The View | Is the age of Milton Friedman’s dream of global integration and free markets coming to an end?
The most powerful voice for globalisation had deep reservations, however, about a common currency and unfettered migration – the very cornerstones of the now-fracturing European project
Between 1980 and 2005, the world embraced the free market policies of Milton Friedman. A new age of globalisation ushered in economic integration of trade flows, capital flows, and migration at an accelerated pace.
Living standards rose sharply, while life expectancy, infant mortality, educational attainment, and democracy improved, and absolute poverty declined. These were not coincidences.
These developments played out through China’s opening, Europe’s deep regional economic integration, and the integration of financial markets among the rich economies and to varying degrees some emerging economies.
Nonetheless, global integration has undoubtedly had other characteristics or consequences beyond improving people’s lives:
● First, the entry of a vast unskilled labour force into the world economy suddenly made the existing stocks of physical capital, highly skilled workers, and prime real estate scarcer, producing windfall returns on these investments. The wages of unskilled workers, however, stagnated worldwide.
The result has been rising inequality between labour incomes and of non-human capital incomes in many rich economies. But these are two sides of the same coin – the dual manifestations of the same economic process.