The world's first wave of economic globalization, led by the British Empire in the 19th century, came to an end literally with a bang on a Sunday afternoon in 1914, when Gavrilo Princip killed (with two uncannily well-aimed bullets) Austria's Archduke Franz Ferdinand. The years that followed witnessed pan-European carnage, instability throughout the 1920's and the rise of fascism and communism, culminating in the death of countless millions during World War II.
Is today's globalizing era also coming to an end? If so, it may not necessarily end with a repeat of the slaughter of the last century, but with an economic retrenchment that brings economic stagnation and consigns billions of people to grinding poverty.
Various candidates have been proposed for the role of globalization's assassin. But one little noticed, yet likely, aspirant has been sneaking up on the world economy: the growing tendency to limit the free circulation of people, to "fence in" the rich world. We see the menace of this tendency constantly nowadays, but we perceive it in such a seemingly unthreatening way that we may well become accustomed to it rather than arresting it.
Globalization means free movement of capital, goods, technology, ideas and, yes, people. Any globalization that is limited to the first three or four freedoms but omits the last one is partial and not sustainable. As soon as people cannot move, there will be little to stop governments from limiting the free movement of goods or other factors of production. After all, if over-populated countries with high unemployment cannot export people, why not reach for higher tariff barriers to protect the jobs they have?
But what of the unemployed who become locked into their societies? The war on terror has shown us the dangers that can arise from the social frustrations that often result.
Nevertheless, the "fencing-in" of the rich world continues apace. The US plans to construct a veritable "Mexican Wall" to keep poor people from crossing into Texas or California. Likewise, hundreds, if not thousands, of Africans die every year trying to reach the shores of Fortress Europe.
Efforts to restrict people's movement between countries expose the soft underbelly of globalization: the deepening gap between countries' mean incomes. Rather than poor countries growing faster than the rich (as we would expect from Economics 101), mainly the reverse is true.
Between 1980 and 2002, average annual per capita income growth in the rich world (defined as the "old" OECD members) was almost 2 percent, compared to just 0.1 percent in the 42 least developed countries. Indeed, average income in Latin America is now barely above its 1980 level.
This huge gap spurs migration. People nowadays know much more about conditions in different countries than they did in the past, and if moving across a border means that their income can be multiplied several-fold, they will try to do it.
This is why today's most contentious borders separate economies where the income gaps between people on the two sides are the greatest. There are four such global hot spots: the borders between the US and Mexico, Spain and Morocco, Greece (and Italy) and the southern Balkans, and Indonesia and Singapore (or Malaysia). The income gaps range from more than seven to one in the latter case to 4.5 to one in the case of Spain and Morocco, 4.3 to one between the US and Mexico, and four to one between Greece and Albania.
Income differences were not always so huge. In 1980, average income in the US was a little more than three times that of Mexico, the gap between Singapore and Indonesia was 5.3 to one, and the difference between Spain and Morocco 3.5 to one. Even the gap between Greece and Albania, at three to one, was narrower than it is now. So income gaps between all these contiguous countries have increased significantly during the last quarter-century.
So it is little wonder that it is in these places that most illegal immigration and human trafficking occurs -- pirates in the Straits of Malacca, fast boats between Albania and Italy, and desperate human cargoes from Africa and Latin America.
If today's globalization continues to widen income gaps, the waves of migration will grow. So the rich world will, in a knee-jerk response, erect ever-higher barriers to stem the human tide.
If globalization, which has so enriched the world's wealthiest countries, is to continue, governments must find ways to increase incomes more evenly. Otherwise, today's "fencing in" of the rich world will increase the risk of a backlash against free circulation of goods and capital, as well as of political instability punctuated by terrorism. Global income redistribution by the rich countries should be viewed as a matter not of charity, but of enlightened self-interest.
Branko Milanovic is an economist at the Carnegie Endowment for International Peace.
Copyright: Project Syndicate
Could Asia be on the verge of a new wave of nuclear proliferation? A look back at the early history of the North Atlantic Treaty Organization (NATO), which recently celebrated its 75th anniversary, illuminates some reasons for concern in the Indo-Pacific today. US Secretary of Defense Lloyd Austin recently described NATO as “the most powerful and successful alliance in history,” but the organization’s early years were not without challenges. At its inception, the signing of the North Atlantic Treaty marked a sea change in American strategic thinking. The United States had been intent on withdrawing from Europe in the years following
My wife and I spent the week in the interior of Taiwan where Shuyuan spent her childhood. In that town there is a street that functions as an open farmer’s market. Walk along that street, as Shuyuan did yesterday, and it is next to impossible to come home empty-handed. Some mangoes that looked vaguely like others we had seen around here ended up on our table. Shuyuan told how she had bought them from a little old farmer woman from the countryside who said the mangoes were from a very old tree she had on her property. The big surprise
The issue of China’s overcapacity has drawn greater global attention recently, with US Secretary of the Treasury Janet Yellen urging Beijing to address its excess production in key industries during her visit to China last week. Meanwhile in Brussels, European Commission President Ursula von der Leyen last week said that Europe must have a tough talk with China on its perceived overcapacity and unfair trade practices. The remarks by Yellen and Von der Leyen come as China’s economy is undergoing a painful transition. Beijing is trying to steer the world’s second-largest economy out of a COVID-19 slump, the property crisis and
As former president Ma Ying-jeou (馬英九) wrapped up his visit to the People’s Republic of China, he received his share of attention. Certainly, the trip must be seen within the full context of Ma’s life, that is, his eight-year presidency, the Sunflower movement and his failed Economic Cooperation Framework Agreement, as well as his eight years as Taipei mayor with its posturing, accusations of money laundering, and ups and downs. Through all that, basic questions stand out: “What drives Ma? What is his end game?” Having observed and commented on Ma for decades, it is all ironically reminiscent of former US president Harry