This week in Economics Society, Professor Goldin, the Director of Oxford Martin School, discussed issues around the theme of globalisation.
Professor Goldin started the talk by giving reasons for why he likes economics and exploring what economics is about. Some of the reasons he gave for liking economics were the following:
- Economics offers a toolbox for thinking about some of the most important issues of our time
- In essence, economics is about allocation of scarce resources and everything is scarce (including the resources we did not previously think of as being scarce such as clean air)
- It helps us to understand why some people are rich and others poor
- Helps in decision making for private individuals, businesses and governments
What is Economics?
Economics is about human behaviour, psychology, politics and philosophy. Whilst economics involves maths, not all problems can be reduced to equations. Economics also involves philosophy and the founding fathers of economics were in fact philosophers and political scientists. Professor Goldin said it he is involved in making Economics more pluralistic. Economics does not have answers which are definitely right and it is not a science. Oxford Martin School encourages research and application of economics into a variety of fields such as demography, climate change, future of technology and future of Euro.
Professor Goldin said that globalisation was in essence about integration. If defined in terms of integration of societies, globalisation has been around for a very long time and if defined in terms of integration of nation states, it has been around as long as nation states have been around.
Globalisation is not only physical involving the movement of goods, services and people but it also virtual, involving transfer of ideas. If transfer of ideas is included in globalisation, then after the development of internet and the fibre optic in 1990s, globalisation has taken place at an exponential rate.
Related to globalisation and the movement of ideas, were several important questions such as:
- What would have the most dramatic impact on the opening up of an isolated economy like North Korea?
- Are ideas subject to property rights and is the intellectual property regime of the WTO just if it prevents countries such as African countries from having access to important antiretroviral drugs?
Professor Goldin said that globalisation is a force, like gravity and it cannot be deemed to be good or bad. What is important is to manage it using policies that render it more beautiful. It has been facilitated by technological progress and flow of finance.
What has globalisation done for the world?
There has been dramatic change, economic, political and ideological, with globalisation and looking at financial, labour, trade and aid flows, on average it has done immense good. The change has nonetheless been different for different societies.
The evidence for the benefits of globalisation is overwhelming. Many countries have escaped poverty and life expectancy has increased in several countries. Looking at any indicator of development shows that globalisation has been beneficial. Some indicators have deteriorated due to the negative externalities but this extraordinary period of globalisation has brought connectivity which helps us to understand the problems and can help us to manage them.
The concern with globalisation is to do with the fact that not everyone feels that they are benefiting from it. Some of the problems globalisation brings are:
- Rising inequality
- Globally – Although globalisation has helped developing countries to grow faster bridging the gap between developed and developing countries leading to convergence, the gap between the developed and developing countries and the failed states has widened leading to divergence.
- Within countries -The gaps in incomes between the rich and poor within nations has widened. This is primarily because the returns to education and technology are high; the rich can afford technology and education and therefore can gain from globalisation whilst the poor who cannot afford education and technology do not gain.
- Systemic risk – The closer integration of the economies has made them vulnerable to spreading of risks. The complexity of their relations has made it difficult to understand the risks leading to uncertainty
- Accountability – As everyone is connected and a tiny effect on one side of the world can lead to a huge effect on the other side, much like the butterfly effect, it is difficult to pin point exactly who is to blame for any problems. The problem of accountability is a consequence of hyper connectivity.
This has led some countries to see globalisation as a threat and adopt a nationalist or a protectionist stance. The feeling that de-globalisation is the solution is not well founded as the consequences of this will be worse. The way forward lies in collective management of resources and managing the externality effects of globalisation.
Suggestions for further reading:
- Globalisation for Development: Trade, Finance, Aid, Migration, and Policy , Ian Goldin and Kenneth Reinert
- Oxford Martin School Research – http://www.oxfordmartin.ox.ac.uk/research
- INET (Institute for Economic Thinking) – http://ineteconomics.org/
The talk ended with questions revolving around globalisation, ranging from the feasibility of having global agreements acting as an international unit and whether the integration of North Korea would follow that of Russia. In response to this highly informative and interesting talk, please feel free to continue the discussion here.
Thank you to Professor Goldin for a highly stimulating talk and to all those who attended. The next Economics Society will take place on 29th November, when Mrs Durrani will be giving a talk on Entrepreneurship.