Lecture 23

1. Lecture 23 In Defense of Globalization Or Jagdish Bhagwati in Action

2. Anti Globalization: Why? • Two critical groups: • Hard Core: • Won’t 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

3. 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.

4. 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?

5. 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

6. 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

7. 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: • 1970’s 11% poor in Africa and 76% in Asia • 2000: Africa had 67% of poor and 15% in Asian

8. 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

9. 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 EPZ’s than in farm • Evils, working in middle east, prostitution and trafficing

10. 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

11. 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 LDC’s 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.

12. 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 LDC’s to raise labour standards.

13. 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 PPM’s seen as non-tariff barrier • Free Riders on Koyoto: US not meet standards. Must do something.

14. 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