“where as globalization has indeed created unprecedente gains for some it has meant increased vulnerability and exclusion for many others. ” Discuss.

 Globalization promises to give everyone access to markets, capital, and technology, and foster good governance. In other words, globalization has the potential to remove all of the deficiencies that create and sustain poverty. As such, globalization ought to be a powerful engine for economic catch-up in the lagging regions of the world. And yet the last two centuries of globalization have witnessed massive economic divergence on a global scale. How is that possible?

This question has preoccupied economists and policymakers for a very long time. The answers they have produced coalesce around two opposing narratives. One says the problem is “too little globalization,” while the other blames “too much globalization.” At different times in history, each of these narratives has found favor and they have experienced varying appeal in different parts of the world. But the debate on globalization and development ultimately always comes back to the conundrum framed by these competing narratives: If we want to increase our economic growth, should we throw ourselves open to the forces emanating from the world economy, or protect ourselves from them?

Unfortunately, neither of these two narratives offers much help in explaining why some countries have done better than others, and therefore neither is a very good guide for policy. The truth lies in an uncomfortable place, the middle. Globalization does greatly enhance the potential for economic growth, but the best way to take advantage of it is not to remove the transaction costs that block full integration to the maximum extent possible. A “thin” version of globalization, la Bretton Woods, seems to work best. Consider a metaphor I once heard from a student from China (appropriately enough): keep the windows open, but don’t forget the mosquito screen. This way you get the fresh air but you also keep the bugs away.