Monday, March 27, 2006

Pranab Bardhan on globalization

Is globalization good or bad? Pranab Bardhan, an economics professor at Berkeley, examines different aspects of globalization in this article in Scientific American. At the end of it all, he does come down on the side of globalization, but he presents all the arguments and counterarguments. If you are looking for a succinct summary of the issues, this article is probably what you need. Some exerpts:

The Local Roots of Poverty: Integration into the international economy brings not only opportunities but also problems. Even when new jobs are better than the old ones, the transition can be wrenching. Most poor countries provide very little effective social protection to help people who have lost their jobs and not yet found new ones. Moreover, vast numbers of the poor work on their own small farms or for household enterprises. The major constraints they usually face are domestic, such as lack of access to credit, poor infrastructure, venal government officials and insecure land rights. Weak states, unaccountable regimes, lopsided wealth distribution, and inept or corrupt politicians and bureaucrats often combine to block out the opportunities for the poor. Opening markets without relieving these domestic constraints forces people to compete with one hand tied behind their back. The result can be deepened poverty. [...]

Social programs: Many economists argue that for trade to make a country better off, the government of that country may have to redistribute wealth and income to some extent, so that the winners from the policy of opening the economy share their gains with the losers. Of course, the phrase "to some extent" still leaves room for plenty of disagreement. Nevertheless, certain programs stir fairly little controversy, such as assistance programs to help workers cope with job losses and get retrained and redeployed. Scholarships allowing poor parents to send their children to school have proved to be more effective at reducing child labor than banning imports of products.

Immigration reform in rich countries A program to permit larger numbers of unskilled workers into rich countries as "guest workers" would do more to reduce world poverty than other forms of international integration, such as trade liberalization, can. The current climate, however, is not very hospitable to this idea.