global inequality

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Globalization Is Good but Not Good Enough

hat, then, are the principal dimensions of an approach to making the beneficial globalization process work even bet- ter? I will sketch here the three principal prescriptions that

need to be kept in view: The beneficial outcomes are only what economists call a “central

tendency,” which is to say that they hold for the most part but not al- ways. They leave room for downsides, and we must have institutional mechanisms to cope with such adverse outcomes if and when they ma- terialize.

Also, we will want to go faster in achieving social agendas than glo- balization permits and facilitates. The question then is: what choice of policy and institutions will achieve that acceleration?

Finally, we can never forget also that a transition to more rewarding globalization requires careful steering and optimal speed of policy changes, not maximal speed à la the “shock therapy” of excessively rapid reforms that devastated Russia.

Handling Possible Downsides

Occasionally globalization will do harm that requires attention. We must create institutions and policies that either reduce the probability of such downsides or can be triggered so as to cope with them, preferably doing both. Let me illustrate.

Consider the recent concerns raised by some NGOs about the rap- idly proliferating shrimp farms along the coasts of India, Vietnam, Thai- land, and many other countries, including some in Latin America. I first

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came across these concerns in my work for Human Rights Watch.1 It seemed a trifle odd that shrimp should be considered a human rights issue instead of being eaten and enjoyed! Besides, shrimp farming in India had led to substantial exports and had contributed to enhancing India’s growth and its fight against poverty, the eradication of which could be legitimately regarded as a human rights concern. On examina- tion, however, it was clear that this was precisely the sort of occasional downside of globalization of trade and direct investment that needed to be addressed. What was the problem?

Coastal shrimp farming was damaging the surrounding mangroves because of discharge of chemicals and backup of uneaten feed, disrupt- ing the livelihood of fishermen and others subsisting traditionally in the surrounding areas.2 Evidently a twofold institutional response was nec- essary: there should be a way to compensate and assist those who had already been damaged; more important, there must be the introduc- tion of a “polluter pay” tax on the discharges and effluents in current farming.

Take yet one more example, extensively developed in Chapter 16, that illustrates how there should also be institutional international change to mitigate globalization’s occasional dark side. Recall that with greater openness in trade there often comes a sense of economic insecurity from the fear that more openness will create greater volatility of prices and hence of jobs. Even though the objective evidence for this fear is not compelling—recent empirical analyses suggest that labor turnover has not particularly increased in the United States and United Kingdom despite ongoing globalization—the fear is palpable and prompts anti- globalization sentiments.3 It therefore suggests that a way to support globalization politically may well be to provide additional adjustment assistance for those laid off in a way that can be linked to such volatility from import competition. I and several others have therefore long sug- gested that such assistance be provided as the economy is opened up to greater trade.4

Accelerating the Pace of Social Change

Then again, the pace at which globalization advances social agendas need not be accepted as satisfactory. After all, the sustained 2 percent growth rate annually during the Meiji era in Japan is no longer considered the “miracle” it was once regarded as. Today, if a developing country regis- ters growth below 6 percent annually, it is regarded as a failure. We have addressed much analysis and effort to securing such an accelerated

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growth rate. Why not the same with the speed at which we achieve social agendas?

So we need to consider the ways in which we can reinforce the benign social effects of globalization. Thus, child labor is known to decline as economic growth occurs. But what can we do to accelerate its removal? This is where the question of appropriate choice of policy instruments, and international agencies to oversee them, becomes pertinent.

The current conflict is between federations of unions such as the International Confederation of Free Trade Unions (ICFTU) and the American Federation of Labor–Congress of Industrial Organizations (AFL-CIO), on one hand, and those such as the Indian trade unions (whose membership exceeds eight million—not a great deal below that of the AFL-CIO, and a figure that is more striking when one remembers that agricultural labor has not been unionized in India) and key developing- country NGOs such as the Third World Network of Malaysia and the Consumer Unity and Trust Society of India, on the other. The former group wants trade sanctions under WTO auspices through the adop- tion of the WTO Social Clause, which would make export market access conditional on implementation of labor standards by the member coun- tries to reduce child labor and to achieve other “core” labor rights (de- fined under the International Labor Organization’s Declaration of Fundamental Principles and Rights to Work, and spelled out in Chap- ter 12). The latter group would rather see non-sanctions-based ap- proaches and the location of the issue at the ILO instead. My own sympathies lie with the latter position, for reasons that are explained in Chapters 10 and 17.5

Optimal, Rather Than Maximal, Speed of Globalization

Again, the question of appropriate management of globalization requires attention to the speed at which globalization must be pursued. The dif- ficulties that Russia got into under shock therapy, which was a program of very rapid stabilization and reform measures, are a reminder that the best speed is not necessarily the fastest speed. Or take the prescription to dismantle tariffs. Maximal speed would mean that they are eliminated forthwith. But this may mean that the government falls and the tariffs are reimposed; gradual reduction over a few years would then have been preferable. To use an analogy, if you kick a door open, it may rebound and close instead, whereas gentle pressure on it would ensure that it remains open.

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A dramatic example of mismanagement of globalization, which is the focus of Chapter 13, is the imprudent and hasty freeing of capital flows that surely helped to precipitate the Asian financial and economic crisis starting in 1997. Again, if one thinks of immigration, discussed in Chapter 14, it is clear that a rapid and substantial influx of immigrants can precipitate a reaction that may make it extremely difficult to keep the door open. There is clearly prudence in proceeding with caution, even if one considers, as I do, that international migration is an eco- nomically and socially benign form of globalization.

And so, in these different ways, globalization must be managed so that its fundamentally benign effects are ensured and reinforced. With- out this wise management, it is imperiled. I shall also argue that this management will be better and more effective if the governments, inter- national institutions, corporations, and intellectuals who celebrate and reinforce globalization joined hands with the non-governmental orga- nizations that generally discount and oppose it, creating what UN Sec- retary General Kofi Annan calls a partnership, achieving what I call a shared success. So before I get on with my principal themes of globaliza- tion with a human face and how to make it work better, I turn now to a close look at these NGOs.