Liberty Discussion on ‘Do globalization and world trade fuel inequality?

On 28thSeptember, 2018, the members of Liberty Discussion Group sat down at Gaia Restaurant and Coffee Shop to discuss the article ‘Do globalization and world trade fuel inequality?’ by Jeffrey Frankel.

In the article, the author talks about the ongoing debate on whether free trade and globalization is one of the major reasons for rising inequality in the world. The author provides some empirical evidence from various researches and shows the correlation between increasing globalization and rising inequality. Furthermore, the author also refers to Heckscher-Ohlin-Stolper- Samuelson model to explain how free trade hurts unskilled labourers (which is a scarce factor) in developed world. But, also criticizes the theory as it could not explain why low-skilled works (which is abundant factor) are not better off in underdeveloped world.

The discussants were divided among themselves while debating the relationship between free trade and inequality. Some of them opined that free trade and globalization has increased inequality whereas, others argued that it is the lack of free and fair trade among various nations that has caused inequality. They maintained that non-tariff measures imposed by developed countries have made it difficult for developing countries to export their products. The cost of meeting various standards imposed by developed countries is very high. This has led to increased inequality between people of developed and developing world.

Some of the discussants argued that globalization might have increased inequality but at the same time it has also raised the living standards of many people. The transfer of technology, capital, and information among other things have helped poor to get out of the poverty. Hence globalization has done more good than bad and hence should be promoted.

As, time was limited, members could not discuss more on these issues even though they desired to. But as always, members can always continue their discussion on the Facebook group.