Arguments for and against globalization

FOR Globalization

1. ONE BILLION PEOPLE OUT OF POVERTY

Between 1990 and 2010, the number of people living in extreme poverty fell by half as a share of the total population in developing countries, from 43% to 21%—a reduction of almost 1 billion people.

Human development indicators have also been improving across the globe. Life expectancy has been increasing steadily everywhere, and most developing countries are now rapidly converging with the rich world; child mortality rates have gone down everywhere; literacy rates, access to clean water, electricity, and basic consumer goods, all of these indicators have been rising.

Scarcity has existed throughout human history. However, never before has the material well-being of so many people been improved in such a short space of time.

2. COMPARATIVE ADVANTAGE

As Adam Smith famously alluded to in The Wealth of Nations, a global free trade system allows countries to use their resources more efficiently, by selling what they produce best, while buying what other countries produce better.

In a 2011 publication, the OECD argued that comparative advantage is one of the most potent explanations of higher income growth in open economies. The differences between countries, including differences in broad policy agendas, create relative differences in productivity, giving rise to gains from trade.

3. INCREASED INTERNATIONAL COOPERATION

Certain economists, such as Jagdish Bhagwati, argue that the trade openness brought about by globalisation can contribute to the spread of democracy, as “the benefits of trade brings prosperity that, in turn, creates or expands the middle class that then seeks the end of authoritarianism.” Princeton’s John Doces found that “globalisation measured as increased exports to the U.S. increases the level of democracy in the exporting country.”

Using data provided by Freedom House, George Mason economist Daniel T. Griswold found a correlation between economic openness and political and civil freedom across 123 countries.

AGAINST Globalization

1. JOB LOSSES

Critics often point out that globalisation has led to job losses in the developed world, notably in the manufacturing sector. For instance, the US has lost 5 million manufacturing jobs since 2000.

What makes things worse is the sense that not everybody is playing by the same rules when it comes to global trade. A common refrain of the Trump administration in the US, for example, is that the West has opened its markets to Chinese exports, but China has not properly reciprocated. Globalization, as it currently exists, is making some in the developed world very rich, but hurting working class communities. This has been a gift to populist politicians, but it has been devastating to many communities in Europe and the US that relied on manufacturing.

2. EROSION OF STATE SOVEREIGNTY

Another common argument is that globalisation has eroded state sovereignty. International trade limits the ability of nation-states to control domestic economies, whereas international organisations and laws place limits on their decision-making abilities.

The Eurozone crisis proved that financial markets can topple governments just as easily as elections. Yet there is no democratic control over financial markets.

Large multinationals exploit legal loopholes (and use well-paid lawyers and accountants) to help them avoid taxes. They offshore their operations to countries with weak labour laws and environmental protection, circumventing higher standards in the developed world (despite selling their products there).

3. INCREASED INEQUALITY

Globalization has made some people very rich. The majority, however, are given scraps. The 2018 World Inequality Report shows that inequality is rising across the globe (particularly in rapidly-developing economies such as India and China).

Free market critics, such as the economists Joseph Stiglitz and Ha-Joon Chang, argue that globalisation has perpetuated inequality in the world rather than reducing it.

In 2007, the International Monetary Fund suggested that inequality levels may have increased due to the introduction of new technology and foreign investment in developing countries.

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