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.

Chapter 6: Globalization in the Periphery as a Morganthau Plan: The Underdevelopment of Mongolia in the 1990s

Erik S. Reinert

Subjects: economics and finance, evolutionary economics, welfare economics


6. Globalization in the periphery as a Morgenthau Plan: the underdevelopment of Mongolia in the 1990s Erik S. Reinert I apprehend [the elimination of diminishing returns] to be not only an error, but the most serious one, to be found in the whole field of political economy. The question is more important and fundamental than any other; it involves the whole subject of the causes of poverty . . . and unless this matter be thoroughly understood, it is to no purpose proceeding any further in our inquiry. (Mill 1848) ‘Woe to the vanquished’ – a saying of the ancient Romans – came to mind when I attended a conference in the Mongolian Parliament building in March 2000.1 As the only non-Asian I participated in a forum addressing the severe economic problems of the country. The local newspapers vividly reported that not far away from the snug heat of Parliament, an estimated 2 million animals pasturing on the plains were starving to death in the bitter cold. Permanent desertification threatened the country, and it was clear that this disaster was manmade. What was not reported was the important fact that the 2 million animals dying during the winter of 1999–2000 were only the increase in the animal population over the previous two or three years. The fundamental cause of the disaster was the same type of diminishing returns that has afflicted mankind since biblical times: too much economic pressure on one factor of production, land, the supply of which was fixed. Rooted...

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