It's front page news in the WSJ, so it must be a big deal

Frank Levy chides me for overlooking today's page 1 story in the WSJ on globalization. It's called "Globalization's Gains Come with a Price," and it's all about how the wage distribution has gotten wider in developing countries, contrary to what a lot of people were expecting. When I read it, my first reaction was, "this is news?"  Frank assures me that it is to most WSJ readers.

Comments

[dissent]

How is this different from "a race to the bottom"?

[conchis]

Or, more importantly, how is it worse than the situation without trade?

[James Galbraith]

It's a good newspaper story but I would not say the same of the data presented in the charts alongside.

Inequality in Mexico surely did not decline after NAFTA. The peso crisis of 1995, and inequality falls? I don't think so. Currency crises hit the real incomes of the poor (food prices go up) but not the real incomes of exporters (the peso value of exports just rises). The effect on inequality is large, easily measured and incontrovertible. Why it's absent from the World Bank data is a mystery.

As for the interesting figure on Korea, it clearly shows the pitfall of *financial* liberalization, which led to the Asian crisis. The debacle of 1997 had nothing to do with trade.

JG

[Anamolous]

I am almost 100% sure most WSJ readers would be surprised to hear this. A very smart WSJ reporter once told me that their masthead should read "All the news that fits our views".

Everyone I know who has worked with them agrees. They are the business lobby's "Pravda".

[Justin]

It isn't news, but it certainly does call into question mainstream economic theory about how trade liberalization was supposed to decrease inequality between the skilled and the unskilled in the developing world. Unfortunately, the economists who peddled those arguments have never really been taken to task.