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The Globalization Debate and You
Demonstrators at a World Trade Organization meeting
The merits of globalization have been the subject of many heated debates in recent years. a There have been extensive public protests about globalization and the liberalization of international trade at World Trade Organization meetings and at other gatherings of international organizations and leaders. The debate is, in many respects, waged by diametrically opposed groups with extremely different views regarding the consequences of globalization. Sifting through the propaganda and hyperbole spouted by both sides is a challenge. However, it is important to recognize the various perspectives on globalization, because their arguments can generate appeal (or rejection) both intellectually and emotionally. The contributions of free trade and globalization to dramatic reductions in worldwide poverty are contrasted with anecdotal stories of people losing their livelihoods under the growing power of multinationals. Likewise, increases in service sector employment are contrasted against losses in high-paying manufacturing jobs.
ARGUMENTS SUPPORTING GLOBALIZATIONa
Free Trade Enhances Socioeconomic Development
That free trade is the best strategy for advancing the world's economic development is one of the few propositions on which almost all economists agree, not only because it is theoretically compelling but also because it has been demonstrated in practice. Data have shown a clear and definitive link between liberalization of trade and economic growth. b On a wide range of measures-poverty, education, health, and life expectancy-more people have become better off at a faster pace in the past 60 years than at any other time in history. Evidence is strong regarding the dramatic decline in both the proportion and the absolute number of destitute people. The World Development Indicators from the World Bank show that the number of people in extreme poverty fell from 1.5 billion in 1981 to 1.1 billion in 2001. Measured as a proportion of the population in developing countries, the decline was from 39.5 percent in 1981 to 21.3 percent in 2001. Between 1981 and 1999, the proportion of people in the East Asia and Pacific region living on less than $1 a day fell from 56 to 16 percent. In China, it plummeted from 61 to 17 percent. The proportion of people living in nations with daily food supplies under 2,200 calories per capita has declined from 56 percent in the mid1960s to less than 10 percent. Life expectancy in the developing world has nearly doubled since World War II, and infant mortality has decreased in all of the developing regions of the world. The proportion of children in the labor force fell from 24 percent in 1960 to 10 percent in 2000. Global literacy grew from 52 percent in 1950 to 81 percent in 1999, and on average the more globally integrated countries spend more on public education, especially in developing countries. Citizens from more globally integrated countries have greater levels of civil liberties and political rights. Within a generation's time, there has been an enormous improvement in the human condition, and every one of the development success stories was based on export-led growth facilitated by the liberalization of trade.
Of course, countries can reject globalization, and some have, including Myanmar, the Democratic Republic of Congo, Sierra Leone, Rwanda, Madagascar, Guinea-Bissau, Algeria, the Republic of Congo, Burundi, Albania, Syria, and Ukraine. They are among the most impoverished countries in the world. As an article in the Financial Times puts it, "They are victims of their refusal to globalize." c
Free Trade Promotes More and Better Jobs
Expanded trade is also linked with the creation of more and better jobs. Over the past two decades-a period of immense technological change and growth in trade-around 40 million more jobs were created than were destroyed in the United States. It is true that when a country opens to trade, just as when new technologies are developed, some of its sectors may not be competitive. Companies may go out of business, and some jobs will be lost. But trade creates new jobs, and these tend to be better than the old ones. The key is not to block change but, instead, to manage the costs of trade adjustment and to support the transition of workers to more competitive employment.
CONCERNS WITH GLOBALIZATION d
Those expressing concern with globalization have come from a range of sectors of society, and they express a correspondingly diverse set of concerns. Some fundamentally oppose the very process and outcomes of globalization on ideological grounds, while others may merely be concerned about finding ways to better manage globalization processes and the resulting outcomes. Some of the opponents' concerns may be viewed as naïve or clearly inconsistent with the preponderance of evidence. Other challenges to globalization may have theoretic merit or other supporting evidence and certainly may be worthy of discussion and the fostering of substantive change.
Although perspectives on the globalization debate may in many respects depend on one's values and ideology, thus further compounding efforts to reach a mutually agreed-on resolution, let us first ask this question: what are some of the primary concerns of the opponents of globalization? While many of the antiglobalizers concede that globalization "increases the size of the pie," they also claim that it has been accompanied by a broad array of injurious social implications. Among their concerns, let us briefly examine three primary ones here: (1) that globalization has produced uneven results across nations and people, (2) that globalization has had deleterious effects on labor and labor standards, and (3) that globalization has contributed to a decline in environmental and health conditions.
Globalization Has Produced Uneven Results across Nations and People
In stark contrast to the positive picture presented by supporters of globalization, opponents describe the painful impact of foreign investment and trade liberalization on the people of the world. Far from everyone has been a winner, they say. The promise of export-led growth has failed to materialize in several places. For example, most of Latin America has failed to replicate Asia's success despite efforts to liberalize, privatize, and deregulate its economies, with results ranging from disappointment in Mexico to catastrophe in Argentina. Similarly, efforts in sub-Saharan Africa have produced only limited benefits, and the share of the population living in extreme poverty there rose from 42 to 47 percent between 1981 and 2001. Open world markets, it seems, may offer the possibility of economic development-but the recipe is neither easy in its implementation nor universal in its outcomes.
Many opponents of globalization have claimed that there is a huge gap between the world's rich and poor and that globalization has caused that gap to increase. That there is a gap between rich and poor is unquestionable, but the evidence is perhaps not so clear regarding the charge that globalization has increased this inequality. Although Martin Wolf's analysis shows that income inequality has not risen in most developing countries that have integrated with the world economy, it does show that inequality has increased in some places, most notably in China. Inequality has risen in some high-income countries as well, but he attributes that more to the nature of technological change than to globalization. When income data are adjusted to reflect relative purchasing power, the inequality in income between poor and rich nations diminishes. Wolf also notes that while globalization of trade and investment is an enabler to improved income and living standards, the results may vary if obstacles exist such as poor governance or excessive borrowing. e
Globalization Has Had Deleterious Effects on Labor and Labor Standards
The issue of the impact of globalization on labor standards has become an oft-mentioned concern of workers in the United States and other nations. With trade liberalization through the World Trade Organization and increased mobility of capital, measures to keep a country's industries within its borders have been reduced, and companies have an easier time divesting their interests in one country and moving to another Workers in developed countries frequently voice concerns that their jobs will migrate to developing nations where there are lower standards, and thus, lower costs, leading to the infamous "race to the bottom," where developed nations with more rigorous labor standards become disadvantaged. Indeed, the Labor Secretariat for the North American Free Trade Agreement (NAFTA) commissioned a report that found more than half of firms surveyed used threats to close U.S. operations as a tool to fight union-organizing efforts. Since NAFTA's inception and the subsequent reduction in trade and investment barriers, these threats have become more plausible. As reported by Alan Tonelson, "In fact, more than 10 percent of employers studied... 'directly threatened to move to Mexico,' and 15 percent of firms, when forced to bargain with a union, actually closed part or all of a factory-triple the rate found in the late 1980s, before NAFTA." f
The concern can run both ways, however Although labor standards in developing countries are usually lower than in industrialized countries, they are rising-and evidence shows that multinationals investing in host nations pay higher wages, create new jobs at a faster rate, and spend more on R D than do local firms. Developing countries may also view the imposition of more demanding labor standards within their borders as a barrier to free trade. They may feel that lower-cost labor constitutes their competitive advantage and that if they are forced to implement more stringent labor standards, then companies may no longer have an incentive to set up operations in their countries, damaging their prospects for improved economic development. As the authors of Globaphobia ask, "Is it humane for the United States to refuse to trade with these countries because their labor standards are not as high as we would prefer? The consequence of taking this position is that many third-world workers will have no jobs at all, or must take jobs that pay even lower wages and have even worse working conditions than those currently available in the export-oriented sector." g A study by the Carnegie Endowment for International Peace found that Mexico's agricultural sector, which provides most of the country's employment, had lost 1.3 million jobs in the first decade since NAFTA was implemented. In addition, far from diminishing under NAFTA, the flow of impoverished Mexicans into the United States has risen dramatically, the study says. h
Globalization Has Contributed to a Decline in Environmental and Health Conditions
Regarding concerns of antiglobalization forces that globalization contributes to declining environmental standards, former president Zedillo of Mexico stated, "Economic integration tends to favor, not worsen the environment. Since trade favors economic growth, it brings about at least part of the necessary means to preserve the environment. The better off people are, the more they demand a clean environment. Furthermore, it is not uncommon that employment opportunities in export activities encourage people to give up highly polluting marginal occupations." Yet a difficulty caused by the North American Free Trade Agreement and the maquiladora program that began before NAFTA has been the substantial increases in ground, water, and air pollution along the Mexico-U.S. border. Damage to the environment has been caused by the many new production facilities and the movement of thousands of Mexicans to that area to work in them. In addition, some health and environmental issues extend beyond the scope of trade agreements. Some of NAFTA's rules on trade in services may cause governments to weaken environmental standards for sometimes hazardous industries like logging, trucking, water supply, and real estate development. For example, to comply with NAFTA's rules on trade in services, the Bush administration waived U.S. clean air standards in order to allow trucks based in Mexico to haul freight on U.S. highways. Globalization opponents argue that this could increase air pollution and associated health concerns in border states, as the aging Mexican truck fleet pollutes more than similar U.S. trucks and these vehicles do not use the cleaner fuels required in the United States. Protesters have also claimed that, under liberalized rules regarding the globalization of trade and investment, businesses have an incentive to move their highly polluting activities to nations that have the least rigorous environmental regulations or a lower risk of liability associated with operations that can create environmental or health-related problems. On the other hand, the economic growth fostered by globalization can help generate and distribute additional resources for protecting the environment, and improved trade and investment can enhance the exchange of more environmentally friendly technologies and best practices, particularly within developing nations.
As you read the preceding synopsis of the complex issues and arguments of supporters and opponents of globalization, are you convinced one way or the other? Is there a way the debate can move beyond a simplistic argument for or against globalization and toward how best to strengthen the working of the global economy in order to enhance the welfare of the world and its inhabitants?