Bài giảng International Economics - Chapter 17: The Future Path of Globalization

The Future Path of Globalization...the sea brought Greeks the vine from India, from Greece transmitted the use of grain across the sea, from Phoenicia imported letters as a memorial against forgetfulness, thus preventing the greater part of mankind from being wineless, grainless, and unlettered. (Plutarch, 100 A.D.)Globalization Means InterdependenceThe performance of each economy is linked to the performance of other economies in many ways, as the circular flow diagram clearly illustrated.The Nebraska automobile industry example taught us the protectionism does not favor national interests over foreign interests, but one national interest over other national interests.The Lerner symmetry theorem shows that protection of an import competing industry hurts the same country’s export industries. The two-country model of trade makes it very clear that protectionism is not just a domestic political matter: Protectionism has clear economic effects abroad as well as at home.Globalization Means InterdependenceThe performance of each economy is linked to the performance of other economies in many ways.The circular flow diagram from Chapter 2 clearly illustrated the links between the domestic economy and the rest of the world. Globalization Means InterdependenceThe Lerner symmetry theorem reminds us that protection is costly to an economy because it favors a higher-cost industry over a lower-cost industry.In the extreme case, protectionism that eliminates all trade takes the economy back to self-sufficiency and a lower level of welfare.Globalization Means InterdependenceThe two-country model of trade makes it very clear that protectionism is not just a domestic political matter: Protectionism has clear economic effects abroad as well as at home.Globalization and GrowthThe power of compounding means that long-run growth invariably does more for human welfare than any short-run economic change.The costs of protectionism extend beyond the immediate opportunity costs because protectionism has serious long-run effects on economic growth.Globalization’s role in spreading knowledge has been recognized for centuries.The models of economic growth made it clear that long-run growth requires continuous technological progress, and protectionism therefore reduces technological progress.Controversial Aspects of GlobalizationGlobalization seems to clash with the concept of the “nation.”Throughout history, foreigners have often been seen as a threat rather than as the source of increased welfare through specialization and exchange.There has also been a fear that foreign ideas and culture accompany international trade and undermine society.To a large degree, the future path of globalization depends on people’s views on foreigners and their countries’ relationships with foreigners.Controversial Aspects of GlobalizationGlobalization is often seen as promoting a “race to the bottom” among policy makers, who are described as facing competition to reduce taxes, relax regulations and standards, and bow down to foreign business interests.There is relatively little evidence supporting the “race to the bottom” hypothesis, however.It remains a hotly debated issue whether international competition improves or weakens economic institutions.Controversial Aspects of GlobalizationA common theme is that an increasingly integrated world economy is “bad” for the environment.It is claimed that firms will locate where pollution controls are weakest, thus increasing overall world pollution and that people will flock to those locations, making the pollution even worse.Globalization and economic growth cause environmental problems only if there is no technological progress.The question of whether globalization is environmentally friendly therefore comes down to whether it raises the rate of technological progress.Controversial Aspects of GlobalizationIn summary, to argue that globalization is bad for the environment is, essentially, to argue that: (1) There will be less technological progress in a competitive global economy than there would be in smaller, isolated economies; and (2) Governments in closed economies do a better job of making prices and taxes reflect opportunity costs than do governments in open economies. There is no convincing evidence to support either of these arguments, and logical arguments to support these outcomes require very questionable assumptions.Globalization and International InequalityDifferences in per capita real output across countries and regions of the world have been getting larger throughout the past two-hundred years.The growing income differences have not been the result of a lowering of per capita incomes in some parts of the world.Virtually all regions of the world have grown.The problem has been that some countries have grown much faster than others.For the income differences to be narrowed, lower income countries must grow faster than high-income countries.It is difficult to argue that low-income countries can achieve faster technological progress and economic growth as closed economies.Figure 17.1Per Capita Real GDP by RegionAccording to Jeffrey Sachs, more rapid economic growth in developing countries requires more, not less, globalization: ...the technological capacity of an economy depends not just on its own innovations, but on its capacity to adopt the technologies produced elsewhere. This can happen through three main channels. Countries can import technology embodied in capital and consumer goods (cell-phones, fax machines, personal computers, immunizations). They can license technologies from patent holders. And they can attract foreign direct investment (FDI), so that a multinational enterprise with proprietary technology sets up production inside their borders. In all cases, countries must be successful as exporters to pay for the imports of technology (or to pay the dividends on foreign investment).Jeffrey Sach (2000), “A New Map of the World,” The Economist, June 24.According to the scientist and writer Thomas Barlow: Change may be inevitable. But does this really make us the pawns of some monolithic, uncontrollable force? Discovering the answer to that, in the long run, will be one of the adventures of our shared future. My own hope, though, is that we will learn–if we aren’t quietly doing so already–that the unpredictable is not he same thing as the uncontrollable. We will see that man does not conform to technology but to a perception of opportunity.Thomas Barlow (2002), “Why We Can Choose to Conquer Fear of Change,” Financial Times, January 5/6.Preparing for the Opportunities of GlobalizationNo matter what your field of concentration is, there are international dimensions to be studied.Business education has globalized along with business. Most business schools now teach specialized courses in international marketing, international management, and international finance.All colleges and universities offer students opportunities to study abroad for the summer, a semester, or an entire academic year.Study a foreign language.