The downside of globalisation: Why it matters and what can be done about it

Sir Paul Collier

The World Economy, 2018, vol. 41, issue 4, 967-974

Abstract: Globalisation is currently facing populist opposition that may result in a costly increase in protectionism. However, these pressures arise because the adverse effects of globalisation have been ignored. Some of these effects follow directly from elementary economic theory yet have been dismissed by cavalier misunderstandings of welfare economics. An increase in international trade has the potential to make everyone better off, but if those who gain do not actually compensate those who lose, the mere fact that they could do so is not a basis for concluding that the change has enhanced welfare. Other adverse effects can only be understood from recent advances. The link between social interaction and generosity implies that there can be costs to greater trans†national social connectivity. The interaction of trade with spatial agglomeration can produce powerful transfers, requiring new compensation mechanisms for those who lose. Economists would critique populist misunderstandings more effectively if they also addressed these genuine grievances.

Date: 2018
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