Globalization, Economic Development and Inequality

Globalization, Economic Development and Inequality

An Alternative Perspective

New Horizons in Institutional and Evolutionary Economics series

Edited by Erik S. Reinert

The expert contributors gathered here approach underdevelopment and inequality from different evolutionary perspectives. It is argued that the Schumpeterian processes of ‘creative destruction’ may take the form of wealth creation in one part of the globe and wealth destruction in another. Case studies explore and analyse the successful 19th century policies that allowed Germany and the United States to catch up with the UK and these are contrasted with two other case studies exploring the deindustrialization and falling real wages in Peru and Mongolia during the 1990s. The case studies and thematic papers together explore, identify and explain the mechanisms which cause economic inequality. Some papers point to why the present form of globalization increases poverty in many Third World nations.


Erik S. Reinert

Subjects: economics and finance, evolutionary economics, welfare economics


Erik S. Reinert It is generally not recognized that two Nobel laureates in economics have provided two conflicting theories of what will happen to world income under globalization: 1. Based on the standard assumptions of neo-classical economic theory, US economist Paul Samuelson ‘proved’ mathematically that unhindered international trade will produce ‘factor-price equalization’, that is that the prices paid to the factors of production – capital and labour – will tend to be the same all over the world. Based in an alternative dynamic tradition – which we here label The Other Canon – Swedish economist Gunnar Myrdal was of the opinion that world trade would tend to increase already existing differences in incomes between rich and poor nations. 2. We would argue that the second approach easily incorporates the main elements of evolutionary or neo-Schumpeterian economics, but with a broader theoretical and historical perspective and with a broader agenda. The aim of this book is to explore the contributions of today’s evolutionary economics to the understanding of the increasing gap in global income inequality, that is to broaden the normal perspective of neo-Schumpeterian economics consciously into the realm of development economics. The experiences since the early 1990s – since the fall of the Berlin Wall – have shown that in many cases globalization has followed the trend predicted by Myrdal. During the 1990s a large number of nations have experienced falling real wages and falling national income; in many cases real wages have declined both rapidly and considerably. In some of the former communist...