Sunday, September 12, 2004


There are scores of interesting quotes from Jagdish Bhagwati's book In Defense of Globalization. (His bio, by the way, says that he is "University Professor at Columbia University and Andre Meyer Senior Fellow in International Economics at the Council on Foreign Relations. A former Special Adviser to the United Nations on Globalization, he is one of the world's foremost authorities on international trade.")

Here's what he has to say about income inequality: It's not increasing world-wide, and even if it does, that's not necessarily a bad thing.
Pages 66-67:

Indeed, the consequences of increased inequality, in any event, might be paradoxically benign, rather than malign. If a thousand people become millionaires, the inequality is less than if Bill Gates gets to make a billion all by himself. But the thousand millionaires, with only a million each, will likely buy expensive vacations, BMWs, houses in the Hamptons, and toys at FAO Schwartz. In contrast, Gates will not be able to spend his billion even if he were to buy a European castle a day, and the unconscionable wealth would likely propel him, as in fact it has, to spend the bulk of the money on social good. So extreme inequality will have turned out to be better than less acute inequality!

In short, the preoccupation with inequality measures -- and there are several -- is somewhat ludicrous unless the economist has bothered to put them into social and policital context. Cross-country comparisons, no matter what measure is deployed, are just so much irrelevant data mongering, it must be confessed, since societies are diverse on relevant dimensions and there inequality cannot be judged outside particular contexts.

And this lunacy -- how else can one describe it? -- extends to what the World Bank, with its abundance of economists and funds, has been doing in recent years, which is to put all the households of the world onto one chart to measure worldwide inequality of incomes. But what sense does it make to put a household in Mongolia alongside a household in Chile, one in Bangladesh, another in the United States, and still another in Congo? These households do not belong to a "society" in which they compare themselves with the others, and so a measure that includes all of them is practically a meaningless construct.

But since some play this particular global inequality game, others must follow suit. Since the World Bank found, in a 2001 study, that a small increase in inequality had occurred between the late 1980s and the early 1990s -- an astonishingly small period to work with since the measured changes are likely then to be transient, just a blip -- the question has been posed in just this way by others. Thus, . . . Sala-i-Martin calculates also the inequality a la World Bank, using nin alternative measures thereof. He concludes that according to all these measures, global inequality declined substantially during the last two decades. These findings are supported also by the recent work of Surjit Bhalla. Between them, they raise a massive discordant note in the chorus singing from a libretto lamenting increasing inequality in the age of globalization.

And so globalization cannot be plausibly argued to have increased poverty in the poor nations or to have widened world inequality. The evidence points in just the opposite direction.


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