0.3 Globalization  (Page 7/9)

There are clear benefits of globalization to the U.S., Europe and Japan. Growing trade with emerging nations has allowed prices of consumer goods to be slashed, from clothing to electronics. This has placed what once were considered luxury goods into the hands of tens of millions of lower income people. For this reason globalization might be considered, at least in part, a “pro-poor” development for the U.S. Also, competition from such emerging markets as China and India has spurred many developed nations on to greater productivity and innovation. Finally, recent research indicates that globalization has had a positive impact on productivity in large R&D (research and development) firms in the U.S. and Europe. Michele Cincera&Julien Ravet, “Globalization, Industrial Diversification and Productivity Growth in Large European R&D Companies”, Journal of Productivity Analysis , April 2014, Vol. 41(2): 227-246.

Nevertheless, as Summers notes, the global middle class may perceive themselves as losers from globalization.

Measuring globalization

The degree of globalization, while very substantial, is often overstated. If the extent and penetration of globalization were as great as commonly thought, then an average pairwise correlation coefficient of GDP growth across today’s five largest economic areas should be high on the order of 0.6 to 0.7. That has not happened.

Consider the table below, containing pairwise correlation coefficients for the U.S., Japan and the six largest European nations combined, plus China, India and Russia for years 1995-2005.

The average is 0.075, about 1/9 of the usual expectation.

Globalization and fertility

We return to demographics (discussed in Chapter___) in considering the costs and benefits of globalization. The decline in fertility rates has been worldwide, but the sharpest decreases have been in East Asia, where rates dropped from 5.4% in 1970 to 2.1% in 2011. But rates also fell substantially in South Asia: from 6.0% in 1970 to 3.1% in 2011. Fertility rates in Africa were high in the 1960s (between 5.5% and 7.5%, about the same as Indonesia and Mexico). But while Asian and Latin American nations’ fertility rates declined steadily after 1970, African rates remained high until very recently. And there has been great variation in fertility rates within Africa: By 2012, only 13 African Nations had fertility rates below 4.0. None of these countries are in East, West or Central Africa. Another 15 African nations have fertility rates between 4.0% and 5.0%. Jean-Pierre Guengant and John May, “African Demography,” Global Journal of Emerging Market Economies, 2013.

Notice something about these figures for fertility across regions of the world. The largest declines in fertility have been in those emerging nations most involved in globalization, especially those in East Asia (China, Indonesia, and Thailand). The smallest decline in fertility rates was for countries that through 2011 have been least involved in globalization (sub-Saharan Africa). Globalization seems to lead to a shift in the direction of replacement fertility, the rate at which population eventually stabilizes. One reason may be that in countries that have “opened themselves up”, families do not need a lot of children for insurance; instead they may rely on urban jobs or services in rural areas.