A Summary of Chapters 27 and 28 of International Global Economy, Essay Example

Chapter 27 begins with the much bandied about statement that “the gap between the rich and the poor is a source of much political strife, both within countries and among them”(Williamson, J. A.). “This article reviews the historical debate about the first globalization boom in the late nineteenth century and attempts to tie it to the current debate about globalization in the late 20^th century.  The two debates are strikingly similar” (ibid.).  Three hypotheses are put forth in this article.  Trade effects and mass migration are supportive of hypothesis No. 01, with the latter having a greater impact on inequality than the former.

In Chapter 28, Stephan Haggard explores “why some developing countries have been more successful than others in promoting stable macroeconomic policies.”  Key to stabilization policy has been fiscal policy, which has been “some combination of increased taxes and non-tax revenues and cuts in expenditures” (ibid.). Today’s “political economy relies heavily on interest group models,” (ibid.) with constituents forming the demand side and politicians the supply side. The latter will increase expenditures—or benefits, as they view them—to the point of incurring deficits, which are financed through inflation and borrowing, which are not as noticeable as taxation.  As for countries transitioning to democracy, time is needed to stabilize.