From 1820 to 1990 the share of world income going to today’s wealthy nations soared from 20% to 70%. That share has recently plummeted. Richard Baldwin shows how the combination of high tech with low wages propelled industrialization in developing nations, deindustrialization in developed nations, and a commodity supercycle that is petering out.
In this meaty treatise, Baldwin, an economics professor at the Graduate Institute, Geneva, argues that we're in the process of a major shift in world economics and economic policy needs to be adjusted accordingly. He begins by identifying 1990 as the point when the historical funneling of wealth to rich countries the "Great Divergence" began to be reversed, in the "Great Convergence." Baldwin posits globalization as the gradual undoing of a forced "bundling" of production and consumption, due to the decreasing cost of moving goods, ideas, and people. Baldwin takes readers through a lot of history, from the introduction of the steam engine, which caused the first unbundling, to the development of information and communication technology, the second unbundling. He seeks to reassure pessimists by showing that recent changes typified by the offshoring of jobs are not out of line with historical experience, but also cautions that a broad range of policies need to be reconsidered. Most interestingly, he writes that we are close to the technology telerobotics, telepresence, and "virtual immigration" that would allow citizens of developing nations to offer their labor remotely. Baldwin has put together an intriguing and compelling case, but the dense, academic language is likely to keep it out of the hands of laypeople.