"When migrants do not bring skills and attributes in demand at their destination, the costs to destination countries exceed the benefits. If there are gains for migrants and origin countries, these gains are not sustainable unless destination countries take action to reduce and manage their own costs (figure O.5)."
Workers/refugees from these developing countries are essentially forced to have a certain skillset needed to find better opportunities in other wealthier countries.
"Migrants can contribute much to the destination economy’s efficiency and growth, especially over the long term. Low-skilled migrants perform many jobs that locals are unwilling to take, or for which they would ask wages above what consumers are willing to pay.21 High-skilled migrants—nurses, engineers, scientists—improve productivity across many sectors of an economy,"
When there is free trade, and a country is in demand for more workers, the aligned goals for both the country people are moving to and the workers moving to the country result in better development. This is because the demand for the skill set offers migrants the opportunity to find jobs in a new country and results in economic gain for both sides.
In the face of such forces
What is the optimal way to approach the issue of migration? This statement implies foreign labor is in a state where it isn't the most efficient, and that their full output potential hasn't been met. What kinds of legislation or developments would need to take place to effectively maximize the potential in the foreign labor market?
"Thus far, U.S. and EU measures against Russia have focused on the country’s financial sector while largely sparing its energy industry. Tough sanctions on oil and gas sales, by far Russia’s most valuable exports, will be politically difficult because markets are tight and the Biden administration worries about the impact on domestic gasoline prices and inflation. The EU, meanwhile, needs Russian gas to make it through the winter."
When a country like Russia does some shenanigans like this, the whole world has to pay for what's happening. Of course, they want to discourage Russia by not engaging trade with them. However, due to modern globalization, so many countries rely on Russia for their energy and oil. In this sense, it's one massive opportunity cost.
"Sanctions will also impose some costs on Western countries, too, which policymakers can’t ignore—including higher prices for Russian commodity exports such as oil, gas, and many types of metals. Nevertheless, the U.S. and European economies combined are more than 20 times as large as Russia’s economy"
If Russia is such a problem, why can't Western countries produce their own energy? Or if not, what made Russia so good for energy/oil production? How does this highlight a weakness of globalization?
"Cutting off Russia’s commodity exports, which would challenge the Kremlin’s ability to fund its foreign policy, would also raise prices for Western consumers in more serious ways—impacting everything from metals to gasoline."
This scenario relates to a New York Time's article (https://www.nytimes.com/2022/02/25/business/economy/russia-europe-sanctions-gas-oil.html) which discusses the impact of the sanctions on Russia. Although Russia's exports are only a miniscule part of the world's GDP (3% according to this book), it still has huge impacts for countries. The NYT article discusses the benefits and drawbacks of these sanctions on Russia. Specifically, they explain that because Russia's economy depends on its energy exports, the sanctions can hit Russia hard. However, policymakers also need to consider the effects the sanctions will have on those living outside of Russia. For instance, European countries, who heavily depend on Russia for gas and fuel, will have to scramble and find other sources of fuel while also raising prices of gas and electricity prices for their citizens.
The result may be a shift in global politics. With the health and safety of their citizens at stake,countries may decide to block exports or seize critical supplies, even if doing so hurts their alliesand neighbors. Such a retreat from globalization would make generosity an even more powerfultool of influence for states that can afford it. So far, the United States has not been a leader in theglobal response to the new coronavirus, and it has ceded at least some of that role to China. Thispandemic is reshaping the geopolitics of globalization, but the United States isn’t adapting.Instead, it’s sick and hiding under the covers.
What are some examples of this new policy implementation? Has it been implemented yet? How will this change globalization as we know it?
But the lesson of the new coronavirus is not that globalization failed. The lesson is thatglobalization is fragile, despite or even because of its benefits. For decades, individual firms’relentless efforts to eliminate redundancy generated unprecedented wealth. But these efforts alsoreduced the amount of unused resources—what economists refer to as “slack”—in the globaleconomy as a whole. In normal times, firms often see slack as a measure of idle, or evensquandered, productive capacity. But too little slack makes the broader system brittle in times ofcrisis, eliminating critical fail-safes.
An epiphany that I had was that in today's world, nothing will ever remove the system of globalization. People in one nation will depend on the resources of another. Even through pandemics or world wars, countries will always find a way to connect.
The new coronavirus is shaping up to be an enormous stress test for globalization. As criticalsupply chains break down, and nations hoard medical supplies and rush to limit travel, the crisisis forcing a major reevaluation of the interconnected global economy. Not only has globalizationallowed for the rapid spread of contagious disease but it has fostered deep interdependencebetween firms and nations that makes them more vulnerable to unexpected shocks. Now, firmsand nations alike are discovering just how vulnerable they are
The authors emphasize how COVID-19 exposed the weaknesses in global supply chains, illustrating the vulnerabilities that come with globalization, particularly when crises like pandemics disrupt interconnected economies. This insight is key to understanding current discussions about the future of globalization, as it highlights how fragile these interdependent systems can become under pressure.
Harvard Business School (https://online.hbs.edu/blog/post/pros-and-cons-of-globalization) explains that one of the disadvantages of Globalization is disproportionate growth within and between nations. Within countries, globalization often has the effect of increasing immigration. Macroeconomically, immigration increases gross domestic product (GDP), which can be an economic boon to the recipient nation. Immigration may, however, reduce GDP per capita in the short run if immigrants’ income is lower than the average income of those already living in the country.
Additionally, as with competition, immigration can benefit the country as a whole while imposing costs on people who may want their government to restrict immigration to protect them from those costs. These sentiments are often tied to and motivated—at least in part—by racism and xenophobia.
For example, because the damage from emissions is cumulative and long-term, while the compliance costs from emissions cuts are possibly acute and immediate, a predictable carbon tax might limit environmental damages at a much lower cost than a cap and trade system.7 On the other hand, it is much easier for outsiders to verify whether (say) China is adhering to its annual cap than to verify that it is appropriately taxing firms based on their individual emissions.8
https://www.epa.gov/environmental-economics/economics-climate-change
Epiphany: Any change we make will eventually have a compounding effect over time. Thus, in order to reduce as much damage as possible, we need to act ASAP. However realistically, that is not likely to happen, especially in developing countries who rely on these industries to be economically stable. The article above mentions specific policies (like emission taxes) that try to control these long-term impacts by holding those responsible accountable. We don't know what the future holds; treatments/decisions we believe are beneficial now may end up harming us decades later.
Many people may be misled by the official cost estimates, because these figures typically assume that governments use the extra revenues (from either allowance auctions or carbon taxes) in an efficient manner.
Question: Why don't governments take more control of private businesses to control emissions if this is such a huge problem? How will this permit system differ from country to country? How can this law/rule be passed on internationally?
Under cap and trade, the government sets a total limit on annual emissions of greenhouse gases (the “cap”). Allowances to portions of this total limit are then either handed out to various groups or auctioned off to the highest bidder. Many people consider this approach a “market solution” because the permits can be traded. People who hold excess permits sell them to those who need more permits to cover their planned emissions.
Thoughts:
Governments use an auction/free market system for greenhouse gas emissions permits. This limits the negative externalities, but also increases government profit. This interesting approach essentially allows departments that require greenhouse gasses to still run, while also reducing the negative impact on the environment.
If political elites in extractive systems deliberately maintain institutions that create poverty, what factors—internal or external—could motivate or force these elites to transition toward more inclusive institutions?
A epiphany I had while reading Chapter 2 of Why Nations Fail is the realization that the failure of nations is not inevitable due to geography, culture, or ignorance, but rather the result of deliberate institutional choices by political elites. This challenges many common assumptions about why some countries remain poor and others prosper.
I, like many others, initially believed that underdevelopment in countries is due to natural disadvantages like harsh climates, lack of resources, or cultural attitudes toward work and innovation. However, the chapter makes a powerful argument that institutions—especially those that are extractive—are the real drivers of poverty and stagnation.
This epiphany might be the realization that poverty is often a product of intentional policies and institutions designed to maintain the status quo for the benefit of elites. Understanding this shifts the focus from blaming geographic or cultural determinism to seeing the importance of systemic change, governance, and inclusive institutions as the real solutions to national success.
The authors are laying the groundwork for their argument that political and economic institutions — rather than geography, culture, or ignorance — are the fundamental reasons behind the success or failure of nations. They reject these traditional theories as inadequate because they fail to account for the underlying institutional structures that truly determine a nation's trajectory. This is also why Singapore is now a rich country because its environment promotes trade and entrepreneurship, thus leading to economic growth and development.
Second principle: Thinking socially
https://www.mdpi.com/journal/behavsci/special_issues/53AZ50V83I
"But by the 1980s, the multiplying technological improvements and additional information had the opposite effect of what the designers had intended: instead of assisting pilots in steering their courses, airplane cockpits had become increasingly complex environments in which the technical improvements stressed and even overwhelmed the pilots. Rates of pilot error rose."
This excerpt aligns with the concept of stress in economics. It is an example of the development of a product intended to improve the worker's productivity, only for it to backfire and instead overwhelm the worker, thus causing inefficiencies (increase in pilot error).
"Most people think of themselves as primarily deliberative thinkers—but of course they tend to think about their own thinking processes automatically and under the infl uence of received mental models about who they are and how the mind works."
I think this text expresses a very interesting concept that that challenges our self-perception and understanding of our cognitive processes. This idea resonates with the concept of cognitive biases, which are systematic patterns of deviation from norm or rationality in judgment.
From this evidence, my question is: "How can we become more aware of and mitigate the influence of automatic, subconscious mental models on our thinking processes to ensure more rational and deliberate decision-making?"
Figure 1.3
As productivity increased, labour also increased. More people had to work to sustain society's needs.