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Lecture 5

W5 Has Globalization Gone Too Far By Dani Rodrik.docx
W5 Has Globalization Gone Too Far By Dani Rodrik.docx

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University of British Columbia
ECON 255
Ashok Kotwal

Week 5 Reading 5 – Has Globalization Gone Too Far? By Dani Rodrik Sources of Tension − Source #1: Reduced barriers to trade and investment intensifies the inequality between groups that can cross international borders and those that cannot. There are 2 categories:  Category 1: owners of capital, highly skilled workers and professionals  these people can travel anywhere where their job is in demand  Category 2: Unskilled and semi-skilled workers and most middle managers. Due to globalization, the demand for this profession is elastic  since their jobs don’t require extensive knowledge, it can be easily replaced  competition for this job occurs domestically and internationally (substitutability)  The substitutability causes worker to: 1) Workers have to pay a larger share of the cost of improvements in work conditions and benefits 2) Face greater instability in the hours worked and the wage obtained 3) Have lower bargaining power  lower wage and benefits − Source #2: Globalization causes internal and external conflicts over domestic norms and the social institution that embody them  As technology used becomes standardized, the competing values/norms that will fuel the inequality (subject to how each civilization views it)  values (ie morality) are important whereby they’re attached to the processes and the outcomes  fair trade  Focuses of fair trade practices: labor standards, environment, competition policy, corruption − Source #3: Globalization has made it difficult for government to provide social insurance  Correlation between an economy’s exposure to foreign trade and the size of its welfare trade  Sweden, Denmark, Netherland spend a lot on income transfers  International economic integration (for example MNCs) are weakening the roles of a government and social obligations  causes: the mobility of capital reduces the source of income tax  Effect: gov has to increase tax on income  Q: How the tension between globalization and the pressures for socialization of risk can be eased?  if cost of globalization > cost of socialization, then it may lead to the rise of protectionism because people become increasingly averse to capitalism  The tension will lead to the clas
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