MAINSTREAM economic thought promises that globalization will
lead to a widespread improvement in average incomes. Firms will reap
increased economies of scale in a larger market, and incomes will
converge as poor countries grow more rapidly than rich ones. In this
"win-win" perspective, the importance of nation-states fades as the
"global village" grows and market integration and prosperity take hold.
But the evidence paints a different picture. Average incomes have
indeed been growing, but so has the income gap between rich and poor
countries. Both trends have been evident for more than 200 years, but
improved global communications have led to an increased awareness
among the poor of income inequalities and heightened the pressure to
emigrate to richer countries. In response, the industrialized nations
have erected higher barriers against immigration, making the world
economy seem more like a gated community than a global village. And
although international markets for goods and capital have opened up
since World War II and multilateral organizations now articulate rules
and monitor the world economy, economic inequality among countries
continues to increase. Some two billion people earn less than $2 per day.
At first glance, there are two causes of this divergence between
economic theory and reality. First, the rich countries insist on barriers
to immigration and agricultural imports. Second, most poor nations
have been unable to attract much foreign capital due to their own