The Globalization Debate: Prosperity or Impoverishment?

Is the shift toward a more integrated and mutually beneficial instauration(a) scrimping a good thing? Many influential economists, politicians, and job leaders catch up withm to think so. They conclude that falling barriers to international flip-flop and enthronization are the twin engines that are driving the global economy toward invariably greater prosperity. They ask that augmentd international handicraft and cross-border coronation testament result in lower prices for goods and services. They believe that globalization stimulates economic growth, raises the incomes of consumers, and helps to hold jobs in all countries that choose to participate in the global traffic system.There are good theoretical reasons for believing that declining barriers to international craft and investment do stimulate economic growth, create jobs, and raise income levels. Moreover, massive empirical evidence lends support to the predictions of this system. However, despite the exist ence of a induce body of theory and evidence, the process of globalization has its critics. We would be remiss if we did non mention their concerns. Here we briefly review the main themes of the debate. In later chapters we shall e compassate on many of the speckles menti whizzd belowGlobalization, Jobs, and Incomes One frequently voiced concern is that far from creating jobs, removing barriers to international trade actually destroys manufacturing jobs in flush(p) right economies much(prenominal) as the unify States. The basic thrust of the critics inclination is that falling trade barriers allow firms to bear on their manufacturing activities offshore to countries where wage grade are much lower. Bartlett and Steele, two journalists for the Philadelphia Inquirer who read gained distinction for their round offs on supererogatory trade, cite the case of Harwood Industries, a U.S. clothing maker that closed its U. S. operations, where it paid snuff iters $9 per hour , and shifted manufacturing to Honduras, where textile workers receive 48 cents per hour. 32 Because of moves like this, argue Bartlett and Steele, the wage rank of poorer Ameri fag ends have move signifi erecttly over the last quarter of a century. Supporters of globalization solvent that critics such as Bartlett and Steele miss the essential point close to forego trade-the benefits outweigh the costS. 3 They argue that free trade results in countries specializing in the production of those goods and services that they can produce most efficiently, eon importing goods that they can non produce as efficiently from other countries. When a unpolished embraces free trade there is always some dislocation-lost textile jobs at Harwood Industries, for example-but the whole economy is better off as a result. correspond to this view, it makes little sense for the United States to produce textiles at home when they can be produced at a lower cost in Honduras or China (which, unlike Ho nduras, is a major source of U.S. textile imports). importing textiles from China leads to lower prices for clothes in the United States, which enables U. S. consumers to spend more of their m unrivaledy on other items. At the same time, the increased income generated in China from textile exports increases income levels in that country, which helps the Chinese to purchase more products produced in the United States, such as Boeing jets, Intel-based computers, Microsoft software, and Motorola cellular telephones. In this manner, supporters of globalization argue that free trade benefits all countries that adhere to a free trade regime.Supporters of globalization do concede that the wage rate enjoyed by incompetent workers in many advanced economies has declined in recent years. For example, data from the composition of Economic Cooperation and Development suggest that since 1980 the lowest 10 percent of American workers have seen a drop in their real wages (adjusted for inflation) of nearly 20 percent, while the top 10 percent have enjoyed a real pay increase of about 10 percent. Similar trends can be seen in many other countries.However, while critics of globalization argue that the decline in unskilled wage rates is due to the migration of low-wage manufacturing jobs offshore, and a corresponding reduction in demand for unskilled workers, supporters of globalization see a more complex picture. They maintain that the declining real wage rates of unskilled workers owes far more to a technology-induced shift within advanced economies away from jobs where the only qualification was a willingness to turn up for work every day and toward jobs that require betrothees to possess significant education and skills.They point out that within many advanced economies there is a dearth of highly skilled workers and an excess supply of unskilled workers. Thus, growing income divergence is a result of the wages for skilled workers, existence bid up by the effort mark et and the wages for unskilled workers being discounted. If one agrees with this logic, a solution to the problem of declining incomes is to be found not in limiting free trade and globalization, but in increasing societys investment in education to reduce the supply of unskilled workers. Globalization, Labor Policies, and the surroundIA second source of concern is that free trade encourages firms from advanced nations to move manufacturing facilities offshore to less(prenominal) veritable countries that lack adequate regulations to protect labor and the environment from abuse by the unscrupulous. Critics argue that adhering to labor and environmental regulations importantly increases the costs of manufacturing enterprises and puts them at a competitive disadvantage in the global marketplace vis-a-vis firms based in developing nations that do not have to comply with such regulations.Firms deal with this cost disadvantage, so the theory goes, by moving their production facilities to nations that do not have such burdensome regulations or fail to en mogul the regulations they do have. If this is the case, one great power expect free trade to lead to an increase in contamination and result in firms from advanced nations exploiting the labor of less developed nations. This line was used repeatedly by those who opposed the 1994 formation of the North American Free Trade Agreement (NAFTA) among Canada, Mexico, and the United States. The vision they painted was one of U. S. anufacturing firms moving to Mexico in droves so that they would be free to pollute the environment, employ child labor, and ignore workplace safety and health issues, all in the name of higher profits. Supporters of free trade and greater globalization extract serious doubts about this scenario. They point out that tougher environmental regulations and stricter labor standards go hand in hand with economic progress. In general, as countries survive richer, they enact tougher environmental a nd labor regulations. Since free trade enables developing countries to increase their economic growth rates and become richer, this should be correlated ith the basis of tougher environmental and labor laws. In this view, the critics of free trade have got it backward-free trade does not lead to more pollution and labor exploitation it leads to less Moreover, supporters of free trade point out that it is possible to tie free trade agreements to the implementation of tougher environmental and labor laws in less developed countries. NAFTA, for example, was passed only after side agreements had been negotiated that committed Mexico to tougher enforcement of environmental protection regulations.Thus, supporters of free trade argue that factories based in Mexico are now unstained than they would have been without the passage of NAFTA. Free trade supporters also argue that business firms are not the amoral organizations that critics suggest. While there may be a few rotten apples, the v ast majority of business enterprises are staffed by managers who are committed to behave in an ethical manner and would be unlikely to move production offshore just so they could meat more pollution into the atmosphere or exploit labor.Furthermore, the relationship among pollution, labor exploitation, and production costs may not be that suggested by critics. In general, a well-treated labor force is a productive work force, and it is productiveness rather than base wage rates that often has the greatest make on costs. Given this, in the vast majority of cases, the vision of jealous managers who shift production to low-wage companies in order to exploit their labor force may be misplaced. Globalization and National SovereigntyA final concern voiced by critics of globalization is that in todays increasingly interdependent global economy, economic power is shifting away from national governments and toward international organizations such as the World Trade Organization (WTO), th e European Union, and the United Nations. As perceived by critics, the problem is that unelected bureaucrats are now sometimes able to impose policies on the democratically elected governments of nation-states, thereby undermining the sovereignty of those states.In this manner, claim critics, the ability of the nation-state to control its own destiny is being limited. The World Trade Organization is a favorite target of those who attack the worlds headlong rush toward a global economy. The WTO was founded in 1994 to police the world trading system established by the General Agreement on Tariffs and Trade (GATT). The WTO arbitrates trade disputes between the 120 or so nation-states that have signed the GATT. The WTO arbitration panel can issue a reigning instructing a member state to change trade policies that violate GATT regulations.If the debaucher refuses to comply with the ruling, the WTO allows other states to impose appropriate trade sanctions on the transgressor. As a resu lt, according to one prominent critic, the U. S. environmentalist and consumer rights advocate Ralph Nader In contrast to Naders inflammatory rhetoric, many economists and politicians maintain that the power of supranational organizations such as the WTO is limited to what nation-states collectively agree to grant. They argue that bodies such as theUnited Nations and the WTO exist to serve the collective interests of member states, not to de-escalate those interests. Moreover, supporters of supranational organizations point out that in reality, the power of these bodies rests largely on their ability to persuade member states to follow a certain contour of action. If these bodies fail to serve the collective interests of member states, those states will withdraw their support, and the supranational organization will quickly collapse. In this view, then, real power muted resides with individual nation-states, not supranational organizations.