Despite their divergent overall verdicts, critics and supporters of economic globalization each typically affirm that a defensible global economic order would be one under which the living standards of less advantaged persons throughout the world were significantly higher than they currently are. The goal of Globalization and Egalitarian Redistribution is to provide detailed empirical assessment of the ways that economic globalization—understood as “the reduced impediments to the movement of goods, people, information, and finance across national boundaries” (p. 2)—can both enable and thwart the efforts of states to adopt “egalitarian” policies and institutional arrangements that aim to enhance the living standards of less advantaged persons, whether by redistributing income to them or by insuring them in various ways against economic risks.
Several of the book's contributors suggest that less advantaged persons have good reason to fear that economic globalization may reduce the likelihood that their governments will adopt egalitarian policies. Layna Mosley, for example, argues that “because of capital market openness, investors can easily punish governments, and their grounds for punishment include both macro- and supply-side policies, as well as political outcomes” (p. 90). For example, financial market responses to the threat of the election of the left-leaning Luiz Inácio Lula da Silva as president of Brazil led to a devaluation of Brazilian currency, a downgrading of Brazil's sovereign debt bond ratings, and an increase in the spread on interest rates between U.S. and Brazilian bonds. Once elected, Lula did much to assuage the worries of investors, but did not pursue the strongly egalitarian political agenda many of his supporters had expected. Examples such as this suggest that societies most desperately in need of effective egalitarian policies may be particularly unlikely to implement them.
Though the mechanism described above is less constraining to governments of industrialized countries that adopt egalitarian policies, Minsik Choi argues that the impact of globalization on the bargaining relationship between workers and employers tends to work to the disadvantage of workers (especially unskilled and less mobile workers) in developed and developing countries alike. Enhanced capital mobility enables firms that are engaging with workers' demands to threaten to move production abroad or to outsource, thereby making workers more willing to accede to the demands of their employers.
Although Choi does not mention it, such a “threat affect” may also affect governments. Poorer countries instituting minimum wages, occupational safety and health requirements, and collective bargaining rights, for example, may reasonably fear that they will be effectively punished for doing so, as the consequent rise in labor costs causes a diversion of trade and investment toward other countries. As a result, workers may be harmed rather than helped by such seemingly egalitarian policies. Samuel Bowles's and Ugo Pagano's chapter suggests that economic globalization is unlikely to improve significantly the living standards of the mass of people in developed and developing countries alike, not only because this process is unaccompanied by international forms of social protection, but also because it undermines the capacities of states to offer more traditional forms of social protection. “The increased mobility of capital and other factors of production owned by the relatively well off has provided a rationale for shifting taxation away from these factors, thus raising the cost of policies designed to redistribute income within the nation state” (p. 293). They suggest, moreover, that globalization may engender the rapid growth of an economically and politically influential class of “cosmopolitans”—those with mobile intellectual skills—who have little interest in sustaining traditional social protection at the national level, the main beneficiaries of which would be “provincials” whose skills are less mobile and more specific to national economies (pp. 294, 302).
Stuart Soroka, Keith Banting, and Richard Johnston analyze international migration, which seems to be negatively correlated with the growth of the size of the welfare state. The evidence suggests, they contend, that societies made more diverse through immigration may be unable to support the strong sense of common identity, solidarity, and trust necessary to support social welfare and other egalitarian policies. Other chapters in this volume, however, are somewhat more optimistic about the prospects for egalitarian policy in a globalizing world. Carles Boix, for example, suggests that countries that open themselves to trade will be more likely to adopt polices that redistribute income toward sectors that are hurt by changes in world markets. Those supporting free trade will only be politically successful in implementing their preferred policies, Boix claims, if they “commit, in a credible manner, to a compensation package” (p. 213).
Bowles, in a second piece, argues that while globalization may indeed make it more difficult for national governments in the short run to adopt egalitarian polices that negatively affect the relative prices of mobile goods and factors of production, in the longer term it should open up more redistributive possibilities. Social democratic reforms that enhance the influence of trade unions in collective bargaining or eliminate sharp wage disparities, for example, may increase productivity or improve the labor discipline environment such that monitoring costs are reduced (p. 136).
Such social democratic reforms are often dismissed as infeasible for less developed countries. Yet Karl Ove Moene's and Michael Wallerstein's fascinating chapter on the emergence of social democracy in the Nordic countries suggests that egalitarian polices such as wage compression through highly centralized wage-setting institutions could hold considerable promise for countries such as Brazil, India, or South Africa. Ove Moene and Wallerstein point out that the Nordic social democratic governments in the 1930s inherited countries burdened with high inequality, intense industrial conflict between employers and unions, and high unemployment—conditions not unlike Brazil, India, and South Africa—and that basic agreements between national associations of unions and employers sharply reduced industrial conflict, significantly increased efficiency (most likely through higher productivity), and sharply reduced inequality (pp. 155, 162). The authors conclude that the free flow of capital and goods should make such egalitarian policies more rather than less economically feasible. They concede, however, that the political feasibility of such reforms in large developing countries is more difficult to gauge.
Pranab Bardhan's thoughtful chapter suggests that the overarching question of globalization's effect on the likelihood of egalitarian outcomes or policies may be ill-conceived, because speaking of the effects of globalization on the poor as such is misleading. Whether or not poor unskilled workers lose from trade liberalization, for example, will depend a great deal on whether appropriate policies of compensating displaced workers are adopted at the national level (p. 19) and even whether macroeconomic stabilization policies prescribed by the International Monetary Fund harm the poor may depend on whether national governments cut public expenditures for the poor or, instead, address inefficiencies in the provision of public services or cut expenditures that largely benefit the rich or small but influential interest groups (pp. 20–21).
The collection might have done more to underscore that economic globalization itself can take many forms, some of which may be more friendly to the interests of the less advantaged than others. That is, the question is not simply whether and how much globalization will help or hinder egalitarian reforms at the national level, but what kinds of institutional frameworks for globalization may do so. Consider, for example, the fear (voiced in many chapters) that egalitarian polices may raise the costs of production, leading countries that implement them to become less attractive locations for export-oriented production. It is certainly true that under present international trade rules, companies can profit by choosing to operate in a country in which labor standards are lax. However, if global trading rules offered such countries additional access to export markets in rich countries or financial assistance, then the cost-raising effects of worker-friendly reforms would be neutralized. Economic globalization pursuant to such international trade rules would reduce the competition between poorer countries to attract trade and investment by lowering wages or disregarding social protections for workers and thus arguably raise the living standards of the less advantaged. Promoting the living standards of less advantaged persons throughout the world will thus depend, it seems, on developing complementary institutional arrangements at the global and national levels.
