Globalisation and inequality

I cited in the immediately preceding post the sceptical judgement of Vincent Cable, Liberal Democrat Treasury spokesman, on the claim that globalisation increases inequality. He has his work cut out to correct that misconception. Last Friday, The Guardian's John Vidal gave further currency to the myths:

Some developing countries would have done better to stay out of the globalisation process altogether if they had the interests of their own people in mind, it [a tendentious UN report] hazards.

'Hazards' is a verb that gives an appropriate idea of the analytical rigour that the anti-globalisers exercise, for the empirical research published since Cable made his judgement (in his book Globalisation and Global Governance) strongly supports his thesis. One study I have found illuminating is summarised here, with a link to the full report (available for a fee). Peter Lindert and Jeffrey Williamson, in Does Globalization Make the World More Unequal?, examine data for global income inequality since 1820. They find that no country that reduced its exposure to the global economy between the 1960s and the 1990s managed simultaneously to increase its standard of living.

These data accord with what you would expect on grounds of economic theory. Developing countries need foreign capital to fund the current account deficits that arise when their investment opportunities exceed their domestic savings. By that route, they are able to specialise, improve productivity (and thereby real wages), and raise output growth. As we are seeing in the cases of India and China, poor countries that grow rapidly thereby diminish global inequality. The anti-globalisation campaigners are in effect demanding that poor countries stay poor and that global inequality intensify.

Comments

[mgl]

Actually, Oliver, the report is free to download, available here.

[Tim]

Check out www.johannorberg.net

He's just won the Hayek prize for his 2001 book,In Defense of Global Capitalism.

I'm sure Oliver already knows about him.