28 May 2007

Ooops! Defenders of Globalization are Not Rawlsians After All!

In his influential A Theory of Justice, John Rawls argues - roughly and among other things - that in matters of distribution, justice requires that we adopt those institutional arrangements that work to the greatest benefit of the least well off. In debates about "globalization," its defenders have sought to pass themselves off as Rawlsians in this respect at least. They have tended to play what they take to be a trump card against detractors of globalization, namely that a regime of more or less wholly unfettered free trade works to the benefit of the least advantaged inhabitants of developing countries. So, detractors are faced with the charge, sometimes tacit, but usually made more or less gleefully explicit, that the defenders of globalization are, in fact, looking out for the poor while they, critics of globalization, actually are callous in their disregard. In a recent article entitled "Globalization's Gains Come With a Price," the folks at the Wall Street Journal (24 May 07) suggest that this "trump" might just be flawed. (You can find a copy of he article here.) Among the sources for the article is an academic review of the evidence for what the authors describe as “the ‘naive’ thinking about globalization” reflected in the argument I just sketched. Here is the conclusion to that review:

“The substantial amount of evidence we reviewed in this article suggests a contemporaneous increase in globalization and inequality in most developing countries. However, establishing a causal link between these two trends has proven more challenging. Despite the ambiguities involved in identifying the relationship between openness and distributional changes, it seems fair to say that the evidence has provided little support for the conventional wisdom that trade openness in developing countries would favor the less fortunate (at least in relative terms).”

- Pinelopi Koujianou Goldberg and Nina Pavcnik. 2007.
“Distributional Effects of Globalization in Developing Countries,”
Journal of Economic Literature
45(1), pages 76-7.

In short, although the authors cannot tell us why, the available evidence suggests that globalization does not work to the advantage of the most disadvantaged in the developing world. Turns out that the conventional economic wisdom is wrong.

P.S.: Lest you worry that multitudes of orthodox economists will line up to recant their "naive thinking about globalization," you might check out this article by Chris Hayes from The Nation about the ways orthodoxy works in the economics profession. The article has gotten a lot of play across the economics blogs.

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Blogger Hans said...

Jim, if you need more empirical support for this argument, look at the article: "Globalization and the dismantling of welfare states in less-developed countries". Here´s the abstract:

Is the welfare state withering away, or will it survive current globalization trends? Recent literature framing this academic debate has extolled the resilience of this institution, despite the pressures of international market integration. These studies have reversed doomsday scenarios from the 1980s and 1990s that contemplated the ultimate demise of the welfare state. Yet trends in welfare spending in developed and developing countries have diverged. During the past quarter century, globalization penetrated both groups. However, while the more developed countries were expanding resources devoted to this form of safety net, the average share of gross domestic product (GDP) allocated in a sample of fty-three less-developed countries (LDCs) began much lower and fell lower still (see Figure 1). My analysis goes beyond existing studies by providing an original model of the determinants of welfare spending in LDCs. I focus on how globalization can affect rich and poor countries differently and present a model that includes a new measure of labor strength.

01 June, 2007 03:44  
Blogger Hans said...

And here´s the reference...


01 June, 2007 03:45  

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