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The old debate on globalization

So now that science magazines are also focusing on non-natural sciences, it can only be for the good of all. Or not?

Scientific American’s April print issue’s economic feature by Pranab Bardhan is a thought article on globalization and whether it really helps or hurts the world’s poor. Often it veers more towards drawing room discussion than a scientific reasoning with clear assumptions & conclusions, and the central conclusion (answer: both. Globalization alone doesn’t do much evil or good by itself, it’s other factors that tilt the balance) is fitting of the typical fence-sitting economist.

But I love the anecdotes. Did you know that “between 1981 and 2001 the percentage of rural people living on less than $1 a day decreased from 79 to 27 percent in China”. That’s one stark drop – I’m going to look to find something that has this translated into cost of living/purchasing power terms to see how it actually changed standard of living. And also in terms of average vs. median income to see how many people this actually benefited or harmed.

The corresponding figures for India are 63 to 42 percent. And this is even before the whole liberalization process started (India shining!), as Bardhan goes on to explain.

And this:

One of the few, published in 2003 by Gunnar Eskeland of the World Bank and Ann Harrison of the University of California, Berkeley, considered Mexico, Morocco, Venezuela and Ivory Coast. It found very little evidence that companies chose to invest in these countries to shirk pollution-abatement costs in rich countries; the single most important factor in determining the amount of investment was the size of the local market. Within a given industry, foreign plants tended to
pollute less than their local peers.

Isn’t it surprising that the single biggest factor in companies’ choice of destination is size of local market? I would’ve thought that in this age, the comparative advantage logic would ensure that local investment was dictated by relative cost of production/delivery from that location vs. other locations.

Seriously, size of local market? Delivery costs (of goods & services incl. marketing services, etc.) are hardly that overwhelming, what with cheap communication & shipping. The only possible logic is that (a) local access & presence is important to effectively sell market the goods/services (which I would contest. Look at Procter & Gamble!), or (b) huge barriers to intra-country trade (ditto. They manufacture shampoo for all of Asia in Bangkok). Of course, option (c) is that people in these companies haven’t done their analysis right!

Categories: economics, food, journalism, science
  1. Dusty
    April 20, 2006 at 5:13 pm

    Hi, I dont know how i landed on your blog. Maybe I was blog hopping. To cut to the chase it is not a comment on this post. But I am so very surprised all your favourite books are mine as well. I mean, Through the Looking Glass – Everytime I read Alice’s tale I find a new meaning a new perspective. To Kill a Mocking Bird is my all time favourite. Another favourite, not listed by you is Of Human Bondage by Somerset Maugh.

  2. m'ella
    April 22, 2006 at 4:07 pm

    Hello there! Yes, I’m an incognito blogger and always use my other online name for public appearances, like commenting on other blogs, etc. – because this has so much private stuff. ALL my favorite books? That’s some coincidence…and I’m sure you agree that this doesn’t even begin to complete the list – these are just the ones that popped up top of mind. No, I haven’t read ‘Of Human Bondage’; think I will, now.

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