Opponents of globalization contend that there is an economic race-to-the-bottom underway as first-world economies will be forced to cut their standard of living in order to compete with third-world economies. One prominent supporter of globalization counters that most of the support for this argument is anecdotal – there’s not much smoke and little substance to the charges.Neither wealthy nor poor countries have been seriously damaged as a result of globalization – that’s a key finding by Robert Flanagan, a Stanford economics professor and the author of Globalization and Labor Conditions: Working Conditions and Worker Rights in a Global Economy, (Oxford University Press, 2006). “I can’t find any evidence that supports the race-to-the-bottom view,” he says.
His book examines three controversial components of global labor: international trade, international migration and activities of multinational companies (MNCs). “I looked at wages, hours, on the job safety and labor rights, which are the concern of a number of international organizations these days,” says Flanagan. “The four main rights are the ones emphasized by these organizations: freedom of association, non discrimination, [elimination] of child labor and abolition of forced labor. Much of the work is statistical or econometric analysis that contains data on labor and working conditions.”
Global trade in services and products is a force for good, he argues, but it’s not the only driver of improving labor conditions – productivity might rise because of technology improvements. “Trade does not have a separate affect on working conditions, although it does have a separate affect on labor rights,” he says. “These rights tend to improve with improvements in capital.”
Of course, Flanagan’s take on globalization is not universally accepted. The Economist magazine disagrees with his conclusions. “Real wages are growing less than half as fast as productivity,” the magazine editorialized in late January in a cover story called Rich Man, Poor Man. The Economist’s main complaint -and it’s a valid one – is that managers are overpaid relative to workers. But is that really a case against globalization? Opponents would say that globalization has accelerated or perhaps exacerbated the problem of wage inequality. In the United States a lack of shareholder, political or regulatory concern has perpetuated the problem.
Flanagan sees the data differently. “Wage differences are almost exactly matched by labor productivity,” he contends. “In manufacturing about 90 percent of the variation in wages can be explained in variations of productivity between countries. The wages per unit of output is almost the same even through the wages are so disparate. That seems to be the most misunderstood fact in the whole globalization debate – you hear wages quoted but never the productivity side.”
The Economist concedes that automation “may play a bigger role in explaining rising wage inequality and sluggish growth of middling wages.” Everyone agrees that it’s difficult, if not impossible, to tell exactly which workers are being held back by technology gains or global competition.
Not to be overlooked, Forbes magazine weighs in with an article called “Why Globalization Is Good,” citing an International Monetary Fund stat showing that 200 million people have been lifted out of poverty in India and China since the 1990s in the wake of deregulated economies that fueled high GDP growth. One of the authors of that piece has a book coming out in July called The Elephant and the Dragon: The Rise of India and China, and What It Means for All of Us, by Robyn Meredith.
The question, in my mind, isn’t whether globalization spins off winners or losers. What system doesn’t have a downstream impact? What I want to know is whether governments, corporations, educators and individuals are doing everything within their power to prepare workers to compete in the global economy.
