Who is Advocating “Free Trade” and Why? Gobalization and Challenges to the Developed World
The paper examines four questions. How will the knowledge economy change the direction and composition of the world trade especially between the developed vs. developing countries? How does this technological change provide opportunities and challenges differently for developing and developed world respectively? After two centuries of Western domination, are China and India coming back to reclaim their places in history and what does it mean to the developed world? Is there a correlation between the rising of the new world economic powers and global prosperity or peace or war?
The analysis of the paper is focused on the interaction of technological changes and globalization, its impacts on income level and social mobility within and between countries, and challenges facing developed and developing world alike.
Through theories of international economics and empirical data, the paper argues that while the current technological changes favour knowledge workers in contrast with mass production of the previous industrialization, the wages in the developed economy will face continuously downward pressure. While globalization may reduce poverty in absolute terms, it will increase income inequality in relative terms. The gap of income inequality will increase between tradable and non-tradable sectors within a nation and also between the more globalized economies and the less globalized ones. The combination of income inequality and social immobility may impose new threat to the world economy in general and human development in specific.
Keywords: Globalization, Income Inequality, Social Immobility, World Trade, Knowledge Economy, Technological Change, international Trade, Developing and Developed Economies, India, China
Prof. Xiaohong He
Professor and Department Chairperson, International Business Department