Do emerging markets and developing nations find economic strength at the expense of the developed nations? Here are diverging views on labor and globalization.

The history of globalization of markets explained the depth of the situation. The new Global Economy is generally considered in either positive or negative terms. Corporations view it as an opportunity to lower costs while widening markets. Labor, on the other hand, views it as exploitation of developing nations and reducing labor standards on a global scale. Both arguments have some degree of validity and we will explore each.

Arguments

Proponents of Globalization make four basic arguments:

1. The developed nation’s corporations can produce cheaper good and services overseas..
2. The developing nations can provide sustainable employment for its citizens.
3. Globalization encourages productivity and product diversity.
4. Corporations are free to expand their markets while simultaneously providing growth for their host nation.

Opponents also center around four central theses:

1. Outsourcing reduces internal labor strength, ultimately reducing purchasing power of a nation’s citizenry.
2. Developing nations do not equally apply international labor standards to uniformly benefit its citizenry.
3. National requirements differ between nations.
4. Corporations are free to evade civil and national responsibilities to the detriment of all nations.

Proponents

A US Department of Commerce report in November 2005 summed up the corporate argument well. “A major problem for the industry is…there are more places and more choices for [US] consumers wanting to shop….Overall import[s]…are manufactured at lower costs since labor costs…in countries like China, Pakistan and Indonesia are significantly lower than labor in the US….”

According to the United Nations Conference on Tradeand development the average GDP of developing nations has increased 52% over the last 30 years: Western GDP increased as well.

Nations as diverse as Russia, India and Brazil have made great strides from third world status towards developed nation status. Average GDP in the 6 largest developing nations has increased 8% annually over the last 5 years. UNCTAD reported “sustained high growth in China, India…seems to have engendered synergy among developing countries so that growth in this group is more endogenous.”

Opponents

A fundamental mistake made by proponent economist is the labor flow from “old” industries is easily made into “new” industries. “Evalueserve…estimates the demand supply gap in the labor market will reach 5.6 million jobs by 2010 and the industries that will face this shortfall include IT…healthcare…biotechnology and nanotechnology.” The implication is that laborers will switch to these new industries - steel workers become nanotechnologists.

Furthermore, the losses of high paying jobs impact worker’s children. “…research finds that…perhaps as much as 60 percent of parents' advantage in income is passed along to their children.” * "We don't have a worker shortage in this country, but we do have a skills shortage," Secretary of Labor Alexis M. Herman said in a 2000 US Department of Labor press release. Yet, those “high-tech jobs [are] often filled by foreign workers” artificially lowering the demand curve.

Foreign nations exploit their labor. It is suggested that Western companies ignore practices in other nations. Slavery and indentured servitude in India’s garment industry, child exploitation in Indonesia and Latin America and substandard material in China have recently been exposed.

GDP has definitely increased in the developed nations as a result of globalization of the workforce; however many Western nations have stagnated economic mobility as a result. David Wessel of the Wall Street Journal wrote on May 13 2005,”Many Americans believe their country remains a land of unbounded opportunity…. Despite the widespread belief…economists and sociologists say that in recent decades the typical child starting out in poverty in continental Europe…has had a better chance at prosperity.”

As the gap widens the consumer base is reduced. “We are increasingly being bifurcated on an economic basis," said Paul Ong, UCLA public affairs professor. "It has taken a big chunk out of the middle." A Brookings Institute** study shows that from 1970 to 2000 middle class neighborhoods have shrunk from 58% to 41% in the country.

In order for globalization to work there must be a large consumer base requiring good paying jobs. Which nations have that base is another question.

* David Wessel WSJ report

** Washington Post article

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