Monday, March 5, 2012

Pankaj Ghemawat - Benefits of globalisation

Pankaj Ghemawat in this piece in the HBR titled "The Benefits From Globalization Are Understated" pitches his case for "globalisation" thus:


To summarize (see chart), the benefits of expanding merchandise trade are much larger than traditional models indicate, and to those one needs to add gains from services trade to have a complete picture of the benefits of increased trade flows. Then, on top of trade, other kinds of cross-border flows double the estimated economic benefits to at least 8% of global GDP. And beyond that there are complementarities and non-economic benefits that I find compelling but are harder to quantify in GDP terms."
 He essentially argues that the gains of international trade in terms of percentage of GDP will be evident in the good, services, labour mobility spheres. 

I think there is no dispute that globalisation does tend to increase trade and with it brings an increase in GDP and living standards. The critics of globalisation however argue, inter alia, the following:

1. The distributional impact of a globalised world is skewed. Rising inequality and concentration of the benefits of the globalised world rest in too few hands.
2. Domestic industry interests are compromised in a globalised world and this impacts the local economy, workers and ultimately the country.
3. Domestic policy space is severely curtailed due to international trade rules in matters that should essentially be a country's sovereign right.

Would look forward to the next post of Pankaj Ghemawat where he promises to address some of the cons of globalisation.

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