!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Strict//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-strict.dtd"> Streamline Training & Documentation: Business Acumen XVI: Globalization and Equity

Friday, May 25, 2007

Business Acumen XVI: Globalization and Equity

As a follow-up to an earlier post dealing with the impact of globalization on productivity, I'd like to highlight equity considerations.

The main equity issue is the impact globalization is having on countries' income distributions. Three Wall Street Journal reporters, Bob Davis, John Lyons, and Andrew Batson, published a report yesterday that offers insight based on both statistical data and field investigation.

Income distribution data indicate that
[a]s trade, foreign investment and technology have spread, the gap between economic haves and have-nots has frequently widened, not only in wealthy countries like the U.S. but in poorer ones like Mexico, Argentina, India and China as well.
To answer the question why, Davis, Lyons and Batson turn to economists, who point to the central role played by job skills and education. Those with low skills have, in many cases, seen their wages rise, but not as fast as the wages of skilled workers.1

The social implications are important. If globalization creates a sizeable group of losers alongside the winners, the efficiency arguments in favor of free trade and free movement of capital lose some of their cogency. There are plenty of people willing to say, or at least think, "tough luck" when the equity issue is raised, but this verges on social darwinism, which is not a particularly defensible social policy.

Better to focus sincere attention on how to share the fruits of economic growth more equally, while directing education and training resources toward the low-skilled and their children.

1 The article is accompanied by several statistical charts, which you can access here.