As normally measured, “global inequality” is the relative inequality of incomes found among all people in the world no matter where they live. Francois Bourguignon and Branko Milanovic have written insightful and timely books on global inequality, emphasizing the role of globalization. The books are complementary; Milanovic provides an ambitious broad-brush picture, with some intriguing hypotheses on the processes at work; Bourguignon provides a deep and suitably qualified, economic analysis. The paper questions the thesis of both books that globalization has been a major driving force of inequality between or within countries. The paper also questions the robustness of the evidence for declining global inequality, and notes some conceptual limitations of standard measures in capturing the concerns of many observers in the ongoing debates about globalization and the policy responses.
- Martin Ravallion
() (Georgetown University, U.S.A.)
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Globalization And Inequality Essay
Goods and services now move more freely among countries than ever before. Ongoing declines in the cost of long-distance communication and transportation and in national restrictions on international trade and investment have allowed economies around the world to become increasingly integrated, thereby enhancing productivity growth and expanding consumer choices. In parts of the developing world and especially in East Asia, globalization has been accompanied by an increase in living standard hardly imagined just a generation ago. At the same time, globalization has also become the focus of widespread controversy. In particular, concerns about adverse consequences for income distribution have fueled policy initiatives that threaten to turn back the clock.
An especially troubling development was the emergence of a popular backlash to globalization in the United States, even when the country was enjoying record growth and the lowest unemployment rate in decades. An article in The Economist ("Globalization and the Rise of Inequality," January 18, 2007), written while the U.S. economy was expanding, highlights "a poisonous mix of inequality and sluggish wages" as the force underlying a globalization backlash in the United States as well as Japan and the European Union. Once America's long period of expansion reached an abrupt end, market-opening trade accords such as the North American Free Trade Agreement (NAFTA) became lightning rods for public concern about stagnating real incomes, job losses, and increased economic insecurity.
In the midst of the global recession that followed, most Americans and their counterparts abroad continued to acknowledge the benefits of globalization in terms of overall productive efficiency, lower prices, and increased consumer choices. The backlash, both in the United States and worldwide, has largely been a response to the perceived redistributive consequences of increased openness, especially openness to imports and immigration. Even if a country "as a whole" is made better off, and not everyone accepts this premise, there remain concerns about the well-being of particular groups within its borders. Indeed, increased globalization has been accompanied by increased inequality not only in the United States but in many other countries. But is globalization a major cause of increased inequality?
While there is little disagreement that globalization has been accompanied by increased inequality within many countries, both rich and poor, this is not the same as establishing a causal relationship. On the contrary, numerous systematic studies have concluded that the redistributive changes the public and policy makers often attribute to globalization are due mainly to other changes in the economy. Thus, while discussions of globalization frequently turn to its contribution to inequality, discussions of rising inequality...
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