Globalization

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Globalization
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Globalization

• Main topics
• We tend to speak of the world today as a
  globalized world. But we have to understand
  better what that means
• We also tend to think of the world today as
  corresponding to the first time we are living
  under globalization that is not true, in the
  second half of the nineteenth century there was a
  first age of globalization
• Globalization is mostly an economic phenomenon
  the more or less free international circulation
  of goods, services and factors of production
• Although sometimes accused of cousing poverty or
  inequality, there is no way of confirming that
  globalization does indeed that
• Globalization is concomitant with growth
• There is no guarantee that globalization will
  last forever

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Globalization

• What is globalization?
• An economic phenomenon the integration of
  economic activities across borders using markets
  as a tool
• Free movement of goods, services and factros of
  production
• Globalization is a relatively recent phenomenon,
  mostly from the nineteenth century onwards, and
  with interruptions
• The most important interruption came with the
  First World War, in 1914, and lasted for the
  1920s and 1930s (a major crisis) until 1945

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Globalization

• Globalization is closely connected with economic
  growth we may say that globalization contributes
  significantly to economic growth
• The cronology of openness and growth confirm it
  growth was fast in the second half fo the
  nineteenth century, when there was opening was
  slow from 1914 to 1945, when there was closure
  and fast afterwards, when there was opening again

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Globalization

• Growth in volume of merchandise exports,
  1870-1998 (annual growth rates)

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Globalization

• Merchandise exports as a share of GDP, 1820-1998

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Globalization

• Capital flows since 1870 (average absolute value
  of current account as a percentage of GDP)

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Globalization

• Sometimes globalization is criticized on the
  basis that it has unpleasant effects
• Two are particularly mentioned the fact that it
  is na agent for poverty in the world and the fact
  that it is a force for inequality
• Neither criticism is exactly corroborated by the
  facts

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Globalization

• Decomposition of world income inequality (mean
  logarithmic deviation)

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Globalization

• Extreme poverty in the world in the long run
  (less than a dollar a day), 1820-1992, millions
  of persons

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Globalization

• Extreme poverty in the long run (less than a
  dollar a day), 1820-1992, share of world
  population

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Globalization

• The negative view of globalization is not true
  on the contrary, globalization has many
  beneficial effects
• This does not mean that globalization will last
  forever it is enough to think of the 1920s and
  1930s to understand how it can be interrupted
• There are today many risks for a process of the
  kind to occur, mainly if we think of the threat
  posed by terrorism

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Globalization

• Suggested reading
• Martin Wolf, Why Globalization Works, New Haven,
  Yale University press, 2005.
• Jagdish Bhagwati, In Defense of Globalization,
  New York, Oxford University Press, 2004.