In a new Report ‘Making Sense of Globalization: A
Guide to the Economic Issues’, CEPR makes an important contribution to the
public debate surrounding how ‘Globalization’ will affect different countries by
analysing the costs and benefits that arise from international economic
integration.
The study, which was funded by
the European Commission Group of Policy Advisors, is introduced by the
President of the European Commission, Romano Prodi, and was compiled by a team
of internationally renowned economists.
The report refers to the arguments that have so far been presented for and
against globalization. The critics
of globalization say that it increases inequality, pollutes the environment,
causes economic instability, exploits workers and undermines the ability of
governments to raise the taxes that finance public spending and welfare. Yet the
authors find a wealth of evidence that demonstrates that globalization brings
great benefits as well as costs. It
offers the opportunity for a higher rate of sustainable growth – growth that
translates into longer, healthier lives and improved living standards. These gains must be weighed against
other effects of globalization, and, in particular, any adverse effects
international liberalization may have on the world’s poorest countries.
In addition, the study finds
that many of the charges levelled against globalization are misguided. An important result presented in the
study is that the increasing integration of the world’s economies does not
inevitably increase the inequality of incomes.
The nineteenth century saw an explosion
of inequality but by the middle of the twentieth century it had stopped
rising. In fact, the proportion of
the world’s population in absolute poverty is now lower than it has ever
been. The authors recognise that
the effects of globalization on inequality are very complex, but advise using
complementary policies to assist this process rather than imposing restrictions
that are likely to sacrifice its benefits.
An important argument
emphasized in the Report, is that many of the apparent costs of globalization
reflect domestic policy failures, to the extent that they are better tackled
through domestic policy reform than through seeking to halt the forces driving
globalization. The authors find
that the effects of increasing economic openness depend critically on the
circumstances of individual countries and the policies they follow. Similarly, they find little evidence
that governments are losing power to multinational corporations or other agents
of globalization or that there is a ‘race to the bottom’ in environmental or
labour standards or taxation. And
where true international policy spillovers exist, such as the regulation of
international financial markets, the authors argue that the EU should take the
lead in developing appropriate policy proposals.
'Making sense of Globalization' concludes that the presence of real dangers of globalization,
and the greater awareness of such dangers due to improved communications make it
vital to implement policies to deal with them. The alternative is a backlash that would
reverse some of the great progress that has already been made.
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