File Size: 6239 KB
Print Length: 344 pages
Publisher: Harvard University Press (November 14, 2016)
Publication Date: November 14, 2016
1. The book’s basic idea is simple. RB posits that there are three types of costs that create barriers to export-type trade: the expense of moving goods, the expense of moving knowledge and information, and the expense of moving people for face-to-face conversation. As each type of cost gets cheaper, a new form of globalization comes forth. (I distinguish export-type trade because, as RB points out, before the mercantilist 17th Century or so, the primary objective of trade was quite different: it was to import hard to find and useful stuff, with exports mainly seen as an method of payment in kind for imports. )
The first wave of globalization happened when shipping costs for goods went down. This specific was the Ricardo-type “make here/sell there” (MHST) kind of trade, which carries on to be most politicians’ idea of what trade is about. Some developing nations around the world, most notably Japan and to some extent Korea, could actually become wealthy under this sort of trade regime, using what a Japanese educational dubbed the “flying geese” strategy, progressively entering more and more sophisticated types of production — and abandoning the older types of production together really does so.
Shortly before 1990, the second wave of globalization commenced in earnest, when ICT helped to bring down the expense of moving knowledge and information. Coming from that time, those items commenced to flow from the wealthy countries of the “North” to the developing countries of the “South” — resulting in a precipitant, precipitate decline in the G7 share of global GDP since 1990 (see chart @2; it’s this action towards more even relative GDP shares that is the “great convergence” of the book’s title). Typically the sort of trade that results is quite different from MHST: New The positive effect trade usually involves corporations transferring knowhow about assemblage and manufacture of components to affiliates in low labor cost countries. Typically the result is that only some parts of a product’s value chain might move away from the G7 country that previously experienced been home to the complete chain — and which parts move away can vary from product to product or from sector to sector.
A clear message of the book is the fact when politicians stay to the MHST attitude and fail to notice that the New Globalization is different, policy can go wrong. Chapter 9 includes an interesting contrast involving the Malaysian and Thai automobile industries that illustrates this time. Malaysia tried during the 1990s to assemble and sell completed cars, but its “flying geese” attitude was obsolete, and it failed; Thailand embraced the notion of making components only, and today has a thriving industry that is part of Japanese automobile makers’ networks. Similarly, Vietnam has developed expertise to make a component called a wire harness; while primarily a supplier to the auto industry, it has been able to department out to supply the element to additional industries as well.
This New The positive effect trade hasn’t benefitted all countries evenly — somewhat, it’s preferentially benefitted nations around the world relatively close geographically to G7 countries. This is why East Asia (close to Japan), Mexico (close to US) and Eastern Europe (close to Traditional western Europe) have benefitted more than South America and The african continent. (India is exceptional because it has relied to a unique degree on the export of services; perhaps its linguistic proximity to the US — namely, widespread fluency in English — operates analogously to geography. ) Regardless of New Globalization’s benefits to companies with HQ in G7 countries, its impact on G7 countries by themselves isn’t necessarily so rosy: as a graph and accompanying text show (@164-165), it is likely to have the worst impact on the middle-skilled workforce in G7 countries. RB doesn’t ruminate on the political ramifications of this, though.
2. Another wave will be when the expense of moving people for face-to-face interaction comes down. RB interprets this in a more “virtual” than literal way: telepresence and telerobotics. Both of these technologies exist, but currently can be very expensive. For example, telerobotics currently allows a surgeon in one country to perform a sensitive procedure on the patient in a different country. Might be the main insight of the book is RB’s remark that before worrying about AI, we ought to look at the implications of cheap human being labor in the developing world remotely operating programs in US or Japanese factories.
Unfortunately, this topic is relegated to a brief discussion in the conclusion; I wished it had been the subject matter of far more elaboration. Typically the social implications of this go beyond the out of place middle-skilled personnel of the newest Globalization. For example, if surgeons can work worldwide without ever leaving their home country, will that reduce the incentives for folks to get surgeons? After all, why should I commit so many years of money and time to learn the skill and have licensed, if doctors working in london, or Mumbai, or Bangkok will do all the interesting and/or lucrative procedures within my home city? How many people are able to afford to gamble on becoming world-class? And if enough people think like me, could there be a shortage of surgeons if my city is hit by an earthquake or other disaster?
3. The book suffers somewhat from several typical pressures of economist myopia. RB mentions the old joke about how precisely economists say “Sure it works in practice; but does it work in theory?, ” yet he falls to the same routine himself with a pair of chapters that make an effort to provide a theoretical basis for his observations (Chaps. 6 & 7). Even if the theory — a sort of Rube Goldberg machine cobbled from four different theories, actually — can produce a story that appears to describe the past, there isn’t any indication that it can predict the future any better than RB’s simple underlying observation about the three costs. So it’s not clear that the theoretical digression gives much.
The book omits any serious discussion of globalization’s impact on within-country inequality — slightly surprising in the post-Piketty era. The conventional, simplistic and fallacious connection drawn between GDP and living standards (box @227) could have been avoided had the book paid more attention to within-country distribution of income and wealth.
Another very common of trade discourse is RB’s implicit assumption that future will be an era of peace, as evidenced by his suggestion that G7 economies concentrate on the service aspects of production rather than manufacturing itself (Chap. 8). If within this century there is conflict between China and the united states, or China and Japan, for example, woe betide the that has to count on international supply lines to obtain essential manufactures and to feed its population. Preservation of production and agricultural capacity and know-how are crucial to a country’s national security, but the question of how to balance security and development is never even mentioned in this book.
RB also follows the neoliberal lead of Harvard’s Male impotence Glaeser in emphasizing that cities should be the focus of advanced economies’ competitiveness policies (which RB characterizes memorably, if a bit disconcertingly, as “growth plan in sexy underwear, ” @226). I live almost all of the year in the rural part of a country that has emphasized the growth of a couple of metropolitan regions for the past 70 years, and from that perspective such a policy has a lot less to recommend it.
4. While the book’s substance is unquestionably macroeconomics rather than management, in tone it seems to aim for a kind of hybrid between an economics book and a business book. Mostly, this works well. The substance is more demanding and less chatty than a typical business book, even one from Harvard Enterprise Press; but the writing is clear and is supported by numerous helpful graphs and illustrations. The chapter-end summary boxes err privately of being repetitious, often beginning with a recap of previous chapters’ substance as well.
The main problem with the hybrid approach is the finding. There isn’t any bibliography, and even endnotes are few and far between, as is more typical of a book for a popular or time-pressured business executive readership. Amongst those few, some are too vague to be helpful: for example, the endnote hanging off a short quote from Claire Kuznets contributes to a quotation of a large fat book of Kuznets’s essays, without any essay title or page reference (@65, 304n4). The few journal articles are mentioned by title and author name within the primary text, but the name of the journal or other source isn't provided. If you’re the type of readers who actively uses the cites in your reading material, this book may disappoint your expectations in that regard, especially considering it comes from Harvard’s main academic press.
To be able to conclude: Personally I’m very skeptical that removing limitations on international trade is always a good thing for all those countries. I’m also troubled by the idea that we must acknowledge it as inevitable that people on the reverse side of the globe will someday be operating robots to do jobs that used to use locals. And since I actually haven’t dug around much in global trade stats myself, part of me wonders on principle whether this book’s story is too neat. But despite my discomfort with some with this book’s assumptions and attitudes, the primary story it tells is simple, seems mostly constant with experience, and provides a viewpoint for formulating future plans (even if those might be different from what RB would prefer). With regard to those reasons it’s definitely worth reading if if you're interested in trade or the social impact of globalization., The positive effect is very topical these days and has become extremely politically charged. Typically the great convergence details the evolution of globalization through human history specifically the dissimilarities between different eras of globalization. The author offers a narrative on the order of human history of how the step from production to consumption has evolved and how each time of globalization has been driven by different factors and how those dissimilarities led to different creation techniques. The history is interesting but the framing of the latest stage of globalization is what is worth reading more than anything.
The book is split into 4 parts. The author starts by giving the history of transformation of human labor into consumption. The creator gives an intuitive review of how self-sufficiency and subsistence living turned into agriculture and specialization. Typically the author discusses how transportation of goods was very costly so trade was minimal regardless of the growth of cities which facilitated local exchange of specialization. Typically the author then notes how steam and coal led to the decline of transportation costs which was the first major unbundling of production from consumption as production + transportation still led to large efficiency gains and comparative advantage drove development. The newest stage of globalization mcdougal illustrates has been where levels of production have been separated and how supply chains taking advantage of specific comparative advantage has become more pronounced. This final part is the emphasis of the book.
Typically the author moves to discuss the ideas set out in the first part with more depth in particular he focuses how early stage globalization led to an industrializing " north" against a less money intensive " south". The author focuses on the conflict between agglomeration benefits and the cost inflation that it creates. The North pertains to Europe and Northern America and the South pretty much everything more. Despite cheaper labor in the south the comparison advantage of a industrialized country final good with ownership of the whole supply change produced cheaper goods net of transportation costs than the South with cheaper labor inputs. As a result the industrializing north experienced the positive feedback of further investment which brought to further development and improvement in cost structure as productivity growth was faster than wage development. The second unbundling which is what we are currently witnessing is significantly more dynamic and a partial reversal of the initial unbundling. As the expense of conversation over space has dropped it has allowed for the increasing subcontracting out of parts of the creation process. The author talks about how this has been enabled by improvements in trade global governance buildings and agreements surrounding property rights and recourse through the courts. The result of the decline in transaction costs of utilizing a supply chain versus depending locally on the whole production process has been revolutionary for global trade. The offshoring of creation has enabled the use of cheap labor and elevated intellectual property to operate a vehicle the most recent lower leg of globalization which has led to the offshoring of jobs.
The creator goes through cases of how production understand how has been exported to where labor cost advantage is extreme. The these include Mexico and China. On the other side of this has been the development of service exports from the " North". Typically the author spends time on policy as well and highlights the difficulties in trying to onshore labor given the global competitive landscape. Most of the examples are framed as situations where the corporate had no choice but to improve cost structure or lose business. Since the impact of offshoring of labor is hitting the lower skilled labor pool, the need for safety nets is of great importance being the need to continue to concentrate on where comparative advantage exists to operate a vehicle productivity growth. This specific area is the toughest but the author offers some good ideas on which to think about.
Typically the great convergence is a good review of how globalization has enabled the separating of location and time of production and consumption. This gives a person history of this decoupling to give the full context of today versus the past and it is done intuitively. How we deal with the bruit associated with globalization is a fierce topic right now and unlikely to be resolved anytime soon. Regardless of the social unrest associated with it, the dynamics as to the reasons globalization is taking place and how offshoring has been enabled by the technological world we stay in imply the need to rethink policy in an educated fashion is very important. The great convergence offers a sense of the dynamics and challenges and is very much worth the time.
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