Foreign Aid & Civil Society

Globalization and the Race to the Bottom

By Dweep Chanana ⋅ April 28, 2006 ⋅  Email this post ⋅ Post a comment

Today I bring forth two interesting, long, articles, each with the same simple lesson.

1. Scientific American: Does Globalization Help or Hurt the Poor, by Pranab Bardhan
2. Reason: Why Poor Countries are Poor, by Tim Harford

Pranab Bardhan’s discussion reminds me of debates in school on the foretold ‘race to the bottom’. I fought vehemently against labor and environmental standards, because I never believed in it, and because those ‘exploited’ workers are so much better of being exploited, than not.

In 2001…a survey of 1,322 women workers in Dhaka…discovered that the average monthly income of workers in garment-export factories was 86 percent above that of other wage workers living in the same slum neighborhoods.

Who then is an Oxfam, Greenpeace, or Fair Labor Organization executive, sitting in his air conditioned office in Washington, DC or London, to criticize the free choice of those workers, and ask companies to pull out? And what options does s/he provide?

In 1993, anticipating a U.S. ban on imports of products made using child labor, the garment industry in Bangladesh dismissed an estimated 50,000 children. UNICEF and local aid groups investigated what happened to them. About 10,000 children went back to school, but the rest ended up in much inferior occupations, including stone breaking and child prostitution.

The second article is an even more depressing indictment of Cameroon. He chronicles the poverty, and the endemic corruption that has seen no new roads built in 19 years in the ‘armpit of Africa’.

Anyway, I digress. The point of the first article is simple. Poverty exists not because of globalization, nor despite it. It exists independent of it. And the second article proves that point.

The roots of poverty in Africa lie not in what someone does in the USA. They lie in what happens in Africa itself. Globalization does not create the poor. However, where the environment is correct, it makes some better off. It will make others worse off, and it will be for local policies and institutions to watch out for them.