Current Debates on Globalization

Globalization has been seen in recent years as a channel to improve well-being through growth and poverty and inequality reduction in less developed countries (LDC). However, the current global economic crisis arises the questions about whether openness has produced the expected results and whether population is safe of risks after the reforms of last decade. In chapter III of CISS’ Report 2007 this issues are discussed. Following paragraphs are a summary of main findings of the chapter:

1. There are adjustment costs in terms of wages and to a lesser extent in employment in LDC.There are mixed evidence of the effect of FDI in wages and employment. An association between trade exposure and informality has not been found.

2. The findings on the labor market suggest that labor is not perfectly mobile across sectors--from contracting sectors to expanding ones--, which implies there are costs to achieve the gains from comparative advantage.

3. Public policies affect the outcome of globalization in labor markets and the poor--either the ones that allow people or firms to take advantage of globalization ant the policies to attenuate the adverse effects faced by some groups.

4. Regarding poverty there are four main findings: i) within a country, globalization in general lowers poverty and helps populations to better face financial crises; ii) there are losers from globalization in particular sectors and in individuals low qualified; iii) the negative effect in the income side may be attenuated, and may even be reversed, when the lower prices, higher quality and more variety of products associated to openness are taken into account in the consumption side; and iv) there is not a consensus on the association between globalization and world poverty (and inequality).

5. The impact of globalization on health takes place through two channels. An indirect channel, via its impact on income and poverty and, a direct channel, via the transmission of health related knowledge and health technology. There is evidence that this last channel has helped to reduce infant mortality rates and improve life expectancy, for example.

6. Globalization has been associated to lower labor standards, specifically via outsourcing and offshoring to countries with lower labor standards and because of the more common tele-work. Even though, corporate practices, labor, international agreements and social security regulation have not been adapted to improve labor standards for this new reality.

7. Financial crises, even is less common now, are very costly, especially to the poor (because they are the uninsured and the ones with lower skills).

8. There is evidence that globalization is associated to productivity but as of today it is not clear whether this productivity gains are translated into economic growth and welfare.

9. Recent reforms in social security programs in LAC have had a goal of financial strengthening and consistency, but did not in general addressed the challenges of a dynamic labor market.

10. All international organizations claim for some changes in the globalization process aimed at supporting poorer countries and persons that are not being benefited from the globalization process or that are bearing the adjustments cost. In particular policies in the arena of social protection are needed.