The Second Coming of Norman Angell
Washington Post Death Spiral Watch (Alec MacGillis Edition)

Notes for PEIS 101 Guest Lecture: August 15, 2008

GLOBALIZATION AND ITS DISCONTENTS

What was traded: 1500 and before:

  • Silks, gems
  • Spices
  • Slaves
  • Knowledge (but very slowly: 500 years from China to Europe): spaghetti, compass, printing, gunpowder

What was traded: 1500 to 1800: add:

  • Textiles
  • Sugar
  • Intoxicants (coffee, tea, chocolate, tobacco, opium)
  • Slaves (industrial plantation slavery: middle passage)

All due to the ocean-going caravel; digression on Zheng He

What was traded: 1800-1870: add:

  • Cotton
    • Consequence: U.S. Civl War (300K dead of 1.2M white southerners; 300K dead of 6M white northerners and Blacks; same number maimed)

What was traded: 1870-today: add:

  • All staple commodities that don't spoil
  • the iron-hulled ocean going steamship
  • the submarine telegraph cable

How cheap is trade today?:

  • A standard container, 5500 cubic feet
  • An iPhone, worth $200, in a box 1/32 of a cubic foot
  • One container can carry $35M in iPhones
  • Costs $8000 to ship a container across the Pacific (used to be $3000)

Economic Growth:

  • Current U.S.: $25/hr ($2008)
  • U.S. 1900: $3/hr ($2008)
  • U.S. 1800: $1/hr ($2008)

Today: You can buy 80,000 calories of potatoes from a day's wages at $1 an hour

  • 1700 Beijing: 2000 calories purchased with a day's wage
  • 1700 Leipzig: 3000 calories purchased with a day's wage
  • 1700 London: 8000 oat calories, but only 3500 wheat calories

International income differentials on the order of 2-1

Today:

  • U.S.: $25
  • Coastal China: $6
  • Interior China: $3
  • India: $2
  • Ethiopia, etc.: $1

Post-WWII Development Strategies:

  • Soviet (seems a good idea because no Great Depression in the Soviet Union, and Soviet victory over the Nazis in WWII)
  • "Commanding Heights"
  • Import substitution
  • Independence as a magic bullet

All failures


The Washington Consensus:

  • Maximize economic contact--eliminate trade barriers
  • Minimize regulation--an excuse for bureaucracy and bribery
  • Shrink the state--outside of East Asia and maybe western Europe, emerging market economies can establish property rights and enforce contracts, and that is pretty much all they should dare try to do...

Rodrik:

  • Regulatory arbitrage on health and safety--race to the bottom
  • Capital mobility: is the constraint savings, or investment demand?
  • Perverse savings flows
  • Needed: global scale institutions (like the EU, only more so)

Immigration:

U.S.:

  • 300M people
  • 150M workers

Mexico:

  • 100M people
  • 35M workers
  • Of whom, 9M in U.S.

Winners from immigration:

  • Mexican migrants bigtime
  • Mexican stay-at-homes (remittances, larger farms)
  • American businesses
  • American consumers
  • American workers who become straw bosses

Losers:

  • Past legal immigrants
  • African-American males with little education

Comments