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Globalization has brought a sharp increase in the developed world's labor supply. Labor in developing countries - countries with vast pools of underemployed people - can now more easily augment labor in the developed world, without having to relocate, in ways not thought possible only a few decades ago. The authors argue that the large increase in the developed world's labor supply, triggered by geo-political events and technological innovations, is the major underlying cause of the global macro economic imbalances that led to the great recession. The financial crisis in the US was but the first acute symptom that had to be treated. A sustainable recovery will only occur when the natural flow of capital from developed to developing nations is restored.
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