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This second overall chapter presents collective critical reflections on how globalisation has affected the course of economic development over the last four decades. We argue that despite its potential in accelerating economic growth and development through the spread and transfer of technology and the transmission of knowledge and information, globalisation as proceeded to date—corporation-led and finance-centred and largely market-driven integration process—has exposed itself to the reality that the process is unsustainable socially, economically and politically as well as ecologically, with discontents growing all around. There is urgency for us all to engage with the pivotal question how to make globalisation work for inclusive and sustainable development, and to arrest the tide of the political fallouts with grave consequences for the global community. Against this background, drawing on many insightful analyses provided by the chapter contributors to the Handbook, this chapter, as our collective narratives of the effects of globalisation on development, is organised under two themes: (i) the diverse development experiences of countries in the South under globalisation; and (ii) the growing inequality and its implications. We then proceed to discuss challenges facing us for finding a way to change the course and nature of globalisation, and indicate several pathways for making globalisation work for sustainable and inclusive development.
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See also Williamson ( 2002), among others, for winners and losers from globalisation in modern history.
Reported in Fig. 3.1 in UNDP ( 2013).
Given this, the survey carried out for the World Economic Forum 2014 ranked widening income disparities as one of the greatest risks the global community faces today (World Economic Forum, 2013). The growing within-country inequality has been a main thematic topic selected to address in many reports by multilateral institutions over recent years (UNCTAD 2012; UNDP 2013; OECD 2011, 2014; IMF 2017 and others).
Naturally, countries within each of the developing regions are heterogeneous in their globalisation experiences. While acknowledging country-specific experiences, the discussions herein reflect our attempt to discern overall patterns of the different regions’ experiences.
See, for example, Chap. 14 for the detailed comparative analysis of effects of alternative financial policy regimes on economic growth between the Asian and Latin American regions.
Baldwin ( 2012) attributes Asia’s success story under the ‘globalisation’s second unbundling’ to Asia’s ability to participate actively in international supply chains that have emerged from the huge reduction in the transport cost and transmission/communication cost in the late 1980s and the early 1990s. The ‘Factory Asia’ thus emerged along with the ‘Factory Europe’ and the ‘Factory of North America’.
Latin America had experienced a successful industrialisation and structural diversification process, which had started during the 1930s and was very dynamic in the first decades of the post-WWII post-war period. It peaked in the second half of the 1970s and was followed by deindustrialisation and stronger dependence on primary exports, with some exceptions (Mexico being the most important case, as it became an important manufacturing exporter). See Bértola and Ocampo ( 2012), chapters 4 and 5.
See Thorbecke and Nissanke ( 2009) for more discussions on the effects on globalisation on poverty reduction in the Latin American region. The better record in poverty reduction in the 2000s in Latin America can be at least partially attributable to institutional innovations for social protection such as the rapid expansion in education coverage and some universal health and pension systems mixed with conditional cash transfer programs (CCTs).
Ocampo and Parra ( 2006: tables 2 and 3, and figure 9).
A number of earlier studies (World Bank 1993; Ahuja et al. 1997; Campos and Root 1996) described the growth pattern of East Asian countries in the 1960s and 1970s as highly inclusive and viewed as a model of ‘shared growth’. As discussed later, however, such a condition has been steadily and considerably eroded as hyper-globalisation proceeded.
This is based on the survey results of income/consumption expenditures per household, expressed in 2011 Purchasing Power Parity (PPP) exchange rates.
On the other hand, referring to this decline, Bourguignon ( 2015) presents a longer historical series of global inequality and notes that from 1820 to the 1990s global inequality steadily rose, but it started declining gradually in the first decade of the twenty-first century, which is also to the narrowing ‘between-country’ inequality, reflecting the rise of average income of emerging economies.
Although the technological changes and the globalisation effects are often entered as a separate factor in accounting for the falling labour income shares in a number of empirical studies (e.g., IMF 2017), these two are closely bundled together from a perspective of developing countries, where skill-biased technological changes are embodied in goods and services imported from the rest of the world. Hence, technical changes can be seen as one element of globalisation effects.
See Basu ( 2003).
During the previous globalisation, there were, however, constraints on the movement of Asian, particularly Chinese and Indian labour, to territories that were considered to be destined for the white population, with notable cases being Australian and US restrictions in this regard. So, Asian migrants largely moved around the tropics.
Primary income distribution is the distribution of household incomes consisting of different factor incomes before tax and subsidies, whilst secondary income distribution is the distribution of household incomes after deduction of taxes and inclusion of transfer payments. Tertiary income distribution is the distribution of household incomes when imputed benefits from public expenditures are further taken into account.
It is also interesting to detect, in this thesis, a potential discord between economic liberalism in its neo-liberal genre and liberal democracies as political institutions, although these two are often presented together to the rest of the world signifying the virtue of the Western institutions over the others.
See Rodrik ( 2011: 201–202), where lists of these policy packages associated with, and institutional requirements for, hyper-globalisation are presented.
European Union (EU) is a notable exception to this, as it tries to organise a democratic legitimacy at the regional level, while preserving nation states’ sovereignty. However, the recent crises within the EU plentifully demonstrate that it is not easy to guarantee the success and the sustainability of their political project.
This is discussed by one of us in Chap. 15 of this Handbook in the context of ensuring aid effectiveness and debt sustainability.
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- Critical Reflections on Globalisation and Development and Challenges Ahead
José Antonio Ocampo
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