Winners and Losers in Globalization, by Guillermo de la Dehesa. Malden, MA: Blackwell Publishing. 2006. Cloth, ISBN: 1405133621, $29.95. 235 pages.
Very few economic topics in recent times have aroused such intensepassions as the economic globalization debate. Anti-globalization protesters have been descending on every major meeting of the World Bank, the World Trade Organization (WTO) and the International Monetary Fund (IMF) since 1999 demanding a halt to the globalization process, and they have added the meetings of the World Economic Forum in Davosto their itinerary. They claim, in addition to other things, that globalization is hurting the poor, destroying indigenous businesses, lowering wages and labor standards and harming the environment. Pro-globalization supporters, primarily academics, have been arguing for more not less globalization on the grounds it promotes economic growth, employment, efficiency, world convergence and economic welfare.
In his book, Winners and Losers in Globalization, Guillermo de la Dehesa states that he will "present the reader with a technical, objective and dispassionate analysis of the globalization debate, detailing its economic effects on individuals, businesses, governments and nation-states" (p. ix). Despite the claim of impartiality, the author leaves no doubt that the scales in which he evaluated the globalization debate were weighted on the descending side against the opponents of globalization. Contrary to what some ill-informed pundits may tellus, the author says, the main losers are not the "victims of globalization" but the "victims of the lack of globalization" (p. xi). Thus,he sets himself squarely in the camp of the pro-globalization supporters. He will undoubtedly argue that those Latin American countries as well as some of the more developed countries that have of late taken policies hostile to foreign direct investment are victimizing theirown citizens and that the collapse of the Doha trade talks will be harmful to global economic welfare.
De la Dehesa defines globalization as "a dynamic process of liberalization, openness, and international integration across a wide rangeof markets, from labor to goods and from services to capital and technology" (p. 1), but as in any process of economic change there are winners and losers. He contends that low-skilled individuals in the more developed countries are the group that stands to lose most from globalization. While the demand for the services of knowledge workers is increasing, the demand for the services of low-skilled workers is falling, thus increasing the likelihood that the latter's share of national income will decline. In addition, as capital has become more and more mobile, firms have been relocating the labor-intensive segments of their production processes offshore where wages are much lower than wages onshore. Trade agreements between the United States and some less developed countries are also encouraging U.S. firms to move some of their operations offshore. Furthermore, the large numbers of low-skilled immigrants, legal and illegal, who are willing to work for wages lower than those paid to low-skilled workers in the more developed countries will further disadvantage low-skilled workers in the more developed countries. Low-skilled workers in less developed countries, however, stand to gain from globalization as foreign firms relocate operations offshore.
Although he is correct that globalization is putting low-skilled workers in the more developed countries at a disadvantage, the author seems to have underestimated the adverse impact that it also is having on knowledge workers in these countries. Firms from the more developed countries are increasingly using knowledge skills in other countries--India and China readily come to mind--to produce a variety of services. Engineering, radiology, Web site design, accounting, chip design and computer software development are some of the many services that firms from the more developed countries are outsourcing. Moreover, many countries are importing knowledge workers on the grounds that a shortage exists. Just as it is putting downward pressure on the wages of low-skilled workers in the more developed countries, globalization is also putting downward pressure on the salaries of knowledge workers in these countries.
Multinational corporations are playing an important role in the growth of economic globalization. They influence the volume of international trade and are primarily responsible for the rapid increase in foreign direct investment. The author believes that globalization willheighten international competition, and more and more firms will locate various segments of their production processes abroad to remain competitive. Thus, increased globalization will lead to the growth of multinational corporations. He also believes that the multinational corporations will become bigger and that mergers and acquisitions willincrease. Although he is not sure how big firms can grow, the authoris sure that their growth will not result in global monopolies because "national authorities exist in every country to ensure that competition is not infringed" (p. 83).
The author argues that globalization allows multinational corporations to evade taxes by using offshore tax havens and transfer pricing. Equally important, it allows multinational corporations to move operations quickly from countries whose tax rates are not internationally competitive. The sudden departure of a multinational corporation from a less developed country can have a very protracted effect on unemployment since in many less developed countries the opportunity cost of labor may be zero or close to zero. Globalization has forced more and more countries to collaborate in fighting drug trafficking and terrorism. Countries have realized that some matters are better dealt with at the supranational level than at the national level. For example, they have ceded authority to the World Trade Organization to settle international trade disputes. The author asserts that globalizationhas led some ethnic groups within some countries to demand their right to self-determination and this is further undermining nation-states (p. 89). He cautions, however, that the nation-state will not disappear, but that globalization "will lead to important changes in the way it functions and is understood" (p. 90).
As suggested, globalization is adversely affecting the ability of governments to implement economic policies. Given the global integration of financial markets, it is extremely difficult for governments to pursue an independent monetary policy and exchange rate policies within a purely national context. When preparing budgets, governments must consider the fiscal policies of other countries.
De la Dehesa is not completely treading on new ground. Former Secretary of the Treasury and Chairman and CEO of Unysis, W. Michael Blumenthal (1988) warned that technological change was creating a global economy in which the power of the nation-sate was diminishing, governments were losing their ability to pursue an independent monetary policy and many problems, once considered national in scope, would require international solutions. The author has not convincingly shown that the main losers from globalization will be those whose economies suffer from a lack of globalization. It will be difficult for the people of the Caribbean island of Dominica, where the vast majority of thepopulation depend on banana production for their livelihood, to accept the argument that their poverty is due to a lack of globalization.They will argue that the recent ruling of the WTO that the European Union (EU) banana regime is illegal and must be dismantled has ruinedthe livelihood of many Dominicans and that their poverty is due to too much, rather than insufficient, globalization.
His approach to the globalization debate is grounded in neoclassical economic theory, with which he shows great familiarity. It should therefore come as no surprise that he is very dismissive of anti-globalization protestors and devotes little time to their arguments. Whatever one may think of anti-globalization protestors, there is little doubt that they are correct when they say that globalization is adversely affecting some indigenous industries in many less developed countries. I have mentioned that increased globalization has adversely affected the Dominican banana industry. A Nobel Laureate in economics, Joseph E. Stiglitz, who supports globalization, suggested that it might be harmful to indigenous industry in less developed countries whenhe said that "opening up the Jamaican milk industry to U.S. imports may have hurt local dairy farmers" (2002, p. 5). The author's thesis that "the persistence of poverty and inequality [between rich and poor] seems to be due to insufficient globalization rather than too much" (p. 117) is highly debatable. Most economists will say that economic development is too complex to be reduced to a single variable or a few variables for that matter. His excessive reliance on the tools ofneoclassical economic theory in his analysis of the globalization debate results in his failure to mention the immense contribution to our understanding of poverty in less developed countries by someone such as Gunnar Myrdal ([1957] 1971). Myrdal was one the first in the post-World War II era to argue that globalization would worsen international economic inequalities and questioned the usefulness of the wholesale application of neoclassical economic concepts to the developmentproblems confronting less developed countries. De la Dehesa approvingly cites authors who claim that globalization and the Industrial Revolution resulted in the transformation of the British economy in the nineteenth century while India, which did not experience an industrial revolution, stagnated. He writes that "India went from being a net exporter of manufactured goods to a net importer of primary products.In the seventeenth century the Indian textile industry was the worldleader, in quality, volume of production, and volume of exports, butin the nineteenth century more than 70 percent of the textiles consumed in India were imported, principally from Great Britain" (Cited, p. 29). In his opinion, the social and economic conditions in which India found itself in the nineteenth century cannot be blamed on colonialism, for colonialism played no part in the industrial development of Britain nor did it negatively impact the colonies.
There is, however, another version of the history of colonialism. Eric Williams ([1944] 1966) convincingly argued that colonialism contributed greatly to the British Industrial Revolution. Barbara L. Solow (1987, pp. 74-75) said "there is no reason to dispute Deane and Cole's conclusion that 'the existence of exploitable markets at the end of the eighteenth and beginning of the nineteenth centuries was probably crucial in initiating the process of [British] industrialization and the growth of real incomes which was associated with it.'" And, Amiya Kumar Bagchi (1982, p. 80) told us "the import of Indian cotton goods into England was restricted by duties and summary regulations. Most of the imports of such goods into Britain were re-exported. Moredamagingly, Indian cotton goods produced in India had to pay considerably higher duties than cotton goods imported from England." It seems that colonialism has contributed to international economic inequalities.
De la Dehesa has written an interesting book that will stimulate further discussion on globalization. Despite his claim that his analysis of the globalization debate will be technical, the book is very accessible to professionals and laymen alike. Whether you are pro- or anti-globalization, you should read de la Dehesa's book.
References
Bagchi, Amiya Kumar. The Political Economy of Underdevelopment. Cambridge: Cambridge University Press, 1982.
Blumenthal, W. Michael. "The World Economy and Technological Change." Foreign Affairs 66 3 (1988): 529-550.
Myrdal, Gunnar. Economic Theory and Underdeveloped Regions. [1957]. Reprint, New York: Harper Torchbooks, 1971.
Solow, Barbara L. "Capitalism and Slavery in the Exceedingly Long Run." In British Capitalism and Caribbean Slavery: The Legacy of EricWilliams, edited by Barbara L. Solow and Stanley L. Engerman, 51-77.Cambridge: Cambridge University Press, 1987.
Stiglitz, Joseph E. Globalization And Its Discontents. New York: W.W. Norton, 2002.
Williams Eric. Capitalism and Slavery. [1944]. Reprint, New York: Capricorn Books, 1966.
Winston H. Griffith
Bucknell UniversityJournal of Economic Issues
