Globalization with Labor: Is the Future Robots or Rosalie

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Globalization with Labor Is the Future Robots
or Rosalie

• Lant Pritchett
• November 2, 2007
• Center for Development Economics
• Williams College

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Are the nurses of the future Robots or Rosalie?
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Five Points

• Gaps in income/wages across nation-states are
  much larger than ever in history
• The current globalization is qualitatively
  different a proliferation of sovereigns and
  everything but labor
• EBL globalization will not reduce (all)
  inequalities
• It is labor versus capital for the future
• What was, was, what can be, could be

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Currently we have historically massive gaps in
income per capita and wages

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Steady growth of the economic leaders have left
the follower countries far behindIndia has not
yet reached the 20th century, Ethiopia the 13th
Mexico, 8165
China, 5332
India, 2990
Ethiopia, 688 Year 1250
1851
1898
1929
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Historically it mattered who you were, now where
you were born
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But liberalization has yet to touch laborwage
for equivalent labor are enormously larger than
those that set in motion the first
globalizations migration
Wage gaps today between potential migration
partners are 61 to 91but with much smaller
(relative) flows
Wage gaps of 21 to 41 drove massive migrations
prior to 1920
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Current globalization is qualitatively
different (Proliferation of sovereigns (POS),
Everything but labor (EBL)--POSEBL)

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Now that was globalization the Roman Empire and
MobilityEmperors from Spain, Levant, North
Africa, Europe
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Pax Americana the proliferation of sovereigns
with modest amounts of cross-border everything
but labor liberality
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But even deep liberalization with borders does
not make the world borderless
Source McCallum, 1995
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The world is not flatthere are big hills
separating even the liberalized countriesprices
are not equalized
Source Bradford and Lawrence, 2004
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Until very recently it was EBLG (Everything but
labor globalization)
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Will POSEBL globalization eliminate global
inequalities The guiding myth of the post WWII
globalization and development

• All problems can be solved in place without any
  movement of people across borders
• Why ever would you think so? History and
  experience within most large countries suggest
  massive population movements
• Does globalization of goods and capital eliminate
  the need for labor mobility?

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Simple supply and demand If there are large
region specific shocks to labor demand then
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If supply is inelastic (e.g. across
countries)little labor mobility, big differences
in growth
Huge differences across countries In output per
capita growth
Small differences in net migration
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If labor supply is elastic(e.g. across regions
in large integrated countries)large differences
in population growth, small differences in growth
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Labor mobility is much larger than growth
differences within these countries, vice versa
across countries
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The emptying of the heartland and the Delta (only
green shaded counties had substantial population
increase over a 60 year period)
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Ghosts and Zombies

• Post WW II world has run a huge natural
  experiment(a) expand dramatically number of
  sovereign states (borders, flags, currencies),
  (b) encourage mobility of capital and labor but
  freeze labor in place (POSEBL globalization)
• How will this turn out? Hinges on views of the
  role of region specific labor demand
• Small shocksall good
• Big shocks, flows accommodateall good in long
  run
• Big shocks, policy and institutionalnot so
  good, can be fixed
• Big shocks, really geographic lets not think
  about itWhat would be ghost countries are zombies

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Is anything other than POSEBL globalization
possible?What was, was,What can be, could be

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Value of annual savings from debt relief versus
existing remittances

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Gains to developing country residents from
globalization options on and off the table

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Which is facetious?

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You see that that Mr. Anderson?... That is the
graph of demographic inevitability... It is the
sound of your death... Goodbye, Mr. Anderson...
(The Matrix, adapted)
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Europes disappearing actcompared to the Muslim
tier that surrounds it
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Support ratios (workers to retirees)--rule of
thumb what cannot happen will notbut what will
happen?
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Hard core non-tradables (non-outsourceable
services) are the major labor growth of the
future who will do these jobs? With a declining
labor force what is the face of the future labor
force?
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The historically huge decrease in the cost of
capital and the rise in returns to
educationunskilled labor is threatened by skill
biased technical changelack of labor mobility
exacerbate this problem?
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What is the future?

• Moores law (increased computing power)
• Robotics
• Increase in very high skilled researchers in rich
  countries plus hugely distorted labor costs
• Robots displace Rosalie
• (ATMs, automated checkout, self-service parking
  garages)

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What could be, can be

• Will the world choose people?

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Globalization cannot include migration because
voters are against it.
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There is similar, or higher, opposition to
trade, but this is a problem to be handled with
globalization and free trade, but an insuperable
objection
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While voters closed borders in the early 20th
century, the huge historical spread in incomes
raises the question are the median voter in rich
countries and an unskilled migrant really
substitutes?
Source Authors calculations with many
assumptions
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Are the nurses of the future Robots or Rosalie?