In Defense of Globalization

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Lecture 23

• In Defense of Globalization
• Or Jagdish Bhagwati in Action

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Anti Globalization Why?

• Two critical groups
• Hard Core
• Wont 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

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Perils of Globalization

• Globalization is an aggregate of
• 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.

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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?

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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

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Trade and Growth

• How does trade lead to growth ?
• 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
  macro-economic stability low inflation, stable
  exchange rates.
• Export earnings allow importation of advanced
  technology

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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
• 1970s 11 poor in Africa and 76 in Asia
• 2000 Africa had 67 of poor and 15 in Asian

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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

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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 EPZs than in
  farm
• Evils, working in middle east, prostitution and
  trafficing

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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

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V. Culture Imperiled or enriched?

• English is a killer language spread by
  globalization
• But immigration has caused countries to go
  bi-lingual USA and Spainish
• UNESCO estimates that cultural exports from LDCs
  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.

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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 LDCs to
  raise labour standards.

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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 PPMs seen as non-tariff barrier
• Free Riders on Koyoto US not meet standards.
  Must do something.

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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