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Globalisation & the Decline of the Welfare State
By Michael Cebon | December 4, 2008
Dani Rodrik points to some interesting economic research which “suggests that as technological progress and multilateral trade liberalisation have made borders less of a barrier to economic activity, the scope of redistribution policies has become smaller.”
Apparently there is a correlation between a more open economy and lower spending on social welfare programs. This makes sense, given the observed increase in economic inequality which has flowed from increased opening of markets around the world.
Interestingly, the authors conclude that the current fragility of financial markets “does not bode well for globalisation.”
The breakdown of private financial markets excites calls for stronger redistribution. If redistribution is national (as it has to be as long as politics are national), it will only be sustainable if national borders become less permeable to economic activity.
The Guardian today passes on a similar concern from the World Trade Organisation’s director-general Pascal Lamy:
He is concerned that economic distress in the US, Europe and Asia is already prompting countries to use protectionist weapons yet to be outlawed by the WTO – raising tariffs to the maximum permitted, and introducing anti-dumping regulations.
This seems to be aimed very much at the US, where members of Congress from both parties have written to President Bush to make sure that the US continues to be a big winner from any agreement of the Doha Round of trade talks:
“Developed and advanced developing countries must commit to provide meaningful new market access opportunities [for the US] if Congress is to support a deal.”
This leaves the so-called Doha “Development” round, which was supposed to be first and foremost about securing the interests of developing countries, not looking in very good shape. Which is probably good news, both for developing countries, but also for the poor in rich countries, which might see a bit more wealth flowing their way as “national borders become less permeable to economic activity.”
Topics: Global Economics, Global Inequality | Comments Off
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