Globalisation twist: Economic growth sizzles but income inequality and carbon clashes cloud horizon

The evolution of globalisation, while contributing to worldwide economic growth, has also introduced new economic challenges including increased income inequality and market failures due to carbon emissions. This was the view expressed by Eric S Maskin, Adams University Professor at Harvard’s Department of Economics.

Maskin, a 2007 Nobel Laureate in Economics for his work in mechanism design theory, shed light on the issue of social inequality and how governments should approach policies in the wake of an economic slowdown and climate change. He pointed out that globalisation has often favoured workers with higher skills, leaving low-skilled workers in a more disadvantaged position, thus exacerbating income inequality.

While redistributing wealth from high-income to low-income individuals is one solution, Maskin argued that it does not provide a long-term fix, as it can lead to dependency while not promoting self-sufficiency. He proposed that a more sustainable solution would be to offer unskilled workers job training, allowing them to earn better incomes.

Addressing the question of who should fund this training, Maskin stated that government intervention is necessary. He suggested that the government could offer incentives such as tax breaks to employers who provide training to non-skilled workers.

On the topic of artificial intelligence (AI) potentially replacing human jobs, Maskin expressed optimism, viewing the situation as a short-term issue. He drew parallels with the Industrial Revolution in the 19th century, where new technology initially eliminated jobs but eventually led to the creation of new roles working alongside these technologies.

Maskin also highlighted the environmental impact of globalisation, identifying carbon emissions as a key cause of market failure. He called for countries to take responsibility for their carbon emissions, suggesting an international treaty where countries pledge to reduce carbon emissions. One solution he proposed was the imposition of a carbon tax, which would motivate companies to switch from carbon-based fuels.

In addition, Maskin emphasised the need for governments to incentivise the shift from gasoline-engine cars to electric vehicles and to reward technologies that aim to remove carbon from the atmosphere. He proposed a carbon tax in reverse to motivate innovators to develop effective, scalable technologies for carbon removal and sequestration, thereby mitigating climate change, reported Bangkok Post.