John Irons's Blog

Icon

Economic News, Data and Analysis

Solow on Globalization

In a recent interview, Nobel Prize winner Robert Solow addressed globalization and the anti-globalization protests.

Federal Reserve Bank of Minneapolis-The Region- Robert Solow Interview (September 2002)
REGION: Much controversy these days revolves around globalization and the contribution of trade liberalization to economic growth. Do you believe that developing countries need to open their economies in order to grow?
SOLOW: I think this is one of those cases in which focusing on growth is the wrong way to look at it. After all, what is the most you would expect international trade and international capital flows to do for a poor country? The most you could expect is that it might achieve the standard of living of a rich country. That would be terrific, that would be great. But it’s a matter of getting from here to there. Now if you’re going to get from here to there, then at least temporarily there must be faster growth, but growth is not the essence, growth is the byproduct.
The essence here is a poor country learning and becoming able to do (it’s more than just learning) what rich countries already do. There, I think the case is clear. The notion that the poor countries of the world can in any reasonable interval achieve rich-country incomes without trade and capital flows is utterly implausible. If the poor countries of the world have to depend upon themselves for the saving to finance the investment that they need, or have to develop by themselves the skills and technology they need to become rich by our standards, it’s going to take forever. So from that point of view I’m entirely with the open-economy people.
Where I think the open-economy partisans run into problems – and it is a respect in which a lot of market-oriented economics and economists fail—is that they tend to look at overall progress and brush off the fact that a lot of people lose in this process. They brush it off as “That’s just distributional. That’s not my business. After all, any country that wants to can make transfers from the gainers to the losers.” I think that’s a bad mistake, not only politically, but in a deep way. It’s a socially bad mistake. A society in which a small number of people get very rich and a large number of people get very poor is not really progressing, even if when you add it up and average it, it appears to show rapid progress.
Economists who see the marvels of trade and markets wonder why these people complain so bitterly. They’re complaining so bitterly because a lot of them aren’t sharing. It’s not enough to say—and everybody knows it’s not enough—that “oh well, if these countries really wanted to redistribute income they could do that.” They can’t do that. They can’t do that because the people who are profiting from the open economy—and who usually have the political power—are not about to give any of it away to the people who aren’t profiting. When a poor country gets attached to the world market and profits from it, the people who gain from this process immediately become politically conservative because they’re the ones who have something to protect.
If you listen to the people in the streets of Seattle or Genoa or wherever, what they say is so dumb that it’s hard to take them seriously. But if you say to yourself, OK, they’re representing some very unhappy people; what could you say that made sense about the situation? You’d find plenty of things to say. In the United States and Europe, we’ve done very well in redistributing income. We’re far from perfect, but we’ve done much better in making sure that nearly everybody profits from progress. But you could not say that about a lot of poor countries.

Advertisements

Filed under: Economics, Policy

One Response - Comments are closed.

  1. Bob

    John M. Irons links (ArgMax Blog: Solow on Globalization) to an interview given by Robert M. Slow on globalization. Solow says some very smart things: I think this is one of those cases in which focusing on growth is the wrong way to look at it. After …

Pages

Archives

%d bloggers like this: