« Readings for this week | Main | ECON 280: The last two weeks »

11/25/2016

Comments

Charlotte Braverman

Goff and Singh makes a strong and concise argument that trade can be beneficial to developing countries with the caveat, however, that a number of conditions must be present for these benefits to be realized. Without the requisite infrastructure, access to credit, and investment in human capital, Goff and Singh make it clear that the benefits of trade will be much more elusive. Ultimately, their paper echoes the recurring theme that there is no silver bullet for development and that in order for trade to be beneficial, there must be the presence of mutually-reinforcing policies and conditions conducive to development.

What stuck out most to me, however, was the point that Goff and Singh make that oftentimes developing nations hold the comparative advantage in markets that demand unskilled labor. This presents its own unique set of concerns. The abundant and replaceable nature of unskilled labor in developing countries creates the dangerous potential for an exploitative labor market and one thing that came to mind while reading this paper is the issue of exploitative labor conditions in developing nations imposed by big, multinational firms. Outsourcing for the sake of cheap labor can be a slippery slope, especially without a strong infrastructure to protect unskilled laborers. While the presence of these firms may bring hundreds and thousands of jobs to developing countries, if working conditions are not safe and equitable, poverty-reduction is an unlikely result. This need not preclude trade from benefitting developing countries- but it essential that this threatening potentiality be seriously considered and actively prevented.

Tanpreet Hunjan

Goff and Singh’s paper shows that the question: Is trade more harmful then beneficial? Is not so clear cut. The role of technology and of structural unemployment is essential to my understanding of this article. Labor market fluidity in reality is difficult especially in increasing the incomes of unskilled unemployed in England. In England the manufacturing sector has taken a huge hit due to the economy becoming more service sector orientated. As a result of this England is now a great hub for service industry jobs within technology and financial services, however, the unemployed lack the necessary skills to enter these industries, due to many times the high barriers to entry. The recent Brexit heavily revolves around trade and with possible tariffs imposed on the UK due to the impeding exit. The Brexit decision economically is disastrous for UK businesses who export heavily to EU countries and import goods services from EU nations- if trade negotiations are not reached. Discussed in class were the positive and negative implications of trade and the paper reiterates this long standing dilemma.

The regulation note: “Excessive regulations restrict growth because resources are prevented from moving into the most productive sectors and to the most efficient firms within sectors.” by Bolaky and Freund was interesting as it tackled a question that cropped up a lot among my internship in Sales and Trading this past summer. The general consensus among Investment banking at the firm I interned at, were that regulations, such as the Dodd Frank and capital ratio regulations, hindered spending to companies, entities or governments who needed it most. Balancing risk and the benefits of lending is difficult and the right solution isn’t always out there and problems systemic. Development Economics has taught me a lot about theories of development and models about how development and growth can occur in many LEDC’s but the reality is always more complex and nuanced then controlling for x amount of variables which makes development a tricky task and vastly interesting to study.

Jim Grant

Goff and Signh show a very complicated correlation between trade openness and wealth production within impoverished countries. As we discussed in class on a micro level, when consumers have access to global markets that can minimize the cost of goods like food, it opens numerous possibilities and lowers the opportunity cost for consumers to buy other goods. Although, through a macro lens we see that the lack of demand domestically affects small businesses and hurts income as now those potential jobs are being outsourced. This in turn makes lower prices essentially irrelevant. As the paper demonstrates, the openness of trade can have any multitude of effects on the poverty gap of a developing country, normally the costs tend to outweigh or cancel out the benefits or there’s no clear correlation. It does however show that the countries with easier access to credit showed a positive growth when they had open markets.
This, for me, raises some questions. Are those countries more successful because they have access to credit or is it a dual relationship between open markets and credit that’s helping them? Would those countries be better off with closed global markets, but then have access to loans? As we have learned credit can have substantial positive effects by enabling consumers to make long term investments in their businesses, But if they are exposed to a constantly changing global market, couldn’t that potentially compromise their market demand and make them more susceptible to losing everything? We have mentioned that changing professions is very costly and one can imagine switching business models should be exceptionally costlier. I think trade openness is probably difficult to limit. But when considering the tradeoff, I believe in the long run its more trouble than it’s worth. More knowledge and data could clear some of the mysteries, but I think countries need to pass a certain level of sustainability to be able to keep up with and interact with the global market.

Walker Tiller

I found this article on trade liberalization and poverty very interesting in the fact that opening up trade does not necessarily benefit the poor. As we have been studying development for the semester I would think that open markets is one of the largest variables as far as importance for changing poverty in a nation. However, I know realize that there must be several different characteristics to solve the issue of poverty which makes since as there has never been a fix all solution for poverty. Instead it takes numerous changes including education, growing industries, access to capital, government institutions, etc. to create a strong economy that limits the presesnce of poverty. And even then if a country changed all of these characteristics it would still not definitively end poverty. I guess my takeaway from this paper and the class so far is that development is a deeply complex issue and one that we have still not found the complete solution for as we still have numerous 3rd world countries in the 21st century.

Thomas Thagard

It’s hard for me to say that I have direct experience with foreign trade; however, I have seen its impacts in my home state. In the 80’s and 90’s Alabama was fairly dependent upon its textile and steel mills for daily survival. Places such as Birmingham and Alexander City were well known for their ability to produce much needed material for the rest of the country. Yet in the late 80’s and early 90’s all of those jobs dried up and moved over seas. Currently, we produce cars and planes for Airbus. In fact, we have become more productive than ever and industry seems to be returning. But it took 20 years for this to happen and the people of the state suffered greatly. I have seen the towns that once produced textile material and worked in an industrial machine shop that used to produce goods for the entirety of the country. These places have fallen from their former glory. While people have moved to new higher tech plants, most still grasp onto the old. It turns out they simply just can’t let go of the places that they built their lives around. So, these old once great towns slowly dry up and the people inside slowly wither away. It is these places in America that are the least satisfied with our current position in the world. They suffer from the inability to move towards jobs and have to endure the ensuing poverty as consequence.
In America, we have placed high importance on the American dream, the ability for someone to rise out of poverty through his or her own skill and hard work. Yet if modern Alabamians admit that they’re in poverty, then they have to admit that they are less skillful and hard working as others. It is in this manner that the impoverished become spiteful at the system and those who they view as outsiders. While globalization may have brought better jobs, it has also brought this attitude throughout much of my home state. I’m not stating that this ideology wasn’t there before hand, but people used to be satisfied with the America. After the great recession, all of these feelings boiled up into cynicism and blatant hate. From my understanding of the news, this is not unique to Alabama. Instead, it appears that this is happening globally throughout first world countries. So, what do we do with globalization? Can we mitigate it or should it even be mitigated? Are these just temporary feelings or will they always linger? Can this be fixed or is it everlasting? I have none of the answers, but I do know that people need jobs to feel satisfied with their daily life. No one truly wants to live in poverty or off the government’s dollar. So how do we allow these people to lead a life that they value?

The comments to this entry are closed.