Why Globalization Has Failed to Reduce Inequality — A Lecture by Nobel Laureate Eric S. Maskin

Why Globalization Has Failed to Reduce Inequality — A Lecture by Nobel Laureate Eric S. Maskin

Kich kicha good afternoon uh ladies and gentlemen thank you for joining us I am extremely delighted to welcome you to a public lecture today by Professor Eric musin the Nobel laate in economic sciences and the professor of economics and Mathematics at Harvard University Professor muskin actually works in a field

Called mechanism design or reverse Game Theory and it was really a great honor for me this afternoon when I handed him a copy of my book on mechanism designed so you can imagine how excited and special this moment is and of course this special event is co-hosted by United Nations

University and the International Peace Foundation commemorating the 50th anniversary of the official relations between Japan and the Assan region Professor Ed musin received the Nobel Memorial prize in economic Sciences in 2007 for laying out the foundations of mechanism design Theory which determines whether it is possible to build institution or

Mechanisms uh in order to achieve um specified economic or social goals his contributions have had a profound impact on economics public policy and even as diverse uh Fields as political science and computer science one of uh the applications of mechanism design uh is the work on using a

Mechanism designed to design a kidney Exchange Market I would like to to call it a rational way of doing it uh where the concept of money does not actually exist and should not exist because the ethics do not allow us to do that and of course mechanism design

Actually does help us to do that as a reminder of the format of today’s event event Professor muskin is going to give a 45 minutes lecture followed by a 45 minute uh Q&A which I have the honor to moderate we have Japanese language simultaneous interpretation available today so if you

Prefer to listen to the lecture in Japanese please use the headsets provided for those of you who are new to the UN university allow me to say a few words about this University that I have a privilege of being its leader United Nations University was established by the UN General Assembly in

1972 and and launched its academic work at our Tokyo headquarters in 1975 I have to add when it was a the general assembly established it in 1972 I was actually one year old so I did not take note of the event because I was too young to do

So over the decades you University expanded and today consists of 13 and soon to be 14 Research institutes located in 12 different countries in the Americas in Europe in my continent of Africa and in Asia we will soon be opening the 14th Institute focusing on artificial intelligence in bolognia in

Italy we University is an International University that acts as a bridge between the academic research and policy makers in the UN system as well as between academics and policy makers in the global North and the global South if I were to paraphrase it in the language of the subject of uh Professor

Muskin the UN University’s role is to design mechanisms that connect uh the global South to the global North the policy makers and the academics to tackle the global challenges such as sustainable development and climate change of course our research spent across 17 sustainable development goals and a strong and direct influence on the

Key un decision making bodies so we are the gate gateway to taking one of the gateways of taking policy into the international uh practice Arena through the United Nations of course one of our Institute is actually located here in Tokyo and I can see Yamaguchi Professor yaguchi who is the head of that

Institute and she of course Institute of advanced study on sustainability is actually creating mechanisms to Ure that U sustainability is not only a dream but is a reality and of course uh uh unu IAS under the leadership of uh Professor yuchi offers two postgraduate degree programs a two-year master’s degree in

Sustainability and a three-year PhD in sustainability science both of these programs have opened applications for September for September 2024 entry we encourage you to take one of the Flyers at the reception desk as well as uh check the website of unas for more information on these programs and how to apply

Inequality seems to be a more pervers to be more perversive than ever I come from South Africa and one of the defining feature of where I come from which we need to resolve is the issue of inequality is not sustainable in fact the World Bank

Stated at the end of last year and I quote if 2022 was a year of uncertainty 2023 is the year of inequality and of course some of that inequality comes from what happened uh during the so-called covid-19 covid-19 has made all of us poorer and countries are many countries

Are actually just trying to be where they were prior to the pandemic indeed the UN Secretary General Antonio gutterz recently stated that and I quote inequality is tearing our world apart 2024 must be the year when we seize the opportunity to create a more inclusive global economy that works for everyone everywhere

I will close with a quote from Professor muskin and I quote globalization is a force that should be enjoyed by everybody not just the people at the top let the fruits of globalization be shared equally as a person who owns a farm in South Africa and when we talk about those

Fruits you are talking about Professor muskin you are actually right but we need mechanisms to ensure that that actually happens I will now asks from our Co from our co-hosting organization the International Peace Foundation to give a few remarks before we welcome Professor muskin thank you very much [Applause]

Much yeah welcome to the Japan Asian Bridges event series which is facilitated by the Vienna based International Peace Foundation the events are hosted in cooperation with various local Partners including some of the country’s main universities and I would like to thank the United Nations University for hosting our event today

Commemorating the 50th anniversary of official relations between Japan and the aian region Brides will be continuously held in Japan and Thailand until March involving the participation of noble laurates for physics chemistry medicine and economics the Japan Asian Bridges series follows the series of over 800 Bridges events which the International Peace

Foundation has facilitated since 2003 to support education in the Asian region the pluralistic program of bridges highlights the International Peace foundations’s Intercultural and transdisciplinary approach towards peace the foundation doesn’t take sides but acts as a mediator be by creating an independent platform for dialogue where representatives of science politics

Economy culture religion the media and youth can meet share their viewpoints listen to each other and find Mutual ways of understanding and cooperation therefore the foundation itself is a bridge and a facilitator between different language groups in our divided societies where politicians speak another language than artists and business and religious leaders another

One than scientists s in a highly interdependent world problems cannot be solved by either one of these language groups only but by working together the aim of bridges is to facilitate and strengthen Dialogue on communication between Societies in Asia with their multiple cultures and faiths as well as with peoples in other parts

Of the world to promote understanding and Trust the events aim at build Building Bridges with local universities in Asia to establish long-term relationships with Noble laurates in all fields which result in common research programs and other forms of collaboration by enhancing science technology and education as a basis for

Peace and development the events May lead to a better cooperation for the advancement of peace freedom and Security in the region with the active involvement of the Young Generation ation Asia’s key to the Future this is why Bridges is not designed as a one-time event but as a

Continuous process of synergies of now over two decades to make the series of events a sustainable success for Asia as a whole I am grateful to our partners and sponsors who have enabled us to make the idea of bridges a reality I would like to thank everyone present today for

Taking part in this progr program may help us to facilitate a new culture of peace through dialogue transcending its definition as merely the absence of war or armed conflict into a new understanding what the basis for peace is education in this Spirit we welcome today the 2007 Nobel laurate for

Economics professor Eric muskin who has agreed to come to Japan to support the events so we all look forward to his keynote speech and to his important contribution to build Bridges a warm welcome Professor [Applause] muskin well it it’s a great pleasure for me to be here today I’ve had the

Opportunity to visit Tokyo many times in the past but this is my first time at the United Nations University and many thanks to the university and the International Peace foundation for making that possible I’d like to talk this afternoon about an issue uh which as the recor mentioned is

Is one of the most concerning one of the most divisive in the world today uh which is inequality and its connection uh to globalization I don’t have to tell you it because it’s obvious that globalization has been a major force in our lives over the last 20 or 30 years

You have only to go to your local grocery shop to see that it’s now possible to get uh fruit and vegetables many other products from around the world and this has certainly enriched our lives and also enriched the countries that we live in uh actually the aspect of

Globalization that I would like to concentrate on though uh and and this point will be made uh in more detail in a little while is that globalization is not only about trade in goods and services but also about production uh a an important aspect of the current globalization is that the very process

Of producing Goods has been globalized computers for example require the inputs contributions of Engineers software people factories located around the world and and and and this will be important to my story now why has globalization occurred uh of course transport costs declining transport costs have a lot to do with that but

Actually even more important has been the decline in communication costs it’s it’s now virtually Costless to talk to people literally around the world and this has been uh this has made possible the fact that uh if I have a company based in New York I can easily have employees uh in toky

In London uh any place in the world and I can communicate with them I can coordinate with them with with no problem at all now the proponents of globalization The Advocates of globalization have made a number of promises on its behalf uh one one promise one important promise is that globalization would bring

Prosperity to emerging economies and on This Promise globalization has certainly delivered uh if we look at countries like China and India for example they have grown enormously in the last 30 years and most of that growth can be attributed to globalization China was a poor

Country 30 or 40 years ago with one of the lowest per capita incomes around it now has the second largest economy in the world it it actually replaced Japan in that uh in that category uh and that success story as I was saying is is attributable to to

Globalization uh same same thing in in India but there’s another promise that Advocates of globalization made which has not been delivered on and that promise was to reduce inequality in emerging economies to reduce the gap between the rich and the poor the halves and the hav Nots in

Fact just the opposite has happened we’ve seen an increase in most emerging economies in inequality that can be directly attributed to an increase in in globalization uh and in particular that’s happened in China and India they are more unequal countries than they were a generation ago even though they are richer

Countries than they were now I’m going to skip over some of this because what I first want to discuss as an economist is should we economists be surprised by the fact that inequality has been increasing and the answer is uh is actually yes because this increase in inequality contradicts a very well-established

Theory a very wellestablished principle in economics called the theory of comparative advantage a theory that goes back 200 years and that has been making very successful predictions for over 200 years uh and the the theory of comparative advantage says that globalization should actually reduce inequality in in emerging economies and

Because this Theory the theory of comparative advantage is so important in in economics and has been so important in guiding or perhaps misguiding our thinking about globalization I want to spend a bit of time explaining why comparative advantage would lead to a decrease in inequality so let me describe the essence of the

Theory of of comparative advantage it’s basically the idea that countries should specialize in producing the sorts of goods that they are particularly well adapted for now what does it mean to be well adapted for producing uh a particular good it means that your labor force is well suited for producing that good uh

I’m going to simplify the story a bit and assume that there that the labor force consists just of two kinds of workers there are high-skilled workers workers who have a great deal of training a great deal of skill at what they do and there are low skill work ERS who

Have very little trading and perhaps are relying on outmoded uh ideas for how to produce and to discuss globalization I I want to make another simplification by just looking at two countries a rich country and a an an emerging economy now why is the rich country Rich

The rich country is Rich because of its labor force it a a rich country will have a high proportion of high skill labor the ratio of high skill to low skill labor is high uh and that means that a rich country country will have a comparative advantage at producing a good the sorts

Of goods that require a lot of high skill labor an example falling into this category would be computer software computer software requires software Engineers it requires coders uh it does not require much low skill labor at all so computer think of computer software as a good for which a rich country is

Particularly well adapted to produce the emerging economy is much poorer because it it’s high skill to low skill ratio is quite low and so the emerging economy is well adapted to producing Goods where skill really doesn’t matter so much and that tends to tends to be things like agricultural products such as

Rice now to understand the effect of globalization on production and on inequality let’s do the following thought experiment let’s look at this the situation before globalization becomes possible that is before the rich country and the emerging economy can trade with one another and let’s compare that with how things look after globalization

Becomes possible that is after the two countries are traed and of course the difference between those two situations can be attributed to globalization so let’s look first at what happens before trade is possible before globalization takes place before globalization takes place of course citizens consumers in the rich country will

Want both software and rice so in order to get this software and rice companies in the rich country will have to produce both software and rice same thing in the emerging economy there there have to be some companies that produce software there have to be some companies that produce rice in the emerging

Economy but there’s a sense in which producing software in the emerging economy is inefficient in the because the labor force in the emerging economy is better adapted to producing rice and so to the extent that production is being diverted away from rice to soft Ware the labor force is not being used uh

Efficiently uh in fact low skill workers are actually hurt by the fact that there’s this diversion away from Rice because low-skill workers are are needed uh seriously needed for rice production but they’re not much needed for software production so to the extent that it’s software that’s being produced

The low the demand for low skill labor is being reduced and therefore the wages for low-skill workers are being reduced it’s it’s just the Opposites it’s just the opposite for the high skll workers uh in the emergy economy they are very much in demand when it comes to software production and so they

Will they will see their wages rise according to how much software uh is being produced so so software production is very good for them now that’s the story before trade be between the two countries becomes possible but now let’s imagine that the door War opens and there is trade between the two countries

What will happen well now the rich country no longer needs to produce rice because it can import that rice from the emerging economy so it can concentrate all its production or almost all its production on software and it can import the rice from the emerging economy just the opposite in the

Emerging economy it used to be producing software but it doesn’t need to do that anymore it can import that from the from the rich country and it can concentrate on producing rice now that means that compared to the pre globalization scenario the emerging economy is producing more rice and less software

Than before and this is great for low skill workers because as I said they they they aren’t really needed much for for software but when production of rice ramps up that puts low-skill workers in more demand and it raises their wages and just the opposite it for high

Skill workers they they were benefiting before from the from the software production but now there’s much less software production so the high skll workers aren’t needed Much Anymore their their wages fall and what what do we see happen to inequality in the emerging economy it declines the low-skill work

Worker wages rise the high skill wages fall there is less inequality than before what I have just shown you is the standard argument the argument based on comparative advantage that was given thousands of times when the current period of globalization uh began suggesting that globalization would reduce inequality in emerging economies now

Interestingly that prediction was correct in all the previous globalizations we had up until the recent one you have to remember that the current globalization is very far from being the first there have been uh four or five periods of globalization over the last few hundred years uh a very

Important period of globalization was took place in in the late 19th century when uh trade between Europe and North America increased dramatically because of the possibility of Cheap shipping across the Atlantic Ocean and and at that point Europe was the emerging economy if you like it it it

Was the it was the place where there was relatively little high skll Labor uh and and an abundance of low skill labor and just as the theory predicts inequality declines in Europe but somehow the current globalization is different from the globalization of the late 19th century and that’s how I got interested

In studying the subject I like intellectual puzzles and it seemed to me that here we had a very important intellectual puzzle what is difference about this globalization that has made inequality increase by comparison with the previous ones and so I got together with a former student Michael ker who’s a development

Economist uh I should point out that uh he’s a student I’m very proud of because he himself won the Nobel Prize for his work in development economics uh a few years ago uh I can’t I can’t take credit for that but I would like to take credit uh anyway we we got together

And we worked out an alternative Theory to the theory of comparative advantage and it’s a theory which puts globalized production at the center remember I said at the beginning that globalization doesn’t just mean trade in goods and services it also means the globalization of the production process itself uh and to see how

Uh globalized production is a Hallmark of the current globalization you only have to think of a good would like computerss computers will be will have contributions a a single computer will have contributions from all around the world the computer might be designed in the US programmed in Europe assembled in

China and computers are only one of literally thousands of products that are truly Global in their production process and that we claim is the big difference between today’s globalization and previous ones it it it’s the globalization of production uh and I I want to try to convince you uh that globalized

Production really does make a big difference and uh to do that uh I can no longer just rely on there being two skill levels uh I’m actually going to need four skill levels uh but I’m going to stick with the simplification that I was making before that there are just the two countries

The rich country uh and the emerging uh and the emerging economy and once again uh the reason the rich country is rich is because it has a more highly skilled labor force than the emerging economy uh I’m going to I’m going to label the four skill

Levels as a b c and d so a is the highest skill and D is lowest skill and the rich country will be assumed to have mostly A and B workers and the emerging economy will be assumed to have mostly C and workers and I need to talk a little bit

About the production process itself uh let’s imagine that in order to produce anything a computer uh car an airplane you need different tasks to be performed uh because I’m I’m trying to make everything as simple as possible let me assume that there are just two tasks

That have to be performed I’ll call one the managerial task and this is a task which is highly sensitive to skill and the other I’ll call the subordinate task which is not so sensitive to skill so the idea is that in order to produce whatever good you’re producing

You need to fill two tasks you need to fill the managerial task you need to fill the subordinate task and the amount of output that you get will depend on the skill levels of the people occupying or performing those tasks so uh this is the only uh uh

Mathematical formula in this talk and it’s a pretty simple one it just says that output is equal to the skill level of the manager squared and I’ll explain why it’s squared in a minute times the skill level of the subordinates now why why is the man manager’s level skill level squared it’s be

Actually th this number doesn’t have to be a two it could be a three it it could be just about any number bigger than one but the point is that if it is bigger than one that gets across the idea that the manager’s skill level matters more than the subordinate skill

Level it’s the difference between the two that is is going to make the difference so uh if um let’s imagine that the manager skill level is four the subordinate the subordinate skill level is three then according to this formula we would get outputs of 4^ squared that is 4 *

4 because that’s the manager skill times three the subordinate skill or uh 48 in all now the the way that workers of different skills are match together to produce outputs will be determined by the markets uh uh and by market forces to to explore this a little bit let’s

Imagine that we had a labor force that consisted of uh just four different workers there are two uh sorry there are two workers of skill level three and two workers of skill level four well there are two different ways that we could match workers in this labor force

Together we could match them this way where one of the three workers is matched with one of the four workers the four worker would had the managerial position the three-w worker would have the subordinate position if you do the calculation this kind of matching which I call cross matching because we’re

Moving across different skill levels within a particular production operation so if if they’re matched this way we get 48 from from this production process here and another 48 from this one adding up to 96 um but the other way that we could match workers together is this way we could

Match the one of the four workers with the other four worker and one of the three workers with the other three worker and this would give us a grand total of 91 now 96 is bigger than 91 so in this example we would expect to have cross matching because cross matching gives

Rise to more output and producers in a market scenario are going to want to maximize outputs given the available inputs which which are the workers uh but we don’t necessarily always get cross matching we do in this example but here’s another example we instead of having two three workers and two four workers

We have two two workers and two four workers so so the the lower skill people’s skills are lower than before once again we can compare cross matching with homogeneous matching homogeneous matching is where uh all of the workers in a particular company or in a particular production operation have the same

Skill now we get this kind of matching rather than cross matching as producing more output 72 versus 64 so so all of this is to illustrate that the kind of matching we get is going to depend on the labor force available to us and the labor force available to us is going to

Be changed by globalization so so let me go back let me go back to our two countries remember that rich country has skill levels A and B the poor country has skill levels c and d and let’s um let’s do the the same sort of thought experiment that I did before with the

Theory of comparative advantage let’s look at the world before globalization and compare that with the world after globalization well before globalization it is impossible to hire workers from two different countries that requires more coordination than can be accomplished in a pre communication Revolution world so in the in the rich

Country we’re going to see domestic matches but we’re not going to see any of the workers in the rich country being matched with workers in the emerging economy so so all of the so so the labor force that accompany in the rich country has to work with is entirely

Domestic and the same thing in the in the developing country in the emerging economy but globalization changes all of that globalization means that as a company you can hire workers uh anywhere in the world and so we’re going to get a picture that looks like this now I have the a workers

Match with other a workers and the D workers match with other D workers actually that’s not the important part the important part is right in the middle where we’ve got B workers in the rich country being matched with C workers from the emerging economy importantly DW workers are not being matched

With workers in the rich country at all it’s only the sea workers and and and that’s critical distinction because to have the opportunity of working with be workers someplace else in the world is a new opportunity for sea workers which is bound to raise their incomes if you have more job

Opportunities chances are your income your wage is going to go up so the seaw workers get some excellent new job opportunities they don’t have to move to another country they can they can stay where they are if if you’re a a Chinese worker you you can work for Apple without moving to California

Uh that that that’s where good communication comes in but the my point is that the seaw workers get these new job opportunities and see their incomes rise the DW workers don’t have high enough skills to offer anything to the global market and so they’re left to fend for

Themselves they they do not see their incomes rise and now you see what the source of inequality is it’s it’s globalization gives job opportunities to the Sea workers and not to the DW workers now what are the implications what are the implications of this Theory this alternative

Theory well of course if inequality is being created by globalization one response would be oh we should stop globalization because it’s a source of inequality I I think that would be a big mistake because as I was suggesting at the beginning globalization has very successfully been an engine for

Increased prosperity in in many emerging economies if we were to end globalization or curtail it that would end the engine for Prosperity a better solution is to keep globalization but to do something directly about the inequality by uh allowing DW workers to have uh exciting lucrative job

Matchings as well they they were left out of the picture the on the previous slide but if we are able to raise their skill sufficiently through education through job training then they will be able to participate in the global labor force they will have new opportunities and that will help to

To fight the inequality that was created the um the problem of course is that education and job training are expensive they don’t come for free someone has to pay for them and uh who’s going to do that well the DW workers themselves can’t afford to pay for education and job

Training we’re talking about some of the poorest people in the world so we can’t expect them to invest in their own uh skill elevations uh but we probably also can’t expect The Producers the the employers uh to do this either because they don’t have the incentive to do it if you are

A potential employer for me say I’m a dorker uh and you’re thinking of hiring me well in order to hire me you’re going to have to give me some job training because I don’t have enough skill uh to work profitably for you without without training so you could give me the

Training but once I have that training I don’t have to work for you I can go to work for your competitor in which case your investment in Me Is Lost uh so that suggests that employers do not have sufficient incentive to solve the inequality problem they do not have sufficient incentive

To invest in skill training of DW workers uh and that means that we cannot expect a purely Market oriented solution to the inequality problem the market is not going to solve the problem on its own the workers can’t do it and the and the employers don’t have the incentive to do

It so someone else has to pay and who is the obvious someone else uh I maintain that it’s government uh if if if the government in in an emerging economy is serious about and in inequality it has to make an investment in the worker skill now it doesn’t have to do the training

Itself it could for example give um give employers a tax break if they hire and train DW workers and if if if if these companies get a tax break then the fact that the workers may go off and work for someone else doesn’t matter as much because at least they’re they’re having

Their taxes reduced or or The Government Can subsidize in some other way a company that is willing to undertake the training of DW workers but the point is that something like that is necessary if we’re going to expect inequality in emerging economies to decline uh we we cannot expect it to happen

Automatically so that that brings me to a simple conclusion from from all of this if we’re going to deal with inequality and and I think we have to deal with inequality because uh once again the the the recor uh pinpointed the problem uh it is extremely divisive it it it makes it

Makes the world a less stable place any country with extremely high inequality is is uh in danger of falling apart and and we’ve seen countries Fall Apart as as a result of inequality so simply for the sake of holding the political and social fabric together we have to deal with inequality

Uh but if we’re going to deal with inequality there are two ways we could proceed one would be to try to stop the forces of globalization that’s not so easy to do but I would maintain that even if we could do that we wouldn’t want to because globalization uh really

Does uh elevates a country on average even if it doesn’t Elevate Everybody by the same amount the right course of action I maintain is to keep globalization but to adjust it to allow DW workers the lowest skilled workers of all to enjoy the fruits of globalization like everyone else thank you very [Applause]

Much I I I think let’s give uh the professor another round of applause so so this is the time at which we open uh uh the floor for discussion but before then I actually have uh quite if you know one or two uh problems uh questions that I will ask

The professor I think the first one is on automation what is the impact on automation uh on inequality and on maybe the concept of comparative ADV Advantage does it change uh uh what makes us uh have a comparative advantage and how do we deal with that to to deal with issues of um

Inequality well that those those are excellent questions and and you won’t be surprised uh to hear that economists have have been very interested in trying to answer those questions uh on on on on the first part uh what is the effect of Automation and new technology in general I would say on

Um on inequality uh the um the answer actually depends on the time scale you look at on a relatively short time scale historically uh new technology has tended to increase inequality make it worse uh and that has been true not only in the recent past but going all the way

Back to the early 19th century the the the early 19th century was was a a very interesting period from from an economists or an engineer standpoint because it was the it was the first period in history where there was a tremendous uh increase in labor saving technology this it was called the

Industrial Revolution and it really was a Revolution and the immediate effect of the Industrial Revolution was was to put many many millions of people mostly low skill people out of work um because machines could do what they were doing better but after a period of time entrepreneurs figured out clever ways of

Of taking relatively low skill people and machines and com combining them say on the assembly line in very productive combinations so that even relatively low-skilled people now became much more productive than they had been and we saw actually an increase thanks to Automation in demand for low- skill labor and over the course

Of the 19th century we saw the fastest and and and and the most pronounced increase in wages that had ever been seen in history so the short run effect effects was to increase inequality but the longer term effect because of the increase in low-skill wages was to reduce inequality uh

Now what has happened more recently we we’ve had a great deal of technological innovation in recent years and once again the immediate effect has been a decline in equality an increase in inequality we we we we’ve seen uh uh inequality even in rich countries uh increase dramatically because relatively low skilled people

Lose their jobs however if historical experience is any guide we should expect entrepreneurs eventually to get into the act and figure out how to use these displaced workers more productively and I think um there’s cause for optimism that eventually automation once again will be a force for Less inequality but there but

There’s one complication about the current technological Revolution as a by comparison with the original Industrial Revolution and that is that some forms of Automation partic and this particularly involves uh AI uh cause not just low-skill people but kill people to lose their jobs that that that that’s the

Novel thing about AI that it’s it it it it’s not just uh say uh taxi drivers who will lose their jobs to uh to self-driving cars but uh uh Radiologists who read X-rays at this point AI can read those x-rays almost as well and soon they will be reading x-rays better than any

Radiologist same thing is true in law uh we’re getting AI systems which can uh compose legal briefs better than any lawyer um that that fact uh of course makes high-skill workers a little bit nervous uh and it and and it does mean that there’s something different about the current technical re technological

Revolution but we don’t really yet know exactly how that will play into um into inequality well I mean just before I I have one more question before I open the floor please bear with me is is somewhat controversial is your thinking around IP and innovation yeah one of the things that is pretty

Clear is that um IP does also inhibit uh our fight of climate change uh for example if we take issues of uh solar energy it is clear that if you give that technology access to that technology to 80% of the population then we are better off know

Uh uh what what are your views the relationship between IP Innovation and climate change and what can we do about it uh once again a uh a very good question uh I I’m a little bit um more skeptical of Ip in intellectual property than than some of my

Colleagues exactly because I worry that it interferes with with Innovation you see if um if you invent something and you patent it of course that protects you against other people being able to copy the idea and that and that might be important because perhaps you’ve made a big investment

In of money of energy of time which naturally you want to recoup and if if people can simply copy your Innovation you may not be able to recoup the investment but the so that’s that’s the that’s the positive side of Ip but the negative side is that

Uh if you if you if you have this patents so I can’t imitate you I I also um can’t use your uh your Innovation for important social purposes so if I if if if I’m a poor country and I want to use uh your solar battery for example

For providing power I can’t do that without paying you a royalty and I might not be able to afford that royalty so um it because of the second effects uh I am um more skeptical about the value of Ip uh than than many of my colleagues but you know being being a mechanism

Design economists I understand that you have to have incentives to to develop these things in the first place so I favor a system in which um valuable patents valuable discoveries are bought out so so I I I if you’ve made a great contribution and you get a patent on it

You deserve to be rewarded for that contribution but that’s something that the government can do they can buy out your patents put it into the public domain and then everybody can can use your great discovery for their purposes that that’s the sort of response I would

Like to see more of no thanks I’m going to open the door uh for questions as you you are raising the hands your hands the idea of government a a a mechanism of government is obviously an ideological issue H uh number one number two number three number

Four where is number five number five I think we are going to stop at number five and if we have time we will go to other numbers so please introduce yourself first and where you you you you you are based and then you can ask your question yeah

Thank you very much uh my name is y I’m the ambassador of Slovenia to Japan but I’m going to speak in personal capacities so don’t quote me this is not the position of my country it’s like thank you very much uh for this excellent presentation about inequality especially this is a very pertinent

Issue I come from a country where we have the second lowest gen coefficient among the o the member states so we understand how important is that for the social cohesion and the productivity as such of the national economy and Society uh it was very well pointed out

The uh importance of the if I say so uh acquiring additional skills in order for the labor that is not skilled enough that can enter the labor market and here a responsibility of the domestic government which is good but on the other hand uh uh don’t you think that

Maybe there should be also corporate responsibility that there should be maybe uh some International guidelines maybe even standards of a corporate responsibility in these emerging economies how to stimulate how to uh boost uh this uh development of labor market in terms of um acquiring higher skill levels thank

You I I certainly agree that if you if you could make companies corpor corations feel responsible for training what I’ve called DW workers that would be terrific uh I’m not altogether confident that it’s so easy to make them feel responsible I mean per perhaps you can do it through through International

Guidelines perhaps you can shame them into doing it by by making them look irresponsible socially if they don’t do it uh and and and certainly you should try to do that but in the end um I’m not sure if that is going to be enough it it it it’s similar to the

Response that that we see uh on climate change climate change is another big uh social problem uh and you yes you can you can change shame companies into reducing their carbon footprint you can shame citizens into reducing their carbon footprint but that’s never going to be enough to solve the climate change

Problem it might be a useful contribution but it’s not it’s not going to be enough what would would be enough again is if Government gets into the act and starts imposing carbon taxes we we we know what the mechanism ought to be uh for solving climate change it’s

Impose a carbon tax so that if youit emit carbon you pay for the damage that you create that that would be a revolution overnight if we could get carbon taxes through uh making individuals and companies feel responsible can help but it it’s it’s not it’s not the answer by itself number

Two uh my name is uh Elon I’m from Brazil uh from the private sector our company Works in uh offices in Singapore in Japan in China and in the mercosur area and uh my question is uh something relate to the the uh low skill label training and uh the relation

We have of globalization with uh the human traffic and the new models of slavery that’s it thank you I’m not sure I I entirely caught the question what what is uh the question so global ation and the relation with uh human traffick and the new models of

Slavery so if we are not uh training the low skill people in very poor countries MH and uh if there is a relationship this uh with this what we see as uh human trafficking and uh mainly to to to rich countries from the very poor

Countries so oh I say y right so so yeah no I think there is a connection say that I I live in a imagine that I live in a in in an emerging economy but maybe a very poor economy and I don’t have and I don’t have

Skills well I’m not going to be able to get a decent job unless someone is willing to train me so what am I going to do well I I might be desperate in my home country and try to go someplace else where at least I

Can get a a reasonable job and and and that that’s what I think you were referring to a lot of the international migration we see these days is out of economic desperation you you you you can’t really survive in your home country so you try to go someplace else

Where you uh where you can survive a much better answer to the problem of this desperation than forcing people to to move around is to train them that that and and if the domestic governments aren’t willing to do it well that’s that’s a role for for international organizations that’s something that the

UN could get involved in the UN doesn’t NE wouldn’t be paying for it themselves but they could organize a Consortium of countries that would be willing to pay for job training let let let me give you an example of a un Consortium that actually has worked very

Well and that’s on providing uh vaccines against um numoco disease uh there there are there are uh a number of very poor African countries which where uh hundreds of thousands of people die from lung infections uh drug companies in the west know how to produce vaccines against

These uh these num mole diseases but they didn’t have the incentive to produce them because who was going to pay uh who was going to pay for the vaccines so the UN much to its credit came to the rescue and organized a vaccine fund into which rich countries would

Pay and then that money could be used to pay drug companies that had develop vaccines for their vaccines which were then distributed uh I I’ve seen figures that many hundreds of thousands of lives have been saved as a result of this initiative and and there’s no reason why a similar idea couldn’t be

Used uh for job training uh to give people in very poor countries skills that would um Ena enable them to have decent lives and number three thank thank you Professor for the the lecture uh my name is asil uh PhD students in sustainability at the Tokyo University of Foreign Studies um I

Understood from your lecture that uh globalization I certainly help countries like China or India but um I would like to speak from the perspective of the global Stu in general so I just I would like your opinion uh uh in the historical development of globalization there was what they call the structural

Adjustment program and the Washington consenus as well so I’d like to know if you think maybe these uh I mean the preton wood institutions have affected uh well negatively uh I mean the the emerging economies economic growth um uh as a reason why globalization has failed to to reduce inequality thank

You again I I I the question is is I want to make sure I I I’m clearly understanding that your your your question are are you uh are you are you saying that that maybe globalization wasn’t such a good idea for for developing countries after

All no no just your opinion I mean in the historical development because uh trying to understand the Divide I mean uh the global South and the yeah and yeah the the global nor so I just want to know if the uh the structural adjustment program and uh also the

Policies put in place by uh uh Britain wood institutions affected uh economy U say the emerging economies uh performance so that’s my question yeah so you’re saying was were those mechanisms effective in addressing I I I think they were effective yes uh I uh that that is if you look at inequality across

Countries today as compared to across countries 30 years ago there was actually less inequality so so emerging economies thanks to these changes has that they have caught up to to some extent so there’s less inequality than before the problem is that within the de developing country within the emerging

Economy most of the benefit of that Improvement has not gone to DW workers it’s it’s gone to people with skills so that although the country as a whole is better off as a result of globalization and and structural reform form the the the distribution of benefits has been very

Lopsided and that’s what I think needs to be corrected that you know we we live in an age where uh globalization is under threats I if if you if you listen to politicians if you listen to the general discussion we where we’re in a sort of anti-globalist period um and that is

Because globalization did not pay sufficient attention or the the people pushing globalization did not pay sufficient attention to the people who were being left behind by globalization if the sorts of things that I’m talking about such as job training education had been thought of 30 years ago or implemented 30 years

Ago we would not I think be in such an anti-globalist age and and and politicians like Donald Trump who have built their careers on being anti-globalists would not have been allowed to prosper uh so so there there’s quite a lot at stake by doing something about inequality it’s

Not just for the sake of the people the DW workers themselves it’s it’s for the sake of our whole system uh that it’s important to try to correct inequality thank you and number four yeah hello yeah my name is Amit I’m based in Tokyo I’m in private sector so

My question is basically in your last slide you mentioned that um there are policy implications for the government because those who are actually left behind uh they have to be trained so my question is where does the government get budget for that does it expect that in general the economy would

Grow and it will get extra budget for that and what are also the political implications for example if the government is not spending enough for for upskilling those who are left behind uh does that in any way indicate or give some kind of explanation why there are u

In many countries there is strong um I mean trained in politicians who are populists and all that so that’s that’s why right thank you so so this what you’ve pointed at is is a is a big problem in political life there are many things you could spend

Your government revenue on uh and how do you prioritize uh if if you’re spending more on job training you’re presumably spending Less on something else uh I would argue that that skill training elevating skills should be a top priority for for almost any emerging economy there there’s really nothing

More important in my view than making investments in people themselves what what Economist call human capital uh and so if this has to come at the expense of of some infrastructure building roads and and bridges uh I I would often argue that that uh we should make that tradeoff uh

Know having another building might be good but having uh another skilled worker is even better uh so uh that that that’s the answer to part of your question now you you were asking about populists uh like Donald Trump for example but there there are populists everywhere now it’s

We we live in an anti-globalist and populist era uh I um I am sympathetic to populists in the sense that they have identified more clearly than the globalists what that there’s a problem out there and and and and that people have been left behind behind by global by

Globalization so so uh to give credit where credit is due I I I do uh uh salute the the populist for that what I uh don’t like about populists is that they don’t offer meaningful Solutions uh I mean that often their solution is to end globalization that is not a solution uh and

So I hope that now that the world has been woken up to the threat of populism and and the threat is that we will have uh leaders who are not solving problems and who have authoritarian uh inclinations now now that we recognize this threat uh more serious politicians Ser

Politicians who who can provide answers we’ll step in and and uh actually do something about inequality the last question number five hello Professor masing um thank you so much for a very insightful lecture I indeed had a lot to take away from it and I enjoyed it a lot um I’m an

Undergraduate I mean I’m a freshman studying at Wasa University here in Tokyo and um now that you have mentioned issues about globalization in equality my question is regarding Equity um professor masing in what ways is globalization intertwin with the issue of equity and so as an economist how do

You think investment in human resources such as education be implemented in order to tackle issues of lack of equity in this Society right now well I If by Equity you mean uh there not being huge disparities in income and in wealth uh I hope that my presentation elaborated uh the the link between

Equity or inequity and uh and globalization globalization tends to aggravate inequities by giving only some people good job opportunities and not and and not others uh now of course the the problem with inequity in education extends well beyond the inequities that were created by by by globalization uh in many

Countries the quality of Education you can get depends very much on the family you come from if you come from a well-to-do family you’ll get a fine education if you don’t uh then um then then you may get quite a poor education or uh or no education at all

Uh and and there again uh I think governments can help correct these in inequities uh I’ve been impressed by the use in in some Latin American countries of what are called um conditional cash transfers uh it it in in many countries uh a large fraction of the

Population is involved in what we call subsistence agriculture where you have a farm or you work on a farm you are using techniques which allow you to subsist yourself but you’re you’re not even producing enough to be able to to sell uh large quantities uh on the market uh and Farms like

That uh require everybody in the family to participate so in particular parents can’t afford to send their children to school they because the the the the children are needed to work on the farm just so that that the family can survive um that’s where conditional cash transfers come in

Uh the idea is that the governments will give a family with children a cash payment in exchange for the family sending their children to school and and so this th this cash payments helps break the cycle of poverty helps break the cycle of inequality because by going to school the children do acquire

Skills which enable them to move beyond the subsistence form where they grew up uh I think this is a very clever policy and the kind of policy that we need more of in order to uh to solve the inequities of of Education Beyond those that were created by by

Globalization thank you very much we have come to the end of this session I think we can give the professor another resounding round of [Applause] openess

On 18 January 2024 at the UNU Headquarters in Tokyo, UNU and the International Peace Foundation co-hosted a special public lecture by Prof. Eric S. Maskin, Nobel Laureate in Economic Sciences, and Adams University Professor and Professor of Economics and Mathematics at Harvard University. The lecture is part of the JAPAN-ASEAN BRIDGES event series, commemorating the 50th anniversary of official relations between Japan and the ASEAN region.

00:00 Opening remarks by Prof. Tshilidzi Marwala, Rector of the United Nations University
10:13 Remarks by Mr Uwe Morawetz, Chairman of the International Peace Foundation
14:22 Lecture by Prof. Eric S. Maskin, Nobel Laureate in Economic Sciences
57:33 Q&A
—
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