most alarming is the xenophobic and protectionist moyeinents that are now spreading l'ke a rash around liurope. leePen. lilaider. and the resurtent Ger— man Right draw heat ily’ and l hink predictably on unskilled. usiu lly male. usually yot ng. workers. The Austrian Socialist Party. notoriously. is simply losing its young people. its yo tag unskilled workers. to the Haider move- mCltl. Unions in the lfiiited States. ol‘eourse. are also becoming more proteck .t (I tionist. and the more general story is to be lound in the works. separately and collaboratiyely‘. ot‘ Ken Schey‘e and Matt Slaughter. Starting with the US. survey eyidence. and extending now to France and the United King- dom. they tind consistently that the single best predictor ol‘general support for free trade is education. The more educated the person is. he more hu— man capital she possesses. the likelier she is to express genera ized support for free trade: conyersely. ot‘course. it is the less educated who express gen- eralized support tor protection and isolation. ldon‘t think this is because ol‘ the great command ol‘ inter rational eco- nomies that is being imparted by high schools and colleges. l think it‘s a shrewd assessment ol‘ self-interest. The more educated you ire. the more likely you are to benetit from globalization and trade and the li 'elier you are to withstand relatiy'ely well the kinds ot‘exogenous shocks that come from a more open economy. Now the good news is that in most ol‘ he adyanced societies the median yoter is ski led. w hieh means w-barring some sort of disaster~~ majority support for continued openness. The bat news is that the really unskilled. in particularly the ineducable. may: become increas- tngty' desperate and alienated losers: and the question then arises. what pol- icy remedies it any can one adopt“? 7' WWWxxmAMW.—V. 568 Ronald Rogowslti Rut/1's]ri/tttiimi is widely practiced in the adyanced countries. and it's worth recalling that redistribution was quite explicitly adyocatcd by Stolper and Samuelson in their landmark l‘Lll article. Since the aggregate gains l‘rom trade will always outweigh the losses. they said. one can always com- pensate the losers and come out ahead. llut ot‘ course itiyou think on art- othct‘ leyel. redistrilnttion simply impedes readiustmcnt. lt discourages people. tor e.\ample. trout acquiring the human capital that a tnore global- ized market demands. The second possibility. and particularly an answer to the Volatility ofa globaliyed economy. is some kind otx social insurance. Not generalized re- distribution. but something like the actiyc labor market policies in Scandi- nayia that are supposed to help you through the transition. And we see of course in tl e empirical C\lt tnce ol‘ l,)a\id (faincron and Dani Rodrik‘s work that this seems to happen: The more trade»e.\posed a country is. the tnore it relies on social insurance mechanisms. lltt Soskice and lyersen have begun to point out. in sortie more recent work. that esteiisiye social insur~ ancc encourages a muludaptcd torm or human capital. namely t’tig/t/l‘spe‘ cit/c human capital. The more social insurance mechanisms a society has. the more rational it is tor people to invest. not in generalized and transfer- able human capital. but in highly sector- or tirmAspecitic kinds ol‘htiman capital that turn out to he worthless it‘ that sector or lirm goes sour. So so- cial insurance. too. doesn‘t look like a particularly good adaptation to the global market. So the third and presumably best answer is more. and more suitable. hu~ titan capital. and subsidies to its acquisition that to some extent internalize educations positiye externalities. But that still lea\es, us with the moral and political issue ot‘w hat to do with the “tail” olthe distribution that isjust not yery educahle. with the people whom nature has cut out to be pretty un- skilled. l think we all see the dilemma. but the policy answer is by no means clear. With that unresohed. let's turn to the question ol‘ gains and losses be— tween countries. l.indert and \Villiantson rightly suggest that a lot more of the action is going on there than within countries. So why are some counv tries lel‘t behind. and why does inyestinent not How to poorcountries‘Hshall l ot‘ course resolye all ot‘ these yer\ .arge issues in my remaining thirty sec- onds. As l understand it and the economists present w ill rush to correct me" tour large classes ol‘answers are proll‘ered: ' /omlt'om// ct'mzomics o/‘st'ti/c. represented at this tnceting by the Ven— ahlcs and (‘ral‘ts paper: * tx'.\‘tt'r/m/iti'tas to human «apt/til. the explanation associated with Romer and Lucas: - fo/(I/ {tic/or /irm/tt<‘/t‘i'/rtz the explanation tor perhaps only description) Globalization in lnterclisciphnary Perspectiy‘e 56‘) that goes back to Solow and was represented here by Greg Clark: and. finally. ' the neoclassical answer. namely I’iut/i'its/t‘rurl'wts and lint/policies, l confess that l am drawn much more to the “bad institutions, bad poli» Cies“ story. tor much the same reason that llant l’richett suggested yester» day. namely that these are the one thing that can explain the Very rapid 'e- \‘ersals that we obsene. wherein a country suddenly moves from stagnation or decline to yery rapid growth. (Anne 0. Krueger mentioned the case of Korea as one ot‘ the most dramatic.) None ol‘ the other supposed explanas tions ~ local agglomeratitms ol‘ production. accumulation of human capi- tal. learning by doing. or cultural shift, it seems to me. can change quickly enough to account tor these sudden spurts. But ifthis is right. w hy don't we just get uniyersal convergence to good policies? lt‘s frequently argued that we will. but so liar theres little eyidence in that direction. .-\s He tried to show in a recent paper. il‘you work through a pret 1. comes combination ol‘polic} per and wages. what you come out with unv der co npletely mobile capital in a two-con itry Cotirnot equilibrium is (It'- tergence: .r'\s capital becomes more mobile. the countries that are already y standard political economy mode assuming voters maximize a more capital-friendly become more so. the ones that were less capital— friend y become eyen less so. and therefore. surprisingly enough. more im— poyerished. I think this is roughly what we see in the real world. most markedly in a place ike sub-Salmran Alricu. where real GDP per capita has steadily de— clined over twenty years in most countries. But that said. only a few couri— tries. especially it‘they happen to he really big countries. need to get it right or met hallway right to hme a major etl‘ect. lt‘ China becomes. as it has. a hospitable pla ‘e for inyestmcnt. then that can have a major el‘l‘ect on the de— veloped world. leading to eyen greater pressure on the unskilled in the first world. That brings as tall circle back to the question. assuming that sortie of these countries are going to get it rit ht and grow and export. and that this contributes both to t‘ttture world wel a re (UH/t0 lower first world wages. then What do we do in terms ot‘ policy for the unskilled workers here? lt‘s very much in our interest to tigurc that out. because it we don‘t the outcome could he \‘Ct’\’ had indeed. Lt ...
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Bordo, Taylor and Williamson, Globalization in Interdisciplionary Perspective-A Panel

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