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And How It Got That Way. The Divided World. The Divided World. Notice: USA and Europe Look Similar. Look how small Russia is compared to South Korea!. Notice how Africa has shrunk to almost nothing. The Divided World.
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And How It Got That Way The Divided World
Notice: USA and Europe Look Similar Look how small Russia is compared to South Korea! Notice how Africa has shrunk to almost nothing
The Divided World • So, Globalization and Regionalization are not taking place on a level playing field • The World is sharply divided into rich and poor countries—and the gap is widening among the rich and poor in both rich and poor countries. • So, let’s ask a very basic question….
The Divided World • How did it come about that two people in different parts of the world, doing the same task, get paid very different wages? Ford Mexico Chihuahua Ford, Detroit
THE TEN WORST PLACES IN THE WORLD TO BE BORN • Angola • Sierra Leone • Afghanistan • Somalia • Ethiopia • Guinea-Bissau • Niger • D. R. Congo • Burundi • Eritrea • UNICEF. 1999
The Divided World • We call these “issues of equity,” or fairness • Again, by what process did 9% of the world’s population get to devour 60% of the world’s resources—the “access to resources” question • Why is there hunger in the world, when there is a surplus of food in most rich countries? The “Distribution” question
Why? This? Or this?...
Plus . . . . • Almost all the growth in the world’s population is in the poorest countries. Russia actually has a rapidly declining population Remember, China and India have over 1/3 of the world's population between them.
Where is the Growth in Population? You can see almostno population growth in the rich countries, and rapid growth in the poor world But, compare that with the growth in population in the poorer countries since 1950
How is Policy Reacting to This? Almost every developed country is taking measures to restrict immigration—particularly from poor countries: The North Africans in France, The Turks in Germany etc.
And the USA? • We are in a particularly sensitive position because the US/Mexico border divides the richest country in the world from what is still a Third World country with a huge population growth. • On the one hand, segments of the US economy depend on these “illegals”; on the other hand, they are illegal.
"Closing the Gap; or Catching Up" First: where did this gap come from? By the middle of the nineteenth century, when the Industrial Revolution was at it height, Europe occupied almost all of what are now the poor countries. So, the poor countries were not really poor to start with, but were locked out of the process of becoming wealthy and modern.
And where is the US in this? • Well, the US was fortunate enough, as we have said, to have thrown off domination by the Europeans, and to become its own master at this critical time in shaping the world.
This colonization happened at a critical time in history. The Industrial Revolution
“Lockout” The colonial countries were effectively locked out of the greatest economic change in history, and became producers of raw materials.
Worst Case Scenario The continent of Africa was not only colonized, but before that was ravaged by the slave trade, which destroyed the inidigenous economy, trade and social structure of almost the whole continent.
Goods, people and capital were all extracted from Africa for 300+ years, and so it was left ruined and without human and physical capital. It has never recovered from this. So, Africa is not intrinsically poor—it was made poor. Ravaged Economy
The Challenge • The US wants to hold on to, and even improve, its life-style • The Rest of the World wants to live like this too—but the gap is widening.
How is the World Doing? Russia's Economy has picked up recently Britain seems to be doing better than the rest of Europe South and Southeast Asia Sluggish to Static Doing very well Negative
Policy Implications? • The basic policy of the US is that the only way for countries to improve is through: • Free Trade and Open Markets • “Comparative Advantage” allowing each country finds its place in the world: its “natural advantage” • Pursue Regional Free Trade first, as the World Trade Organization does not have the full confidence of the Administration.
Why this interests the US • Poor countries + population growth = • Crime and instability at home (Latin America in part) • Pressure on illegal immigration into the parts of the world that are rich. Since the Developed World has a static, or declining, aging population, this need will increase, so there will be push and pull factor in immigration
Final Conclusion • It is not in anyone’s interest for the poor to remain poor: • Poor people are a weak market • Poor people are a source of political extremism (hopeless people are that way!) • There is an historical injustice at work here anyway, so there are moral, equity, compassion and other emotional arguments
Why this interests the US, 2 • World seems to be shaking out into 3 zones • Rapidly-advancing East and South Asia (China became the largest consumer of resources in 2005) • Uncertain, periodic growth with high risk factor (Brazil, Argentina, Russia (too dependent on oil prices) • “Hopeless cases” like much of Africa
Why this interests the US, 3 • What policy should we have to each of these? • Will the rich world unite to protect their colossal advantage? • Is China a threat? • Should we find a partner to strengthen our position? (EU, FTAA?) What are the advantages of doing this?
