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What is the next phase of globalisation?

This video introduces tele-migration.
In this video, we’re going to be talking about the future. Now, of course, no one knows what the future will bring, but that’s not an excuse to not think hard about it. One way or another we have to prepare for the future. The study of history and the broader view of globalisation that we’ve looked at in previous weeks should help us here. What I want to do is start by organising our thinking about the future of globalisation by looking at a graphic we’ve seen several times about the constraints on globalisation. History loosened two constraints on globalisation. Will the future loosen the third? Now, look on the left there. We had the three constraints on globalisation.
The cost of moving goods was high, the cost of moving ideas was high, and the cost of moving people was high. From about 1820, the affects coming from the steam revolution and the Industrial Revolution lowered the cost of moving goods. That relaxed one of the constraints on producing things a long ways away from where they are consumed. But the communication cost remained high and the face-to-face cost remained high. That was the old globalisation. The ICT revolution– from about 1990– lowered the communication costs radically. So we had low costs of moving goods and low costs of moving ideas, but the cost of moving people was still very, very high. That’s what we’ve been calling the new globalisation.
From 2020 maybe there will be another revolution that lowers the cost of face-to-face interactions. Maybe this will be the new new globalisation, or the third wave. Now, before we get to the types of technology that might lead to this breakthrough, I’d like to focus a little bit on the economics. Consider what would happen if workers in one nation could provide services in another nation. Let’s not ask about how they could do this, but let’s just suppose they could. The economic question is, would there be an incentive to do this? Now, to figure this out, we have to look at the prices, which in this case are the wages and salaries of workers.
So I would like you to look at this table here, which shows international salary differences are enormous. So just to take two countries, I’ve taken the US and the Philippines. And I’ve taken three different professions, starting with university professors. In the US, they earn something like $6,100 per month. In the Philippines, they earn something like $400 per month. A schoolteacher in the US– $4,100 per month. In the Philippines, it’s only $300 per month. Engineer– $6,200 per month versus $570 per month. Now what you can see here is if there was a way for university professors in the Philippines to provide their services in the US, there would be a large economic incentive to do so.
If migration were made easy, there would be a massive flow of workers from poor nations to rich nations. Now, this would be very disruptive in rich nations, but it would create great opportunities in poor nations. Remember, globalisation is really nothing more than arbitrage. Globalisation means that things go from where they are abundant– and therefore cheap– to where they are scarce– and therefore expensive– whether it’s goods or ideas or people. Now, up until now, the high cost of moving people– both legal and physical– meant that migration was fairly limited and fairly rare. As a consequence, the arbitrage on these wages and salaries has been quite limited, except in some very particular cases.
What we’re going to look at going forward is the possibility that people can stay in one nation and provide the services in another. We’re going to be looking at something like virtual migration. But before I get there, I just want to remind you of something you should keep in mind always about globalisation. It’s opportunities and competition– as you can see in this slide. Globalisation always means opportunities and it always means more competition. So whatever technical advances– which relax the constraints on globalisation will be good for some and bad for others. The next video, we’ll start looking at the technology.
Introduction to “tele-migration”.
Wages around the world are very different and this opens up the possibility of trade in labour services. That is to say, companies in high-wage countries have an incentive to buy online labour services – like copyediting articles and designing logos or web sites – from people in low-wage nations. At the same time, however, it opens up the possibility that highly competitive people in high-wage countries could export their labour services all around the world. Indeed, of exporting services to other nations is exactly what I’m doing right now by providing lectures via this online course.
This video looks at why I believe that advancing digital technology could radically change the nature of globalisation from a things that mostly concerns goods, to a thing that also concerns services.

Engage & Discuss

After you have watched the video, engage and discuss!
Do you think your current or future job could be affected by competition from low-wage, online freelancers? Or do you thinks this sort of exporting-over-the-internet opens up opportunities for you? Have you ever done a freelancing job online, or hired a freelancer on line?
See what other learners say and comment. The more you participate, the more you get out of this online course!
The next video looks at some technologies that make this sort of exporting and importing of services easier.
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International Affairs: Globalisation

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