In the most globalized era to date, the world faces many policy debates and questions. Many are fearful of globalization and are worried about the negative consequences it can produce. Brawley addresses these concerns in Chapter 3, ‘What People Fear-or Anticipate-about Globalization”. One issue people have about globalization is its ability to widen the gap of inequality between the rich and the poor, both domestically and across borders. Krugman uses the United States of America as a basis for the study of inequality in his chapter “Inequality and Redistribution.
On a global scale, Easterly explores foreign aid as a remedy for inequality in developing states in his chapter “The Legend of the Big Push. ” To dissect these issues, we must start with the force that raises all these questions, globalization. Brawley weighs both the uncertainty and positive outlook of globalization. Brawley points out that many are worried globalization is a “race to the bottom. ” These people are concerned that the economic competition of globalization will put too much pressure on domestic systems and will undermine everyone.
This is reasonable thinking for local producers who are worried about external competition. Consumers should not be worried about the competition because they will simply receive better and cheaper goods through tough competition. To counter the “race to the bottom” worry, Brawley gives examples of Japan and China. Both states have experienced immense success under globalization. China has quickly become one of the greatest exporting states in history, all through globalization. By opening its borders, China has been able to provide more jobs, produce more goods, and tremendously increase its GDP and economy. Japan is a similar story.
Japan has been known in history as always being isolated and keeping its borders tightly closed off from foreigners. However, once Japan opened up its borders, its economy, like China’s, literally took off. Now Japan is the source of an incredible amount of innovation, goods, and global supercompanies such as Sony and Toyota Motors. Moreover, globalization has also forced states to become more transparent. Brawley takes note of Golden’s study of Italy. Government officials cannot get away with corrupt rent payments anymore. Since businesses became more integrated across borders, they became more dependent on trade.
The corrupt rents were hurting Italian businesses compete with foreign businesses. Thus, governments were forced to become “more transparent, more accountable and more authoritative” as Golden was quoted on page 66 of Brawley. This is an important step in eradicating inefficient governments that halt growth for personal gain. Furthermore, globalization establishes strong economic ties between certain states. When states have meaningful economic ties, they have much less incentive to go to war with each other. But then again, globalization has also made it easier for small groups of people to gain access to more dangerous weaponry.
The thought of easier access to deadlier weapons is certainly a scary one. Brawley alludes to the trouble the United States saw in Vietnam and the USSR saw in Afghanistan to support this claim. Currently, we are seeing this in the form of ISIS. A great point Brawley brings up is that globalization enables the ordinary citizen to make a difference. With the right campaign, a group of individuals can launch a meaningful NGO, and NGOs have more power than ever. A specific case Brawley mentions is how instrumental NGOs have been in reducing landmines throughout the world.
This shows how globalization enables a great idea or cause to spread throughout the world. Weak local economies are concerned with globalization because it can be difficult for them to compete with the outside world. On page 70, Brawley explains how “lower taxes, competition for international investment, etc. ” can strongly weaken certain governments and even make them collapse like in the case of Somalia. Although globalization does put pressure on local actors, it is an overall benefit for the world. Just think about all the goods available today.
One person can order a good from the other side of the world that is produced at a higher quality and lower price than ever before. If domestic populations complain about how tough the competition is, they must improve their goods. Consumers should not suffer just because their domestic producers cannot keep up. Brawley provides great facts and evidence to support his points. The argument would be better if Brawley touched more on the huge benefits available to consumers through globalization. Although globalization provides never-before-seen benefits, it also seems to be increasing the inequality problem, and one can see how that is so.
It cannot be easy for developing states to compete with developed states in globalization when the developed already have such a huge head start. Furthermore, pollution controls unseen during the era of the Industrial Revolution are being enforced today, which severely hinders the pace at which the developing can catch up at. Krugman’s analysis of inequality both inside and outside of the United States supports the fact that growth is faster the higher up you already are. Within the United States, the top 0. 01 percent’s income growth has risen “at least six-fold since 1970. This statistic shows two things.
First, the top 0. 01 percent in the United States already has a huge gap from the poor or even majority of the population of the United States. Second, and maybe even more significant, the growth rate of the top 0. 01 percent shows that the gap is only widening, and by a serious margin. Data inequality is much harder to track in developing states for a number of reasons. Regardless, Latin America as a whole is one of the most unequal regions according to Krugman. Krugman notes that the Washington Consensus actually increased inequality rather than compressed the gap.
Furthermore, liberalization has actually shown to be directly correlated with rising inequality according to Behrman et al. (2003), as cited by Krugman. Nonetheless, the effects of liberalization should fade out over time. It just appears to be a huge shock right away, and the people at the top are able to adapt and take advantage first. Regardless of these “problems” iberalization causes. Krugman admits that inward looking policies are certainly not the answer. It would be interesting to see how the inequality gap would have been if the inward and import-substitute based economies never liberalized.
Perhaps the inequality gap would be even larger. This would be a very useful study that Krugman could have tried to include in his piece. But by staying with mainly data from the United States, Krugman is able to work with accurate and not muddy data which is very beneficial in his explanation of the inequality gap. Without liberalization though, one has to assume that those in power of an inward economy would reap all the rewards and give no chance for the gap to lessen. With the inequality that rapid globalization has caused in the world, many have pushed for foreign aid as a solution.
Easterly explores just how helpful foreign aid actually is. He first assesses the the legend of the “poverty trap. ” Through comparing growth rates between the poorest fifth of countries and the other four fifths, Easterly explains that there is no distinguishable difference in the rates. Perhaps the strong case of evidence against the poverty trap legend is that eleven out of the twentyeight poorest countries in 1985 were not in the poorest fifth in 1950. This means that instead, countries had declined from above; while those thought to be in the poverty trap have actually emerged ahead.
Thus, there cannot be such thing as a poverty trap. Easterly does take into account individual cases such as Chad and the Democratic Republic of the Congo which experienced zero and negative per capita growth rates respectively. However, those seem to be outlying cases that are present in almost any type of research. Botswana strongly supports Easterly’s argument against the poverty trap. Botswana went from being the fifth poorest country in 1950 to increasing its income thirteen times by 2001. One factor that Easterly looked at to explain why certain states did better with aid than others is what kind of government that state had.
Studies were able to differentiate between “good” and “bad” governments based on certain characteristics that took in account corruption, democracy, etc. It was weird that in conclusion the type of government in charge of a state had no impact on how well the aid given to them fostered growth. Part of the reason for this conclusion was that aid would sometimes be given simply for political reasons or other less effective longterm means. The takeoffs that Planners push for are also very rare and largely unrealistic. Meanwhile, booming economies like China and India are growing in no part thanks to aid.
In a nutshell, Easterly describes just how useless aid actually is. A further problem with giving aid is much of the aid seems to be going toward consumption and not long-term investment. If this is the case, no one wonder aid isn’t sparking growth. Easterly does also ponder if growth would be even worse without aid. Perhaps aid doesn’t help too much, but it is also very possible that without aid, the poor states would be even more devastated. He addresses all parts of the arguments and takes into account multiple opposing views and dilemmas.
