How globalization affects trade and immigration

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From the course by IE Business School

Trade, Immigration and Exchange Rates in a Globalized World

43 ratings

IE Business School

Trade, Immigration and Exchange Rates in a Globalized World

43 ratings

Course 2 of 3 in the Specialization Globalization, Economic Growth and Stability

This is the second of the three courses part of the Globalization, Economic Growth and Stability Specialization. This course will focus on facets of globalization that affect a country´s economic perspectives and decisions. Globalization has recently been the predominant subject in many political debates, and this course will go into the determinants of globalization. It will be separated into four modules; the first module will explain exchange rates. It will cover what determines exchange rate and how different exchange rates affect the economy and the reality of currencies. The second module will explore trade, the reality of free trade, and what occurs to a country´s economy with protectionism. The third module will go into the balance of payments, it will help you understand how economic transactions between a country and the rest of the world work. The fourth module will focus on Immigration, which is probably one of the most controversial subjects today. It will explain how migration affects host countries and it will cover current migration trends.

From the lesson

(Im)migration

Migration:objections and responses6:19

How globalization affects trade and immigration5:38

Conclusions: Is globalization to blame for stagnant lower- and middle-class incomes?7:09

Globalization is worth fighting for!5:28

Meet the Instructors

Gayle Allard
Professor
Economics

[MUSIC]

In this course we've looked at globalization as a phenomenon in

the world.

And we've identified different facets of globalization, which are the free movement

of capital, the free movement of goods and services, the free movement of people.

We've explored all of these aspects.

Capital a little bit less, with exchange rates and

with the balance of payments we've included some concerns about capital.

But we've talked quite in detail about trade and

about the movement of people, and we come to the place,

through all of this discussion, where we must conclude that trade and

migration are beneficial to both sides.

In other words, trade and migration are a win-win situation for both countries

engaged in trade, for both countries engaged in the movement of people.

And it's very difficult to argue with those conclusions.

So this is the first bottom line that we want to establish.

And as we've seen, as incomes, as trade increases,

the world benefits from more efficient use of its scarce resources.

The world benefits from countries being able to specialize in what they do best.

Both countries engaged in trade gain consumer surplus and currencies,

if they're traded freely,

should reflect the different productive advantages among nations.

We've seen that often countries interfere with this but

in general, if currency markets are free,

they should reflect something that has to do with the patterns of trade.

Now another point that's important to keep in mind,

we haven't spent much time on this, but it's true that when we think of

globalization, either currencies or trade, there are nations that don't play fair.

Sometimes currencies are manipulated.

Sometimes industries are subsidized.

Sometimes there are barriers placed to the movement of goods and

services to protect the domestic industry to give them an artificial advantage.

And this is the reason that we created the WTO, and

some of these other trading arrangements that we talked about in the trade section.

Because we need sort of a level playing field.

We need a system of rules that everybody has to obey, some sanctions, so that trade

can really be free and that we can truly see countries advantages being reflected.

And therefore, everyone benefits from real differences in efficiency.

So, this first part established that trade is a win-win situation and

the last part established that migration is a win-win situation.

However, in both of those sections we discovered that there

are losers within each country.

In other words, each country gains, but

within each country there is a group that loses.

In developed countries, these losers,

the people losing out from globalization, tend to be among the most vulnerable.

They tend to be the least skilled workers.

Their wages are hit because of the dynamics of trade and

we talked about trade and factor incomes and how as countries engage in trade,

in developed countries the unskilled workers wages are pushed down.

Same thing happens when theres migration of unskilled workers.

The workers at the bottom in the host country are the ones that are hit hardest.

And we've discovered that in developed countries, this gives us more inequality.

Inequality is a problem.

It's a problem because it causes political and social instability and

it also slows down growth.

So that's the problem in developed countries.

Now in developing countries the whole process of trade and

migration generates more equality, which is something to be welcomed.

And we have to recognize that hundreds of thousands, actually,

hundreds of millions have moved out of poverty in China and

India in other countries thanks to trade, thanks to migration.

So how do we approach this problem of win-win with some losers?

Well, since the whole country gains, governments need to use the income gained

from trade to compensate the losers so that they don't get left behind.

And here is where we have failed, and so it boils down to a political problem.

Have governments done their job by taking some of the gains of trade,

not all of them but some of the gains of trade, from the corporations or

the individuals who have benefited greatly from the globalized economy and

compensated those who have lost out in trade?

Have they transferred some of these income?

Helped workers to adjust and to move to other industries and to gain skills?

If they have not, and many of them have failed to do this,

then we're going to see populism being fueled.

We're going to see resistance to globalization, which is benefiting

everybody and eventually what we going to find is that this greater inequality and

the protectionism that's rising will slow down growth.

So the first conclusion I'd like to make from this whole

course is globalization has huge wins for everyone.

Some specific groups lose.

Let's make sure that our political systems are compensating those groups and

taking care of the problems that are generated for them by globalization.

[MUSIC]

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