Introduction to
International Relations
Globalization and Inequality
Jaechun Kim
Globalization, Growth, and
Inequality
Definition of Globalization Revisited: What Is It?
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One of the most hotly debated issues of today’s world…
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Both proponents and opponents…
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The term entered the scholarly jargon in the 1980s… but lack of
clear definition …
To some Globalization means integration of economies, but to
others it also means political and culture integration…
(Economic) Globalization
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Increasing integration of economies around
the world, particularly through free trade and
financial flows…
This is the definition that we will use today…
Economic Globalization has taken on many
different forms (mainly 3 forms)
International Trade:
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Share of international trade in total output among
developed countries
27 percent in 1987  48 percent in 2004
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Among developing countries – 10 %  20 %
FDI
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World FDI flows tripled between 1988 and 2004
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US $ 192 billion  US $ 710 billion
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The share of FDI to GDP is rising in both developed
and developing countries
About one third of total FDI is going to the developing
countries
FDI is the largest form of private capital inflow to
developing countries
Capital Market Flows
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Diversification of portfolios including foreign
financial assets…
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Borrowers look for foreign sources of funding…
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Most volatile feature of Economic Globalization…
Asian Financial Crisis of the 1990s…
Recent financial crisis… starting from Lehman brothers…
Each aspect of Econ Globalization (i.e., intl free
trade, FDI, short-term K movement) raises
distinct issues and distinct consequences…
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You can favor openness in trade, but not in FDI and
short-term K movements
Or favor openness in trade and FDI, but not short-term
K movements
Or favor all three…
Or reject all three…
Is (Economic) Globalization a Wholly a New
Thing?

What about economic globalization of the 19th century?
The differences between Economic Globalization
of 19th c. and Economic Globalization of today?
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limited players in the late 19th century… it was
basically European affair…
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Today’s Globalization is more global…
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limited degree of financial integration in the late
19th century…
Today financial services are far more developed
and far more deeply integrated….
What caused today’s trend toward Economic
Globalization?
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The role of technology? Technological
developments are the driving forces…???
American hegemon? (HST) creating and
maintaining liberal international economic order in
post WWII era..
International Regime? (similar to functional theory…)
Collective interests of the firms (MNCs)? (Helen
Milner)
One of the greatest problems in the world is poverty.
Economic Globalization and World Poverty: Does
More Economic Globalization Increase World Poverty?
Or Reduce it?

Impact of economic globalization varies from one country to
another… !!!
Does openness in trade raise (overall) growth within a
state?
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1 percentage point increase in ratio of trade to GDP  2
percentage point increase in per capita income (Figure 3)
Consensus that greater openness raises growth within a
nation… e.g. KORUS FTA
Economic growth and poverty reduction:
Does more openness worsen income
inequality (within states)?
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Poverty may increase despite growth…
Figure 1 – relationship between poverty
reduction and economic growth
Must growth come at the expense of equity?
(the relationship between changes in equality
and growth)
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Developing countries have feared this…
Figure 2 – no correlation between growth and
change in inequality
The relationship between changes in equality
and openness (free trade)
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Figure 4 – no correlation between openness and
changes in equality (Gini)…
Caveats:
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Controversy over what influences
income inequality… we don’t know for
sure what influences inequality…
Openness does not necessarily ensure
that the benefits of increased efficiency
and growth are distributed equally…
Stolper-Samuelsson Theorem – factor
endowment and free trade…
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Openness benefit owners of factors in which that society is
abundantly endowed, whereas it harms owners of factors in
which a society is poorly endowed… (SS theorem)
Some other factors which contribute wealth distribution other
than factor endowment… Many intervening variables!
Governments’ policies
Educational and vocational training programs…
Social safety nets…
Restriction of openness, is it desirable way to help
(negatively) affected sectors?
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It can be very costly way of helping affected workers…
Globalization and Inequality between
Countries? (North-South relations): Has
Globalization increased inequality between
states?
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1960: the average per capita GDP in the richest 20
countries was 15 times that of the poorest 20
2001: the average per capita GDP in the richest 20
countries was 32 times that of the poorest 20.
What is to blame? Openness?
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Figure 5
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Does openness explain why poor countries
got poorer?
Figure 5!
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Problem for many of the poorest countries –
the exclusion from the process of
Globalization…