Top positive review
2 people found this helpful
excellent entry level text..
on 22 August 2013
I recommend this book as a persuasive and accessible introduction to the pro -globalisation line of argument,ideal for the general reader or student who is starting out to study development economics.Globalisation is a process of greater economic, cultural, social and technological relatedness that has its basis in trade.It is not a modern phenomenon. For as long as production,communication,travel and exchange has been possible, then it has existed.But like the genie once let out of the bottle, its effects are hard to control or anticipate, especially in the case of financial markets.Globalisation is a fact and can't be uninvented. More importantly, the spread of ideas, effects on politics, good practise and the free -flow of capital and other resources implicit in the process has had profound impacts on all ot us.
Legrain's view of course, is that globalisation is a 'good' thing, not just for some, but rich and poor countries alike. Further, if only governments reduced tariff barriers and other spurious self-serving restrictions, incomes, output, choice and opportunity would improve globally.This is because each country, and by extension their citizens,would be forced to specialise in particular products or services wherein they had a comparative advantage. This would lead to more efficient use of resources,higher employment and lower taxes.
Legrain however is not some libertarian extremist, he is a pragmatist.He understands that there will be transition costs in the form of unemployment,elimination of inefficient industries and firms and resultant social upheaval.Works work, but they take time.Reassuringly,he adds that markets need regulating (but on an international, not unilateral level)and preventative mechanisms such as bail out funds and methods of restricting capital outflows when particular currencies come under speculative pressure to smooth over market uncertainty and instability.
The argument then is that protectionism serves special interest groups, especially declining industries, inefficient producers , such as European small farmers or intellectual property right holders such as big pharmaceutical companies. Protectionism has a two fold impact. It costs citizens in say Europe and America higher taxes to pay for subsidies, higher prices by virtue of import duties and less choice. Jobs might be protected, at last in the short run, but at what cost. Producers in the developing world find themselves locked out of world markets. They suffer from lower prices and demand and an inability to move beyond being suppliers of primary products. The net result is continuing poverty,lack of funds for education and health care and a dependence on aid. So opening up markets ( with certain proviso's)generates significant long term and sustained welfare gains. Legrain's view is that whilst Globalisation has many failings (sweatshop labour,financial panics , pollution and resource depletion) the benefits far outweigh the costs. But if consumers really feel that some products,services or governments are morally compromised, then they should vote with their feet. Falling incomes or wealth tends to adjust behaviour!
Legrain has the habit of many economists of ignoring the political realities.Protectionism appeals to nationalism and a romantic attachment to particular productive activities, not to mention powerful sectional interests. Why else does the CAP exist? Protection exists because it is a convenient way of satisfying powerful interest groups( unions and producers), raises revenues for government and imposes costs on consumers who don't realize what they are being forced to pay and so can't object. Secondly he is very dismissive of the critics of globalisation.To be concerned about the welfare of workers in developing countries is not naivety or sentimentality, but a real moral issue that should be given proper consideration.
Thirdly, he fails to acknowledge the real transition costs of lowering protectionist barriers. Free markets do not guarantee labour mobility or higher incomes. There will be winners and losers.Can and should the losers from reduced protectionism, be compensated by the winners?
'Open World' is an interesting and informative read. It is packed with useful examples and case studies. It's points are clearly made and easy to understand.What I liked about the book was its essentially optimistic tone. Increased trade and more open markets deliver benefits for everyone. Trade reduces dependence, increases freedom and makes for a better world. Whats not to like?