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Overarching Concerns Programme Paper 7: Interpreting Globalization: Neoliberal and Internationalist Views of Changing Patterns of the Global Trade and Financial System

11 Nov 2005

  • Author(s): John Quiggin

Debate about inequality and changing patterns of resource distribution has inevitably focused on the concept of globalization, which has been central to the international policy debate since the early 1990s. However, this concept obscures as much as it reveals. Globalization is not an exogenous technological shock, forcing governments to adopt neoliberal policies of market-oriented reform, and generating greater inequality in labour market outcomes. Rather, this author writes, the breakdown of controls on international capital markets is the international manifestation of a broader process in which the institutions of the postwar long boom have partially, but not completely, failed to deal with the consequences of the declining effectiveness of Keynesian macroeconomic policies. The response to this failure has been the adoption of neoliberal policies, both domestically and internationally.

Although the fundamental concept of inequality is straightforward, the technical difficulties relating to the measurement of inequality are immense. While indexes can easily be chosen to “prove” that inequality has increased, or decreased, over recent years, the best available measures suggest that outcomes have been mixed, with increasing inequality at the extremes of the global income distribution, being offset by strong income growth in countries such as China and India. According to the author, it follows that no unambiguous answer can be given to the question “Has globalization reduced or increased inequality?” And none should be expected.

Changes in the pattern of resource distribution have been similarly complex. Although trade has grown faster than world income, most of the growth has occurred within trading blocs such as the EU and NAFTA. International flows of capital, after rising rapidly in the early 1990s have been declining since the series of financial crises that began in the late 1990s. These developments cast grave doubt on simplistic neoliberal accounts of globalization.

Neither a wholesale embrace of the neoliberal conception of globalization nor an outright rejection of the processes leading to increased international integration makes sense. What is needed is a cooperative, internationalist approach to the resolution of the world’s common problems and, in particular, the achievement of reductions in poverty and inequality.

John Quiggin is Federation Fellow in the School of Economics, University of Queensland, Australia.

Order UOC PP 7 from UNRISD, 36 pages, 2005; US$ 12 for readers in industrialized countries and US$ 6 for readers in developing and transitional countries and for students.