lec 2 The Global Economy as a Movie

Lecture 2: II. Globalization: Blessing or curse? Discussion: Cases of GlobalizationWorkers Falling Behind in Mexicoby Mary Jordan, Washington Post, 7/15/03 : 

Lecture 2: II. Globalization: Blessing or curse? Discussion: Cases of Globalization Workers Falling Behind in Mexico by Mary Jordan, Washington Post, 7/15/03

Workers Falling Behind in Mexico: 

Workers Falling Behind in Mexico Why Mexican earn only half of what they used to bring home? Describe the vicious cycle mentioned in the article; what are the negative effects of low wages?

Summary of Discussion: 

Summary of Discussion Nice location for FDI; but illegal immigrants Financial Crisis low wage & unemployment  black market, tax revenue↓  education; health

Workers Falling Behind in Mexico: 

Workers Falling Behind in Mexico Case one: Discuss the impact of globalization on future trend of Mexican wage. Case two:台灣區域差距擴大，貧窮的縣市正加速貧窮, 2006.09.24, 中國時報

Lecture 2: II. Globalization: Blessing or curse? The Global Economy as a Movie: 

Lecture 2: II. Globalization: Blessing or curse? The Global Economy as a Movie Michael Mandel, Chief economist for BusinessWeek July 20, 2005, BusinessWeek Online

What’s in common?: 

What’s in common? Casablanca Jaws, Close Encounters of the Third Kind, 2004 film: The Terminal They all had alternative endings!

Happy ending? Sad one ?: 

Happy ending? Sad one ? Does the rise of China and India supercharge global growth? Will all the new competition pull down wages in the industrialized world? Director: Paul Krugman Producers: IMF; W.B.

Loss of Balance: 

Loss of Balance Labor is getting a smaller share of the economic pie.

Broad Decline in Wage, why?: 

Broad Decline in Wage, why? Intensification of global competition Workers in advanced countries to accept a lower wage

Plot by Economist: 

Plot by Economist What determines wage? Econ 101! Entry of China, India, and the former Soviet countries into the global economy effectively doubled the size of the world's workforce. (Richard Freeman, Harvard economist) real wage employment Ls Ld Ls’ China India

Loss of Balance: 

Loss of Balance L/K  2×L/K; labor is relatively abundant, capital is relatively scarce returns to L drop, returns to K rise “shifts the balance of power in markets toward capital, as more workers compete for working with that capital.” writes Freeman

Alternative Explanation: 

Alternative Explanation This is the unhappy ending to the global economy story. True or false? It may be temporary, since Restructuring of corporations in Japan and Europe  Productivity growth & Profit An unanticipated surge of productivity growth sent corporate profits soaring, and it took a couple of years for wages to catch up. It had happened during 1995-97.

Slide13: 

There's no way of telling yet -- but hey, what fun is a movie with a predictable ending? Will we get the happy ending or the sad ending?

Reading: 

Reading 「閒論財富與經濟」黃春興 ’02-03-04 Globalization and Growth in Emerging Markets", by Joseph Stiglitz In Journal of Policy Modeling, 25, 2004, pp.465-484. Ref: both are post on my course website