THE GOOD SIDE OF GOING GLOBAL Globalization has become the new bugbear of liberal economists But they forget the benefits of growth
Mandle, Jay
THE GOOD SIDE OF GOING GLOBAL It opens the gates to growth Jay Handle The industrial sites that are developing through-out the third world are often ugly and the wages they offer are low....
...When labor-intensive production methods result in prod-ucts becoming over-priced, we should engage in neither pro-tectionism nor in a race to the bottom in wages...
...Obviously there should be limits to what is acceptable when the United States purchases goods from poor countries...
...So is reliable infrastructure: transportation, energy, and, of course, communications...
...A productive labor force, usually meaning a relatively well-educated population, is needed in most cases...
...But when these are present, rapid economic growth and there-fore an escape from poverty become a very real possibility...
...Doing so requires an activist government, supportive of technological advance while at the same time compassionate about the human costs of that process...
...Higher in-comes for working people need to be achieved, but this is possible only to the extent that productivity growth permits it...
...Economic development in the third world is not the enemy of the well-being of the American people...
...The antitrade liberals fail to acknowledge that curtailing access to the United States market would stifle that growth...
...This is because high levels of labor productivity can offset the cost effects of high wages...
...What we should not do is turn a blind eye to the needs of the poor elsewhere, something that is implicit in denying the developing world access to our markets...
...Ignored is what Wood says on the first page of his North-South Trade, Employment, and In-equality (Oxford, 1994): Trade "has had large benefits, rais-ing average living standards in the North and accelerating development in the South...
...On one hand, development has permitted nations to export where previ-ously they lacked the productive capacity to do so...
...In just the last decade, our trade with the third-world countries of Asia, Africa, and Latin America has increased from 3.7 percent of the gross domestic product to 6.8 percent...
...To be sure, the spread of modern production has not really been global...
...The labor force in these in-dustries therefore finds itself in competition with lower-cost workers in poor nations, a competition which puts down-ward pressure on wages and incomes...
...Antipathy to globalization, for ex-ample, is prominent in the work of analysts at the Economic Policy Institute (EPI) such as Jeff Faux, Thea Lee, and Robert E. Scott...
...With moderniza-tion, in the past as today, nations become increasingly im-portant consumers and suppliers for each other...
...workers to earn high and rising wages we will have to specialize in high productivity industries...
...But such ef-forts must never represent impositions on unwilling societies...
...He betrays no anxiety at all that such policies could harm both the United States and the developing world by seriously disrupting international trade...
...Nor does it represent an adequate response to the situation of low-skilled/low-wage workers in this na-tion...
...In effect, trade raises incomes by reducing prices, a consideration which was all but absent in the liberal opposition to NAFTA and appears not at all in the EPI studies of the impact of trade...
...The surprise is that many liberals who identify with the poor have not seen globalization in this light...
...But they cite Wood only selectively...
...Given the relatively high cost of labor in this country, goods produced with low-productivity workers, if traded internationally, tend to cost too much to be successful in world markets...
...But great care must be exercised in imposing such restrictions...
...adjusting the economy in this way requires that we do a much better job in ensuring that our working people possess the skills to be suc-cessful participants in the world economy...
...We should also ban the imports of products whose production process-es contravene internationally negotiated environmental pro-tections...
...This liberating outcome will not happen automatically...
...The real danger lurking in the liberal antitrade position is that it concedes precisely what we have to fight for: a sup-portive government committed to advancing the productive skills of the labor force and offering an adequate safety net for those who confront difficulty in the highly competitive world economy...
...trade with the rest of the world is growing...
...Few on the left are will-ing to acknowledge what the historical experience of the de-veloped world clearly demonstrates...
...Ignored also is what Wood says concerning policies addressed to those hurt by the process: "The least attractive...
...The widely acknowledged deficiencies in our educational sys-tem threaten our ability to create and sustain high-paying employment...
...Instead, it turns to protectionism to provide jobs and raise incomes...
...A better alternative would be to exit from those industries and spe-cialize in the ones where we can be successful...
...It is no surprise, therefore, that today U.S...
...Such individuals retain the potential to be highly productive and should be helped to regain their place in a structure of production that can offer them high-wage employment...
...Trade-hostile liberals like the EPI analysts have not sufficiently considered the implications of their position for the growth of these underde-veloped countries...
...They are silent on the ques-tion of how, in the absence of trade, wages in poor countries could be increased over the long-run...
...Better than we have in the past, we will have to reform our educational system to make cer-tain that our workers can compete at the highest levels of pro-ductivity...
...globalization will have to be guided to make it as inclusive as possible...
...South Korea, seen as an economic basket case in the 1960s, is only one of a number of Asian countries where economic growth, achieved by successfully penetrating export markets, has substantially raised the population's standard of living...
...In adopting this position they appeal to the work of Adrian Wood who argues that unskilled workers in de-veloped countries have been hurt by globalization...
...Rather than pitting the poor of the developed world against the poor of the third world, as protectionism does, we should be pre-pared to continue to fight for economic justice everywhere...
...In general, the latter will be those in which output per worker is high...
...But it is true that in today's international economy, in which low-income countries are emphasizing trade as the means to escape poverty, for U.S...
...Those same low prices, it is true, do pose a threat to some U.S...
...The advocacy by Americans of trade sanctions to reshape labor and environmental policies in other countries risks a politically distasteful coercion...
...Indeed, on the political left globalization is seen as a process to be opposed and reversed if possible...
...consumers to buy a wider array of goods and pay lower prices than would be the case if imports were barred or minimized...
...imports of goods from poor countries and the flow of American capital to them have depressed wage rates in this country...
...policy response would be to raise bar-riers to imports from the South...
...It also provides benefits to the people of developed nations such as the United States...
...Low-wage rates alone do not attract investment...
...This promise exists because we live in an era when ad-vances in technology mean that, in Lester Thurow's words, "for the first time in human history, anything can be made anywhere and sold everywhere...
...The only realistic way labor incomes in poor countries can increase is by creating jobs which in the first instance are poorly paid...
...Neither is the in-ternational trade associated with that development...
...If income transfers are required to assist the needy, that is what we should argue for...
...Aside from the impossibly high price tag associated with such a strategy (one estimate has it that the cost of trade protection per job in the United States today is $170,000), this strategy turns its back on the legitimate in-terests of the poor in other, less-developed nations...
...Because this is the case, economic development has become a real possibility for all nations throughout the world...
...Globalization already has meant that numerous countries that formerly were considered to be "third-world nations" have become centers of modern production...
...On the other hand, growing incomes have permitted consumers to increase their purchases from overseas...
...In these ways, globalization can be har-nessed to the task of extending the benefits of development internationally without dangerously pitting the people of the developed world against those of the third world...
...However, the globalization of trade promises not only to raise living standards in the poor nations...
...If the unskilled in this country need a public-sector jobs pro-gram because private-sector employment requirements ex-ceed their capacity, that is what we should urge...
...industries...
...Nevertheless, it is realistic to believe that dramatic inroads can now be made against the scourges that afflict humankind in the third world: malnutrition, illness, and ignorance...
...Both of these problems require recognition of the fact that, to advance our society's well-being through interna-tional trade, we must specialize in industries in which we, despite our relatively high wages, nevertheless can be suc-cessful in the market place...
...The EPI economists adopt this stance because they believe that U.S...
...Especially important in this regard is job re-training for workers who are displaced by technological ad-vances and productivity growth...
...The spread of economic modernization has long been as-sociated with increased international trade...
...The same is true with regard to our labor unions' assisting organizing efforts elsewhere...
...Exporting goods produced with high quality, highly paid labor would be a means to augment sales, thereby increasing the number of high-pay-ing jobs in this country...
...Globalization, in short, rais-es the possibility that, for the first time, the mass depriva-tion associated with underdevelopment might dramatically be reduced, if not eliminated...
...We should not import goods produced by children or by work-ers who labor in demonstrably unsafe conditions...
...These authors argue against the growth in interna-tional trade which has been experienced in recent years as the result of globalization, and advocate neomercantilist, if not protectionist, trade policies for the United States...
...This is because trade allows U.S...
...At the same time we will have to recognize the interests and needs of those who are not successful partici-pants in the process...
...Nevertheless, they symbol-ize a sea change in the global economy, one which has the potential to raise the living standards of millions of people in today's poor countries...
...Generally these are industries that employ poorly skilled labor...
...In the EPI's recent book, Reclaiming Prosperity, Scott is remarkably cavalier in asserting that most-favored-nation trading stat-us may have to be withdrawn from Japan and from export-oriented developing countries, and that restrictions should be imposed on investment in specified developing nations...
...Our technological and environmental expertise should be made available where they are desired...
...However, curtailing trade as antitrade liberalism calls for is not a satisfactory answer to the problem of defining the role of a high-wage country like the United States in the globalized economy...
...The historic fact has been that such growth is the sole mech-anism by which the living standards and well-being of large numbers of people have been advanced...
Vol. 124 • July 1997 • No. 13
