"Economic Globalization and Asia".
DiPietro, William R.
"Economic Globalization and Asia", by Ramkishen S. Rajan.
Rajan's book looks at globalization through the eyes of an
economist and provides what might be called scatter shot mosaic of
globalization. Each chapter in the text is a self-contained article that
focuses on a particular aspect of globalization, and each chapter is
followed by a comprehensive and extensive bibliography. The chapters are
filled with references and sprinkled with authoritative quotations. The
book's special geographic interest is Asia. While the writing is
sophisticated and somewhat technical, it is not mathematical, and is
therefore accessible to a wide audience.
To get a flavour of the book, here is a quick synopsis of four of
the nine chapters (globalization topics) that particularly caught my
eye.
Chapter 2 tracts international capital flows for the various phases
of the East Asian financial crisis of the 1990s for five countries
(Indonesia, Malaysia, Philippines, Thailand and South Korea). It also
discusses contagion, and the various and assorted channels through which
financial crisis can spread. Rajan notes that contagion tends to be more
a regional than a global phenomenon with a crisis tending to spread more
in the neighbourhood of an originally infected country than further a
field geographically. He also points out that countries with weaker
economics are more likely to be susceptible to contagion and more prone
to be severely damaged if and when they are infected.
Chapter 4 is called "Choosing the Right Exchange Rate Regime
for Small and Open Economies in East Asia". Here, Rajan disagrees
with the position that in our modern world the only viable exchange rate
regime is either a freely fluctuating exchange rate regime or a fixed
exchange rate regime. After reviewing some of the pros and cons of a few
of the variants of these two exchange systems, Rajan advocates some form
of an intermediate (adjustable peg) exchange rate regime as the best
type of currency regime for emerging economies. He believes such a
regime allows developing countries to capture the best features of both
the fixed and floating exchange rate systems.
Under the implicit assumption that the major potential source for
poverty reduction from trade liberalization is through its effect on
economic growth, Chapter 5, entitled "The Nexus between Trade
Liberalization and Poverty in Asia", reviews the theory and the
empirics of the two key component relationships in this chain, the
relationship between trade liberalization and growth and the
relationship between economic growth and poverty. The author cautions
the reader that even if trade liberalization increases economic growth,
growth is a necessary but not a sufficient condition for a sustained
reduction in poverty. For any real chance of success in alleviating
poverty, trade liberalization must be accompanied by a whole host of
comprehensive and complementary policies, including solid macroeconomic management, the inclusion of the agricultural sector, a favourable
investment climate, the removal of labour market rigidities, and the
fostering of adequate labour market mobility.
An extremely noteworthy chapter is the very last chapter in the
book, chapter 9, "Economic Globalization and Taxation: With
Particular Reference to Southeast Asia". In this chapter, Rajan
talks about the problems of tax policy facing countries in an
increasingly globalized world (particularly in generating tax revenues)
in the presence of antiquated tax structures based on national tax
sovereignty. There are a whole series of tax consequences associated
with spreading globalization. Potential inconsistency between national
tax efficiency and global tax efficiency becomes more pronounced.
Multinational firms manipulate transfer pricing so as to minimize their
tax burdens. More mobile factors such as capital and skilled labour and
less easily taxed and therefore less likely to be taxed at the expense
of relatively less mobile factors such as unskilled labour. The
potential resource wasting and resource distortion from prisoner's
dilemma style competition between countries for scarce foreign direct
investment using various incentive devices becomes more prevalent (this
is especially true for developing countries as they become more insecure in a globalized world). The spread of E-trade leads to a reduction in
the tax base, and brings in its wake issues regarding new forms of
taxation to deal with the new form of commerce. Lastly, there is the
problem of regulating the free flow of financial capital across borders
through altered tax policy so as to mitigate financial crisis.
For people with dissimilar tastes from mine, Rajan's other
five chapters are: "Economic Globalization and Small and Open
Economies: Finance, Trade and Taxation", "Liquidity Enhancing
Measures and Monetary Cooperation in East Asia : Rationale and
Progress", "India's Decade Long Trade Reforms: How Does
it Compare with Its East Asian Neighbors?", "Singapore's
Drive to Form Cross-regional Trade Pacts: Rationale and
Implications", and "International Trade in Infrastructural
Services in East Asia: Telecommunications and Finance".
Rajan's book is concisely written and packed with information
for anyone interested in globalization, and, especially, for those who
are interested in the impact of globalization on Asia.
William R. DiPietro
Professor of Economies, Daemen College
