With globalization’s limited success, countries should invest more in people - Nobel laureate
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MANILA, Philippines -- Globalization has been credited for helping create unprecedented prosperity but has also failed to substantially cut inequality, especially in emerging countries.
But a Nobel laureate for economics said the solution to globalization’s limited success should not be a repudiation of it but a rebalancing in favor of low-skilled workers.
2007 laureate Eric Maskin, who delivered a lecture at the De La Salle University, said recent developments such as the internationalization of labor and growing digitalization has knocked out of the production chain many low-skilled laborers, thus excluding them from the gains of free trade.
“The more different two countries are, the more trade should be between them according to economic theory,” Maskin said. “But that is not what we have seen. There is very little trade now between rich industrialized nations and the poorest countries.”
Maskin noted, however, that “it would be a big mistake” to try stepping on the brakes of free trade, despite its drawbacks.
For the Philippines, Maskin said that it would be beneficial to open up to more countries such as Russia and China.
“In the case of the Philippines, developing new trade partners could be a good thing,” Maskin said. “The Philippines trading more with Russia and China doesn’t necessarily mean a reduction in trade, there is a mixture there of constructive and not so constructive.”
For the not so constructive possibilities, Maskin said it would be detrimental “if there was an explicit deterrent to Philippine companies trading with the US.”
Maskin also likened Duterte to US president-elect Donald Trump with regards to views on free trade.
“They are suspicious of globalization, which I worry about because globalization is a much more positive than negative force for the world,” Maskin said.
The bottom-line, Maskin said, the key to make globalization more inclusive is a continued investment in human capital to empower low-skilled and unskilled workers.
“The solution to the problem is not to undo globalization or erect trade barriers but to keep free trade in place with some corrections to who is benefitting. If the wise leaders of the world continue to recognize that then I think we will be alright,” Maskin said.