Monday, February 28, 2005

And Globalization Done Right Could Be A Good Thing - Honest

Sebastian Mallaby has a good article in today's Washington Post about the successes and pitfalls of globalization. He is mostly glowingly positive about how free trade has increased the economic growth of poor nations. He compares the GDP (gross domestic product) of those third world nations that participated in free trade to those failed nation-states that did not. The ones that became part of the global free market did indeed experience far greater growth of their gross domestic product and had greater overall economic success than those who opted out of the free market.

He also goes into how the assault of 9/11 and the increased threat of terrorism has presented challenges to free trade. The need for better border security and the impediments to the free flow of both products and people are just two of the challenges that need to be dealt with to keep the borders open and the goods and business moving back and forth.

What Mallaby doesn't talk about, however, is whether the growth of the GDP of those countries has in any way benefitted the average worker there. One of the reasons for outsourcing, and with it the success of globalization, is that most of the poorer nations can provide much cheaper labor because their workers have a lower standard of living. Companies also don't have to pay expensive benefits like health insurance and pension plans.

So, how much is the success of globalization and the wealth trickling down to the average worker overseas?

Also, as I've pointed out in other posts, how much is our loss of manufacturing jobs and our whole manufacturing base hurting the U.S.?

Yeah, we're getting cheaper prices at the stores. But our wages are also depressed. For example, in January, we had a net drop in income. In addition, the U.S. has an unsustainably high trade deficit. Our dollars flow out of this country. We consume too many foreign made goods and we borrow too much money to do it. Most economists see storm warnings here.

We're all to blame for this to a certain extent. After all, who doesn't want the cheapest prices? I know I do. I can't keep writing this stuff and not admit that I go for the bargains too (although, it must be said that I don't shop at Wal Mart to get them).

Robert Reich has a good piece in the New York Times about this. He too likes the bargains but realizes the Faustian tradeoff. The lower prices do drive wages down too. What to do?

He comes up with some modest solutions to soften the blow to workers whose jobs go overseas, and to slow down the rush to the bottom with wages. And to soften some of the other wrenching changes that are hurting America's workers. At the same time, his proposals take care not to destroy free trade.

In addition to what he writes, here are some modest reforms I think we can make to actually protect foreign workers from the worst results of the exploitation and also put American workers on a more level playing field. These changes could keep the best results of free trade and open markets, which can be good for the U.S. and worldwide economy, while ameliorating some of the most harmful effects of liberalized markets.

For one thing, free trade done right, with a little fair trade thrown in, does produce greater prosperity for greater numbers of people. And it can encourage a more peaceful world. Trading partners often also become cultural partners. And liberal markets, cultural exchanges and greater contact with other countries often produce more understanding among differing people.

One modest suggestion to offset the problems caused by globalization would be to have an international minimum wage. It could be a low wage, but it would at least establish the princple that there is a minimum below which you cannot exploit labor. Another idea would be some international labor laws that would ensure that there was a certain level of fairness in the way workers were treated in the workplace. Managers couldn't compel workers to toil for more than say ten hours. They would have to make sure that certain minimum health, sanitation and safety standards were met at the workplace. And that there were minimum benefits, including insurance for on the job injuries, health benefits and pensions.

There should also be minimum standards that all nations comply with to ensure that the environment isn't degraded by manufacturing.

The concept of international business law is already established. There are world courts that fine nations for violating free trade rules, like erecting tariffs, and that protect international intellectual property rights. In fact, corporations and business people already do quite a lot to protect free trade and property rights and to keep a level playing field at the business end of it to ensure that markets are open, reciprocal and that investments are protected. How radical is it to extend this protection to workers?

Why not level the playing field so that workers are protected from the worst exploitation in countries like China and also to prevent a rush to the bottom of the wage barrel for Americans?

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