Unit 6 Notes

Global Development

The United Nations Development Program (UNDP) has the role of measuring development across all countries via the Human Development Index Links to an external site. (HDI) and coordinating improvements via seventeen Sustainable Development Goals Links to an external site..  About HDI, the current data Links to an external site. puts Norway at number 2 in the rankings, Canada at 15, the US at 21, and Mexico at 86.   You may remember President Trump saying that we should have more immigrants from Norway Links to an external site..  I suspect he may not be familiar with the HDI dataset, since it explains why Norwegian immigration is uncommon in the 21st century.  

By working in terms of specific development goals, instead of just broad goals like GDP per capita, the UNDP made very good progress in its last initiative, called the Millennium Development Goals Links to an external site..  For example, the under 5 mortality rate declined by more than half, from 1990 to 2005, with respect to the goal of reducing child mortality. 

Stepping back to a broader view, one interesting line of development research is by Prof. Jared Diamond, of UCLA, best known for his book, Guns, Germs, and Steel.  The title is an answer about why the European nations were able to colonize and control so much of the world, between the 16th and 20th centuries.  The Europeans had "Industrial Revolution" items, like guns and steel, and inadvertently brought infectious diseases, particularly to the Western Hemisphere.  Getting into more detail, Diamond noted differences in factors like climate, native animals and plants, and social/political institutions in helping to explain why some cultures have done well, while others have declined, or even collapsed.  (And as a more specific example, Europe and the Middle East had native animals that were relatively easy to domesticate, like cattle, sheep, pigs, horses, and camels.  North America lacked counterparts, and our native species like bison and moose resist domestication.) 

Global Trade

Among the strongest areas of consensus among economists is that free trade works very well, and conversely, that protectionism is self-defeating.  Tariffs and quotas tend to make economies worse off, but are sometimes used because -- at the risk of sounding cynical -- politicians from both parties can get votes by focusing only on the benefits of protectionism, but not on the costs.  Consider an example of a US factory worker who earns $50,000 per year.  Lower costs of manufacturing in China or Brazil or whatnot lead to increased imports, threatening that worker's job.  The government can "protect" that worker's job through tariffs on imports. 

But here's the question that politicians avoid bringing up:  How much more should US consumers pay via tariffs and higher costs of US-made goods?  $100,000 per job saved?  $200,000 per job saved? More?

In Iowa, where the last Democratic Presidential Debate was held, some criticism of trade treaties was expressed, and the need to "bring jobs back."  But the unemployment rate in Iowa is 2.6% (at the end of 2019), so that state seems to have done very well from recovering from the closure of factories like Maytag.  (Which had been in Newton IA.)   The approach that economists suggest, in the case of factory closings, is to provide unemployment benefits and re-training.  (Note that in Europe, workers generally have more power in negotiations in the face of factory closing, about the timing of the closing, benefits, and re-training.  American workers are sometimes left "high and dry" when businesses close.)