Meeting The Challenges Of Globalization
Globalization’s Double-Edged Sword
Stephen Fidler of The Wall Street Journal says many have reaped the benefits of globalization, but notes that its dark underbelly is that it also has “made richer countries more unequal—squeezing the incomes of the poor and the middle class.” Those benefits, as recent data indicates, has benefitted the top earners, who took half of all income earned in the U.S – the highest level since 1917.
“The reasons for rising inequality are several-fold. Globalization delivers a financial hit to the unskilled, whose labor comes in direct competition with lower-paid workers in developing economies. Highly skilled labor tends to be the major beneficiary of technological advances. The rise of the financial sector, where top bankers have been able to cream off huge remuneration, appears to be another factor. But perhaps the most influential is the growing importance of access to capital,” he writes.
However, Fidler argues, that is no reason to stray from global markets or the expansion of trade because that would make the situation worse. “If globalization isn’t sustained, national barriers will rise to restrain trade, capital movements and labor mobility. That could close an avenue to self-betterment for many of the world’s poor.”
World Bank economist Banko Milanovic has created a graph of real income growth that gives a snapshot of globalization’s winners and losers.
Does Global Income Inequality Have An Impact?
So, does the inequality matter? A white paper released by the global financial firm UBS during the recent World Economic Forum in Davos, Switzerland makes the case that it does impact the global recovery.
The paper contends that the world economy remains as unbalanced “today as it has been over the past quarter century – with big implications for the global economic recovery. The authors argue that the adjustment of current account imbalances in the world economy was mostly a function of recession, not shifts in competitiveness. Large current account deficit countries restored external equilibrium at the cost of domestic disequilibrium, so output plummeted and unemployment soared,” reports The Financial Times.
Global Trade Could Lead To Reducing World Food Insecurity
One of the agenda items in Davos was the challenge of combating global food insecurity and a new report suggests that increasing access to global trade could contribute to a solution.
The report released today by the Global Harvest Initiative “underscores the critical need to reduce barriers to moving agricultural products, equipment, and information technology from producers to consumers,” says Dr. Margaret Zeigler, Global Harvest Initiative executive director.
The report suggests reducing export restrictions, lowering tariffs, and reducing trade-limiting non-tariff measures on agricultural products, equipment, and modern technology that could improve agricultural productivity, particularly in less development countries.