By Bernard Hickey
A question is beginning to nag at the academics, the politicians and ultimately the voters who decide our leaders and laws. Does globalisation actually work to make most people better off most of the time?
Until recently it was mostly the more left-wing fringes of academia and political life that asked this question and didn't like the answer. The events of the last four years has shoved this debate firmly into the mainstream and now even the most conservative of economists and academics are questioning the drive to globalise everything as completely and as quickly as possible.
These doubts are relatively new.
The globalisation of companies, of factories and of money markets appeared for almost all of the last 30 years to be the ultimate proof that unfettered capitalism was the best way to run our economies and lives. Francis Fukuyama even declared the 'End of History' as communism's walls came down and China began opening up its economy.
It not only seemed the most efficient way to do things, but also seemed the fairest way to do things. People in poverty in third world countries could get jobs in factories and get richer. People in rich countries could buy amazing gadgets and other knick knacks at ever cheaper prices, while not having to do the dirty, labour intensive and boring work needed to produce these things.
Hundreds of millions of Chinese and Indians migrated from grinding poverty in rural areas to often highly skilled and much higher wage jobs in the factories that churned out the flat screen televisions, iPads, phones, plastic toys, car parts and myriad bits and pieces the West loved to consume at an ever greater rate. 'They' got jobs and higher incomes and 'we' got cheap stuff and new easier jobs. There was even the potential that an emerging and enormous middle class in the BRICs (Brazil, Russia, India and India) would get so rich they started buying the highest quality goods and services from an even richer West.
It seemed the perfect solution. Until it wasn't.
Four years on from the Global Financial Crisis and we're now in a second round of a global debt crisis with economies in the West slipping into Zombie-like states of perma-recession with high unemployment, falling real wages and intense social pressures. High paid manufacturing jobs that underpinned healthy middle classes have been gutted in the drive for globalisation and replaced by often insecure and lowly-paid jobs in fast-food joints, hospitals, shops and hotels.
The 'creative destruction' of jobs was supposed to lead to higher wage jobs in high tech, services and tourism. Instead, the wages are lower, the non-wage benefits are fewer and the extra value created in the shift of manufacturing jobs to Asia has been captured in the form of lower prices, higher profits, higher bonuses for managers and higher dividends for shareholders.
Now a debate is growing after the publication of a research paper by mainstream economists in the United States with the dry title:"The China Syndrome: Local Labor Market Effects of Import Competition in the United States." It shows a quarter of America's manufacturing job losses are due to the effects of cheap labour in China and that the shift in jobs has signficantly increased government spending on unemployment benefits, healthcare costs and retraining costs.
And the debate is starting in Australia too with reports of 7,000 jobs likely to be lost in banking this year. The issue was crystallised in Brisbane last month when Westpac employees protested after they were sacked and then asked to retrain their Indian replacements.
This next wave of oursourcing of high paid services jobs in IT, healthcare and banking to India and China will intensify the debate.
Globalisation makes things cheap and helps lift millions out of poverty, but the costs are borne largely by the developed world's middle classes. It is easy to shift capital and goods and money across borders.
It is much harder to shift people, to expect them to uproot their families and history for the sake of an economic model that delivers many of the benefits to the very rich and the poor somewhere else.
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