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Lecture 23
In Defense of Globalization
Or Jagdish Bhagwati in Action
Anti Globalization: Why?
• Two critical groups:
– Hard Core:
• Won’t be persuaded by rational argument
• Hold Trilogy of beliefs, plus
– Anti-capitalist, capitalism exploits weak countries
– anti-corporation: multi-nationals are principle agents of exploitation
– All leads to anti-globalization as force which facilitates growth of
capitalist corporation
– Anti-American,
– Mainstream dissenters
• View globalization as source of
– Poverty, environmental deterioration, child labour, cultural imperialism,
female exploitation
• Rebut Mainstream dissenters
Perils of Globalization
• Globalization is an aggregate of
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Capital flows
trade in goods and services,
immigration
diffusion of technology
• Globalization is faster today
• Globalization creates greater instability due to
greater integration
• Globalization is a product of technical change
and government intervention to reduce barriers.
An optimal Speed for
Globalization?
• Can you manage globalization ?
• What institutions are available?
• How fast do we lower barriers for
– Trade in form of tariffs and quotas
– Immigration flows
– Capital flows
• Is one rate (big bang or crawl) good for all
countries?
I. Poverty Enhanced or
Diminished?
• Does globalization reduce poverty?
– Yes, via globalization leading to growth which
in turn leads to poverty reduction.
– Some types of growth reduce poverty faster
than other types of growth
• Tigers used export led labour intensive growth
• India growth was inward and relied on capital
intensive project. No connection between growth
and poverty reduction
Trade and Growth
• How does trade lead to growth ?
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Specialization leads to gains from trade
Trade allows scale economies which leads to growth
Trade increases competition and reduces monopolies
Out-ward looking trade countries have macroeconomic stability; low inflation, stable exchange
rates.
– Export earnings allow importation of advanced
technology
Examples of India and China
• China: outward looking and poverty
reduction from 28 % in 1978 to 8 percent
today.
• India; Inward looking 55% poverty rate
was near constant
• World-wide:
– 1970’s 11% poor in Africa and 76% in Asia
– 2000: Africa had 67% of poor and 15% in
Asian
II. Child Labour Increased or
Reduced?
• Evidence: Increased household earnings
and specialization has reduced child
labour
– Vietnam: 26% of children work in ag and only
7% elsewhere
– Increased income in poor countries allows
households to send children to school
III. Women Harmed or Helped?
• Trade and the Wage Gender Gap
– Greatest when there is no free trade since
• Monopolies can discriminate against women if not contested in the
labour market in closed market
• Opening market will cause competition and force end of
discrimination
• Global Female migration: migrant is better off to be free
of attachments and host women are better off
• Unpaid work: Trade is neutral on this issue
• Trade Agreements lead to low wage female intensive
work in EPZs (export processing zones)
– Not true, females are paid more in EPZ’s than in farm
• Evils, working in middle east, prostitution and trafficing
IV Democracy and Globalization?
• Globalization aids democracy in two ways
– Indirectly by creating social conditions
• Increased education, social equality and breaking class structure
– Directly:
• Farmers now by pass intermediaries with computers to sell their
products
– Examples of globalization fostering democracy
– Chile under Pinochet, Spain, Indonesia, South Korea
• Globalization can reduce social spending on education,
health and welfare and jeapordize democratic reforms.
• Democratic Deficit: Politicians approve globalization
when people are against it
V. Culture: Imperiled or enriched?
• English is a killer language spread by
globalization
• But immigration has caused countries to go bilingual USA and Spainish
• UNESCO estimates that cultural exports from
LDC’s have risen from 12 to 30 % between
1978-2000
• Globalization may destroy indigenous cultures
by taking lands or passing them by.
• Free trade must allow for cultural exceptions
– Free imports of films etc with subisding local
productions is optimal solution.
VI. Wages and Labour Standards
at Stake?
• Labour saving technology and not
globalization has caused labour
displacement in developed countries
• Race to the bottom on labour standards is
really race to the top as DC lobbyists force
LDC’s to raise labour standards.
VII Environment and Globalization
• Free Trade reduced emissions from autos since under restrictions
only gas guzzzlers exported.
• Free trade in ag will lead to less chemical based framing techniques
• Increased income in poor countries reduces pollution as new
technologies emerge
• Race to Bottom: Lower environmental standards to attract
investment. No supporting evidence that this occurs.
• WTO and the Environment
– Hormone fed beef and GM; WTO rule is that an exclusion of an import
must be based on scientific evidence. And there is none.
– Dolphins: production, processes and methods (PPMs) violates ethical
preferences
unless dolphins protected when tuna caught then one could ban that tuna was
denied because it is de facto discrimination
• WTO denies PPM’s seen as non-tariff barrier
• Free Riders on Koyoto: US not meet standards. Must do something.
Good Governance
• Coping with downsides
– Adjusted assistance:
• domestically implemented but externally funded
• WTO dispute mechanism should trigger an aid
response when it is a burden to poor countries
– Use generalized trade sanctions and
– Sanctions for not meeting pre-conditions (i.e.
no child labour)
To cope with downsides