Tuesday, May 22, 2007

Global Trade and Free Action

In an earlier post, “Maintaining and Enhancing Free Action,” I argued that increasing individual freedom in general in any significant way required production of greater wealth. I further argued that this was a necessary but not sufficient condition for enhanced quality of life and real freedom for any significant number of people in global terms.

Much of Sub-Saharan Africa provides a case in point. Most of the African continent has been quite marginal to global trade, and its population, cut off from trade and much economic development, has suffered for it. (I’d argue that most of Africa has been thoroughly enough incorporated into global trade to be dependent on it, while simultaneously not integrated enough or in a way to benefit much from it.) One of the lead articles in the April 28 issue of The Economist, “Will Africa ever get it right?” (pp. 14 – 15), puts it bluntly:

“The post-colonial continent has hitherto been a colossal flop. The killer comparison is with Asia, where many countries suffered from the same colonial humiliations and rapacity that independent Africa customarily blamed for its early failings. According to the World Bank, real income per head in the 48 countries of sub-Saharan Africa between 1960 and 2005 rose on average by 25%, while it leapt 34 times faster in East Asia; countries like South Korea and Malaysia were once as poor as Ghana and Kenya.”

I’d question whether many places in Asia suffered the same degree of “colonial humiliations and rapacity” as much of Sub-Saharan Africa, and I’d point out that trade and production of wealth in Africa was seriously set back by the continent’s role as major site for numerous Cold War proxy wars. (Parts of Asia experienced that, too, most obviously Korea and Vietnam – though in both of those cases, armed struggle ended long ago, whereas much of Africa has been beset by lingering, continuous, low-intensity armed conflict.) Still, this is to debate the cause of Africa’s economic marginality, and not its effect, which is clear: endemic grinding poverty.

Still, recently things are looking up for much of the continent. The same Economist article points out that the economies of many Sub-Saharan nations (and not just oil-exporting nations) are growing at annual rates of 6 – 7 % for the past several years. This has been accomplished via changes that have been conducive to trade and investment, such as more openness to private enterprise, moves toward democratization, freer markets, etc. There are many obstacles in the way of sustained development (continued political tension and violence in some countries, the recent election scandal in Nigeria, malaria and AIDS, recent indications that Global Warming may affect Africa especially severely, etc.), and I’m under no illusion that the wealth produced through increased trade will be distributed in equitable ways, but even small increases in the wealth of average persons could significantly alleviate the worst miseries of poverty in the continent.

In a recent article in The Washington Post, “Free Trade’s Great, But Offshoring Rattles Me,” economist Alan S. Blinder makes the case for how globalization, free trade, et al., will improve conditions for people around the world, but with the big caveat that it will not make things better for everyone. Blinder argues that two things are driving globalization, and associated phenomena such as offshoring or outsourcing. The first is technological innovation, especially in information and communication technology, the second being the more systematic entry of huge numbers of workers into the world economy in countries such as China, India, and Eastern Europe, workers willing and able to perform information based or manufacturing jobs more cheaply that workers in more developed nations.

Blinder writes:

“Looking at these two historic forces from the perspective of the world as a whole, one can only get a warm feeling. Improvements in technology will raise living standards, just as they have since the dawn of the Industrial Revolution. And the availability of millions of new electronically deliverable service jobs in, say, India and China will help alleviate poverty on a mass scale. Offshoring will also reduce costs and boost productivity in the United States. So repeat after me: Globalization is good for the world. Which is where economists usually stop.”

Blinder doesn’t stop there. He also points out that globalization will have ill effects on some. Globalization and freer trade may be related to greater total production of wealth, but it also changes the distribution of wealth. In some ways this is good, as with the degree of poverty alleviation that increased numbers of jobs brings to places like India or China. For workers in the U.S. or Western Europe whose jobs are offshored, their share of wealth clearly drops, and as Blinder writes, this will potentially affect large numbers of people. “In some recent research, I estimated that 30 million to 40 million U.S. jobs are potentially offshorable. These include scientists, mathematicians, and editors on the high end and telephone operators, clerks and typists on the low end.”

Blinder argues that some reforms could be implemented to ease the transition, such as better economic safety nets for displaced workers, and changes to education to emphasize training for flexibility and for the sorts of jobs least likely to be offshored, but he is ultimately gloomy about the prospects of such reforms being implemented and warns of a rough transition for many Americans.

Globalization is not a panacea for people in China or India or Sub-Saharan Africa either. The jobs being offshored to such countries are generally low-wage (or else they wouldn’t be offshored there), and sometimes associated with dangerous working conditions. In an earlier post, “A Different Globalization for Labor,” I wrote:

“Another common assumption is that such globalization processes are also bad for labor in the developing nation contexts that manufacturing and service jobs are being outsourced to, e.g. promoting sweat shop labor conditions. Robert J. Flanagan has recently published an important book on this topic, Globalization and Labor Conditions (Oxford University Press, 2006). Flanagan closely examines the available data on labor conditions around the world. He is clearly sympathetic to critiques of globalization, but comes to the conclusion that overall, globalization has led to improved conditions for labor in much of the world. He in no way implies that globalization processes make things wonderful for workers in developing countries. As he documents, there are things like sweatshop labor associated with globalization, but there are more overall jobs and fewer jobs with the worst labor conditions in more open developing economies – hardly what I’d consider a ringing endorsement, but still having more crappy jobs available might be better than having fewer or no crappy jobs available, even while still not good.”

What do I conclude from all this? Globalization and more trade (and the greater production of wealth associated with it) has its problems – and major problems at that for workers in all countries. At the same time, globalization is here to stay, and to the extent that production of greater wealth is a precondition for increasing individual human freedom in general, there are positive developments associated with globalization as well. As Blinder points out, economists and other free trade apostles often emphasize what is positive or what they see as positive about globalization and ignore the rest. Leftists of a variety of stripes just as often emphasize what is negative or what they see as negative and ignore the rest. The goal, as I see it, should be an emphasis on more equitable distribution of wealth (which would entail things like better social safety networks, better job training and re-training programs, better regulation of work conditions globally, emphasis on freedom of speech and assembly so that workers could better organize and act collectively, emphasis on often neglected aspects of “free” trade – freer movement of labor and reduced agricultural subsidization in rich countries, etc.) within a system of global trade and development which is sustainable (which would require positive work on global warming and major diseases, such as malaria and AIDS).

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