Is Globalization Good for the Globe?

Protectionism is raising it’s ugly head once again across the globe. And I make no bones about the fact that it is ugly and undesired while globalization is good.

Yes, life is tough! In Mumbai, every single morning and evening, people struggle to make their way inside a train. However, once inside the train, they are openly and sometimes subtly, trying to reduce the number of people who enter the compartment from other stations.

 

Critics of globalization in the UK and US complain about how global movement of capital has created a great loss in jobs and higher levels of inequality within their countries. Bernie Sanders claims the real wages of the average American factory worker has declined over many decades.

 

Source: https://www.factcheck.org/2018/06/sanders-misleading-wage-claim/

One may debate that, but data does show an increase in inequality in the developed world since 1980 and some of it could well be attributed to globalization.

 

Source: https://voxeu.org/article/american-growth-and-inequality-1700

It is true, multi-national corporations have no interest in retaining manufacture in high-wage nations and will if permitted to, move production to places where wages may be lower, all else being constant. Free markets should mean that not only are corporations free to produce where they choose to produce, but customers also are free to buy from who they choose to buy from, and employees ought to be free to work where they would get the best wages. Some, progressives in the US, rue the fact that while goods flow freely across borders, people cannot. While this is true, are we saying white Americans from the mid-west are willing to work in a factory in China or India and even if they were willing to do so, would they be willing to accept wages an Indian or a Chinese worker is willing to work for? There is, however, a great demand for workers from poorer nations wanting to work in the developed countries of the world and none of these people opposed to their factories moving to Guangzhou want immigrants from rural China flocking to their town. 

I see a lot of hypocrisy here and it must be called out for what it is. It is not a battle of good vs evil or even David vs Goliath, it is about entrenched interests opposed to change.

Global inequality is very high, is far higher than it ought to be in a civilized world where even if kindness is scarce, enlightened self-interest is a virtue to pursue.

 But let us look at inequality. The inequality within a country is not the main source of inequality. It is the inequality between countries that makes it almost impossible for upward mobility of large sections of the world's poor.

Miremba, born to poor parents in Uganda in 2005 wanted to graduate from school, and get to live in a proper home. She has been sexually abused in school like 82% of girls in Uganda are, beaten by her parents at home, like 70% of children there for crying in hunger. Look at Emily from the UK.  Her mother lost her job at the local textile mill when all manufacturing moved to China, and Emily has a child from an abusive neighbor who raped her when she was 14. Yet, she lives in a home provided by the council. Her daughter goes to school alongside the middle-class children who live in the neighborhood, and Emily gets treated for a skin ailment at the local NHS. Of course, Emily has not had a grand life and deserves a much better one but is her situation in life not better than that of Miremba’s?

 

A solution is to open borders and allow anyone to enter any country and apply for any job. This may well lead to depression of wages in the west but may drive greater global equity. If a worker from Patna has an option to borrow money and board a plane to the US to work at a construction site in the US, contractors in Mumbai will start paying their workers more money eventually.

However, I do not believe that even the progressives want to completely open borders, and let anyone come in. Globalization may have increased inequality in the west, but it has reduced inequality between nations.

Free trade, in products between nations, on the other hand, will improve global efficiency, drive greater equity between nations, and by proxy provide reparations to nations exploited by the west. Another thing that gets ignored by opponents of globalization is the positive impact it has had on consumers who now have access to better quality and lower prices.

Proponents of progressive political and economic views feel poverty is caused by a lack of opportunity. Children born to poor parents live in poor neighborhoods. This means they will study in underfunded schools which further reduces their chances of getting into a good university. Along the way, their parents may lose their jobs, fall sick, and fail to provide even basic levels of nutrition to them. How can such a child compete with the children of the rich? They cannot compete and often end up in jobs flipping burgers or making coffee or stacking shelves at Walmart with barely enough wages to afford a home, raise children and save for retirement. This endless slippery slope of poverty is soul-crushing and a society that does not take care of avoiding this tragedy will have a huge law and order situation on its hands. As Atkinson said, “if we are concerned about equality of opportunity tomorrow, we need to be concerned about inequality of outcome today.”

Yet, these very same people, who want more taxes for the rich, a higher minimum wage, better and free healthcare, and education, have not agonized over the condition of the poor in other countries. The bottom 20% of the British are 10 times better off than the bottom 50% in India and Pakistan. The reason for the lower poverty in the UK compared to India can at least partially be attributed to colonization. So, if reparations are due from the rich in the UK to the poor in the UK, is not/reparation due to the poor countries?

Let us look at Global Wealth. In 2019, the world grew richer by 2.7% over the previous year and now stands at $400 Trillion. The 8 billion people in the world enjoy a per capita wealth of $50,000. That does not look terrible to someone in India where adult per capita wealth is $17,000 but sounds awful in the UK where per capita wealth is $250,000.

So, what is the plan to provide reparations to the poor? Geography of birth is the single biggest indicator of future poverty and it is all by accident. How is this fair? Why do the people who cry hoarse about fair wages in their own country, talk about the exploitation of capitalism, ignore the positive impact colonialism has had on their own lives and the positive effect globalization is having on the lives of the poor in developing countries? However bad one may feel the public schools in the UK are, they are way better than 90 % of private schools in India. However terrible the NHS may be, it is infinitely better than the healthcare accesses a poor landless laborer in India has. The council homes provided by the British taxpayer to the deserving poor in the UK are way better than educated middle-class executives in India can provide their families even at the end of their careers. Look at roads, sanitation, public transport, parks that a poor person in a developed country has access to and compare it with what an Indian must face every single day.

I agree, the rich in the UK and the US could be taxed more but the money should not be spent only on the poor in their own countries but should be used to alleviate global poverty.

How do we do this in reality? One way would be to open borders and allow people to migrate at will to any part of the globe and apply for a job anywhere. When they move to London or Oslo or Tokyo or New York, they could be provided with housing, schooling, education, healthcare, and so on. This may lower wages in the host country and put a further strain on its finances without immediately increasing wages in the immigrant’s native countries.

However, if one were to move factories to the poorer countries, it will increase wages in the host countries. So, even if people are unable to move freely from one country to another chasing their preferred jobs, globalization will reduce income inequality across the world. I make a strong pitch for Globalization and we should pursue it even more aggressively.

Works Cited

Credit Suisse. (2020). Global wealth report.

Gibson, D. (2021). 14 Miles: Building the Border Wall Paperback .

Milanovic, B. (2013, October). The winners and losers of globalization: finding a path to shared prosperity. Retrieved from https://www.worldbank.org/en/news/feature/2013/10/25/The-Winners-and-Losers-of-Globalization-Finding-a-Path-to-Shared-Prosperity

Peter Lindert, J. W. (2016, June). Unequal gains: American growth and inequality since 1700. Retrieved from VOX EU CEPR: https://voxeu.org/article/american-growth-and-inequality-1700

Rosenberg, T. (2002, August). Globalization. Retrieved from https://www.nytimes.com/2002/08/18/magazine/globalization.html?auth=login-google1tap&login=google1tap

Roser, M. (2013). https://ourworldindata.org/global-economic-inequality. Retrieved from Our world in data: https://ourworldindata.org/global-economic-inequality