LINE

Text:AAAPrint
Voices

Globalization drives development

1
2019-05-29 10:20:18China Daily Editor : Jing Yuxin ECNS App Download

While some state leaders and politicians exhibit strong anti-globalization tendencies, it is time to review the history of economic globalization and understand why we should rescue globalization, and how we can rescue it through global governance.

Classical economists of the 19th century, notably British political economist David Ricardo, said international trade, based on comparative advantage, can benefit all countries involved so they can prosper through globalized economic activities. However, it did not seem to bring prosperity to the poor countries, colonies and peripheral regions.

Modern theorists expect nations with initial low incomes to grow faster than their richer counterparts, and see a convergence of the world economy. According to them, as incomes rise quickly, the gap between poorer and richer countries will narrow.

However, such a convergence has never happened, at least during the period before the 1990s. Instead, the "Matthew effect"-in which the rich get richer and the poor get poorer-was in view. This phrase has been attributed to sociologist Robert K Merton. It has only been since the 1990s that convergence of the world economy has occurred, thanks to changes in the characteristics of globalization and their outcomes.

First, many developing countries embraced economic globalization and found their place in the global value chain. As a result, more low- and middle-income countries benefited from trade, cross-country investment and technological spillover.

Out of the 160 members of the World Trade Organization, more than half received their member-ship after January 1, 1995, when the founding members were designated.

Second, the wider participation in globalization pushed international trade back to the Ricardian type, in which comparative advantage determines the pattern of trade. According to Ricardo, a nation is said to have a comparative advantage if it can produce a particular type of goods relatively "more efficiently or relatively less inefficiently" compared with the other nation.

In the decades before the 1990s, the Cold War between the East and West and the divide between the South and North affected world trade. At the time, the developed countries conducted transactions between each other via intra-industry trade, while the developing countries barely participated in the worldwide division of labor.

Consequently, international trade was no longer based on comparative advantage.

Only after economic globalization became more widespread did international trade return to its classical form: inter-industry trade based on comparative advantage. As a result of inter-industry trade-developed countries exporting capital-intensive goods and importing labor-intensive goods from their developing partners-both groups gained from globalization.

Third, globalization does not guarantee equal distribution of overall gains among different groups within a country. In emerging economies, the labor market force has helped workers and low-income families share the outcomes of globalization through increasing participation in the labor force.

Related news

MorePhoto

Most popular in 24h

MoreTop news

MoreVideo

News
Politics
Business
Society
Culture
Military
Sci-tech
Entertainment
Sports
Odd
Features
Biz
Economy
Travel
Travel News
Travel Types
Events
Food
Hotel
Bar & Club
Architecture
Gallery
Photo
CNS Photo
Video
Video
Learning Chinese
Learn About China
Social Chinese
Business Chinese
Buzz Words
Bilingual
Resources
ECNS Wire
Special Coverage
Infographics
Voices
LINE
Back to top Links | About Us | Jobs | Contact Us | Privacy Policy
Copyright ©1999-2019 Chinanews.com. All rights reserved.
Reproduction in whole or in part without permission is prohibited.