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Unformatted text preview: ex for various countries (prepared by Foreign
Policy magazine at www.ForeignPolicy.com) was compared to life
expectancy. A strong correlation appears between the degree to which a
country has globalized and that country’s life expectancy. 46 Chapter 2 Economic Systems and the Global Economy people, at greater distances, than they once
did. They are trading different things: money
for goods, their labor services for money,
their savings for expected returns, and so on.
In other words, expanding trade—which is
what globalization is about—is no more than
extending the benefits of trading to people
one might not have traded with earlier.
Standard of Living As both India and China
opened up their economies to globalization
in recent decades, they experienced increases
in income per person. For example, between
1980 and 2000, income per person doubled
in India. Between 1940 and 2000, income
per person increased by 400 percent in
China, much of this increase coming in
recent years. According to the International
Monetary Fund, these dramatic increases in
income per person accompanied the expansion of free international trade (which is a
key component of globalization).
Also, according to the International
Monetary Fund, in the last 30 years hunger
and child labor have been cut in half and life
expectancy has dramatically increased in
developing countries. According to the World
Bank, 200 million people in the world were
raised up out of poverty in the past 20 years.
People in the United States have benefited
as well. According to work done by two economists, globalization increases U.S. income
by roughly $1 trillion a year, or $10,000 per
household. In other words, without the
United States globalizing, Americans would
be poorer by $1 trillion a year.
Another benefit to globalization seems to
be longer life expectancy. One study compared the globalization index (a rating based
on how globalized a country is; the higher
the number, the more globalized) with life
expectancy as computed by the United
Nations. The study found that generally the
more globalized a country was, the greater
the life expectancy. See Exhibit 2-4. QUESTION: How do we know that the ben- efits you say are a result of globalization
are, in fact, caused by globalization?
Couldn’t they be caused by something else? 11/17/05 4:14 PM Page 47 ANSWER: Economists are fairly sure that globalization leads to an increased standard of living based on their comparisons of countries with similar
characteristics. For example, take a look
at Exhibit 2-5, which shows that the
annual percentage change during the
1990s in output per person is positive in
globalized developing countries but negative in less globalized countries.
Or consider an extreme case, North
and South Korea. The two countries
share a people and a culture, but North
Korea avoided the process of globalization during the period in which South
Korea embraced it. What we observe is
that South Koreans enjoy a much higher
standard of living than North Koreans. Cost...
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This document was uploaded on 01/16/2014.
- Winter '14