Making Globalization More Inclusive
Saturday, Jan. 6, 2018 10:15 AM - 12:15 PM
- Chair: James K. Galbraith, University of Texas-Austin
Making Financial Globalization More Inclusive
AbstractThe distributional effects of financial globalization, unlike those of trade, have gone largely unrecognized. In fact, however, episodes of capital account liberalization are followed by an increase in the Gini coefficient and top income shares and declines in the labor share of income. These distributional effects hold with a de jure measure of liberalization and only get stronger when this measure is scaled by the extent of the capital flows that ensue in the aftermath of liberalization. Financial globalization emerges as a robust determinant of inequality, even after accounting for the effects of trade, technology and other drivers. At the same time, the output effects of financial globalization remain elusive and appear to be restricted to cases where financial depth and inclusion are high and where liberalization is not followed by a crisis. Financial globalization thus poses very difficult equity-efficiency tradeoffs and making it more inclusive requires, as a start, recognition of this fact.
The politics of the globalization backlash: Sources and implications
AbstractA backlash against globalization has led to widespread political movements hostile both to economic integration and to existing political institutions throughout the advanced industrial world. Openness to the movement of goods, capital, and people has had important distributional effects. These effects have been particularly marked in communities dependent upon traditional manufacturing, some of which have experienced a downward spiral from the direct economic effects of foreign competition through broader economic decline to serious social problems. Those harmed by globalization have lashed out both at economic integration, and at the elites they hold responsible for their troubles. Political discontent is in part due to failures of compensation – insufficient provision of social safety nets for those harmed by economic trends. It is also due to failures of representation – the belief that prevailing political parties and politicians have not paid adequate attention to the problems faced by large groups of voters. Countries vary on both dimensions, as do national experiences with the populist upsurge. Previously dominant socio-economic interests and political actors may act to try to address this dissatisfaction, but the path faces serious economic and political obstacles.
Making Globalization More Inclusive: When Compensation Is Not Enough
AbstractAccording to many economists, the globalization backlash is the result of governments’ failure to redistribute the gains from globalization adequately – to compensate the losers. This paper argues that this is too narrow a perspective on the backlash and, in particular, fails to understand the limitations of the compensation hypothesis. First, the political equilibrium that produces intensified globalization is unlikely to favor redistribution. Second, even if compensation is politically feasible, the deadweight loss of compensatory redistribution becomes very large once the barriers to trade become low. Third, many of globalization’s downsides are the result of market failures, for which compensation provides no help. Finally, compensation cannot credibly address the longer-term erosion of distributional bargains entailed in trade agreements and financial globalization.
- F4 - Macroeconomic Aspects of International Trade and Finance