Claudio Schuftan MD
September 1, 2017
Key words: Human rights, globalization, contradictions
Setting the stage
The two decades following the Cold War were celebrated and decried as the era of globalization. Critically speaking, the long-term trend of globalization masks a frank deterioration. As opposed to poor households, high-income households have been able to save a lot but, relative to their incomes, consume too little. Economists have simply not given much attention to the income polarization this has been brewing. [Income polarization measures the move from the middle of the income distribution out into the tails. Income inequality measures how far apart incomes at those tails are, i.e., the income distribution between the low and high-income groups]. Since 1970, polarization has grown faster that inequality with alarming consequences for human rights (HR) and for the economy overall. (1)
What the above says is that globalization has continued to enrich the few at the expense of providing a decent livelihood and a respect for the HR of the many. There is a long tale of foreign interests undermining domestic controls of the economy. It has importantly been bilateral trade instruments, treaties and free trade agreements (FTAs) promoted by the rich countries that have entrenched their dominance and have generated the uneven bargaining environment under which we live. Industrialized countries are the rule makers –poor countries are rule takers. Rich countries go for growth, but an inequality-entrenching growth, together with HR violations and poverty. Bottom line, globalization is a story of very few winners and billions of losers, a story of unequal partners, of inequality, of suppressed development, of continued exploitation and of exclusion. The rules are not working for the many; they never have. (2)
What is claimed
Point 1: Corporations are effectively using data to influence public opinion and behavior. They tell we must focus on stronger growth first. “A larger slice of the pie for everyone calls for a bigger pie”.
Point 2: For long, the deliberations and decisions of the IMF have not fully taken into account the political (and certainly not the HR) ramifications of globalization, true. But now it does see that politics and economics are a two-way street. So they now are calling into question the legitimacy of the political and economic elites the world over. (3)
Point 3: Globalization has allowed a quantum jump going from strengthening safety nets to calling for ‘trampolines’(springboards), for instance, for creating new jobs. Better international coordination against tax avoidance to prevent the bulk of globalization’s gains from accruing disproportionately to capital is called for. (4)
Point 4: As the world economy becomes richer, it shifts from manufacturing to services –and that is good. So, globalization is purportedly changing the economy rather than stagnating it or retrogressing. That the distribution resulting from globalization has so far been inadequate is a failure of politics rather than of globalization per-se. (5)
Point 5: There is no evidence that immigration exacerbates inequality within the bottom 90% of earners. Immigrants need help with language training and job search support; recognition of their education and work experience, all easing the way to entrepreneurship. Eventually, economic reality can overcome cultural resistance to migration. (6) [It is aid that Prince Parsis fleeing from Iran to India was received by the local ruler with a cup of milk full to the rim implying there is no more room. He responded by adding sugar to the cup to show how immigration can enrich local communities, dissolving into society].
What is countered (and closer to the truth)
Counterpoint 1: In many developing economies, income inequality and the violation of HR have clearly increased over the past three decades especially in Asia. Free trade affects earnings unevenly across local labor markets within a country. Lower export costs affect workers differently across provinces –the poorer provinces ones carrying the brunt. Provinces that benefit more are richer to begin with. So, as trade goes up so does regional wage inequality. International trade generates an earning wedge across regions. Poverty decreases less in rural districts disproportionately harming households rendered poor. Ultimately, households in the bottom 10th and 20th income distribution percentiles experience the largest decline in per capita consumption. Many have to find jobs in the informal sector. (7)
Counterpoint 2: Discriminated losers have been fighting globalization before it had a name; they still are. Economists thus have to pay more attention to these groups’ plight. For the losers to lose their job is something crucial to plead about. You may think they want to stack the deck in their favor, but if they do not, technology and trade under globalization will stack it against them. Nothing new here: The over-privileged generally benefit from globalization more than the under-privileged. Thus there is both a fairness case (less inequality, greater respect for HR) and a politico-economic case (fairer trade) for supporting much more the losers of free trade. (8)
Counterpoint 3: Globalization has actually resulted in greater income inequality, HR violations and disrupted lives. Most governments have not ensured that gains from the purported economic growth are broadly shared. Inequality has worsened most in Asia and Eastern Europe; it had declined in Brazil, but now, who knows. There has been a decline in labor union members and influence and a related rise in businesses’ willingness to shift production to low wage venues offshore. There is no guarantee the potential of globalization will be realized, absent decisive government action to support those who suffer from its negative effects. (4)
Counterpoint 4: The right response to the inequalities brought about by globalization is taxing policies and spending policies that redistribute the overall gains to those who are hurt by an unfair economic system.
Counterpoint 5: Trade liberalization is very attractive to the kinds of people who go to Davos and talk about global affairs. The overall effect has been big gains for the third-world middle class and the global top 1%. It is surprising that he backlash against globalization has been so long in coming. Globalization may well be a finished project. (9)
Counterpoint 6: Trade, like technological advances can and does skew the distribution of income and often threatens HR.
Counterpoint 7: Viewing the downgrade in workers’ jobs and pay over the past 30 years as solely the result of globalization risks letting national governments off the hook. Domestic politicians have often given the impression that they are powerless. In the face of globalization trends this hardly confirms this claim. It is their policy choices that have had a huge detrimental effect on the prospects of working people’s jobs and pay. Most important for trade unions, attacks on collective bargaining rights progressively weakened one of the most important protections against inequality. Countries with a higher coverage of collective bargaining agreements enjoy lower wage inequality, including between high and low skilled workers, between women and men, and between workers on regular and temporary contracts. We must remind our respective governments that they have the power to improve working people’s lives and can enable and encourage trade unions to continue their vital work in protecting workers human rights and pay. (10)
Counterpoint 8: We thus need policies that address the needs of those who lose out from technological change and globalization. Otherwise our political problems will only deepen. (3)
Footnote: Postscript/Marginalia: It is said that Voltaire so much enjoyed annoying stupid powerful people that he kept forgetting that stupid people who had gained power were never stupid about threats to their power.
I declare no conflict of interests.
Excerpted from F&D, the IMF quarterly publication, 53:4, December 2016 (with human rights issues added by the author). http://www.bing.com/search?q=Finance%20and%20Development%2C%2053%3A4%2C%20December%202016&pc=cosp&ptag=C1N0822D010317A316A5D3C6E&form=CONBDF&conlogo=CT3210127 accessed September 1, 2017.
1. Ali Alichi, p.40
2. Kumi Naidoo, p.37
3. David Lipton, p.17
4. Maurice Obstfeld, p.12
5. Sebastian Mallaby, p.6
6. Florence Jaumotte, p.30
7. Nina Pavcnic, p.34
8. Alan Blinder, p.33
9. Paul Krugman, p.11
10. Frances O’Grady, p.28