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Globalization and Decent Work

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Globalization and Decent Work Globalization and Decent Work Byung You Cheon(Korea Labor Institute) 1. Introduction The issue of globalization, which emerged in the late 20th century, is still at the forefront of many debates. Various definitions of globalization can be given, depending on the angle and standpoint from which the phenomenon is viewed. The most simple, economic and technical definition of globalization can be given as the process of expanding mobility in trade, production capital, financial capital, technology and human resources across national borders. Thus, globalization refers to the movement towards an integrated global economy through increased trade and mobility of elements. Under globalization, international trade expands at a greater rate than domestic production.1 Globalization, however, does not merely mean the increase of trade across national borders. Globalization is differentiated from the simple concept of internationalization in that not only does the volume of trade between countries increase, but the very characteristics of trade and exchange take on a global meaning. An international economy means that national economies compete in a global market, whereas a global economy means that the relationships and mechanisms of trade take on a global characteristic. For instance, multinational enterprises operate production, sales and services on a global level, adjusting to the changing trends of the global economy. Currently, about 65,000 MNEs and their 850,000 foreign affiliates take part in a global production system. The main factor that determines the characteristics of globalization is technological changes based on ICT. This is the differentiating factor between the globalization that began in the late 20th century and the globalization of the late 19th to early 20th century. If the globalization of the past was achieved through a revolution in transportation devices such as railways, steam boats and cars, the globalization of the late 20th century 1 Trade imports and exports in the % of GDP increased rapidly from 37% in 1986 to 57% in 2001, and FDI inflows in the % of GDP increased at an astounding rate in comparison to past performances, from 0.5% in 1986 to 2.2% in 2001(World Development Indicators 2003, online version). 1 is being advanced through a revolution in telecommunications technology, such as IT. The IT revolution is changing the characteristics of exchange between countries. Companies are no longer merely transferring their manufacturing facilities to low-cost regions, but are segmenting their manufacturing processes to be positioned in various locations around the globe, and integrating the segmented production chain through IT technology. Various financial transactions are also being integrated around the world through telecommunications technology. Such global activities are not only limited to businesses; governments and individuals also have more resources enabling them to think and act on a global scale. Thus, technology is providing cost-effective ways to achieve global communication, enhancing the feasibility of economic transaction across the globe by reducing the cost of transferring information, people, goods and capital across national borders, while facilitating mobility and transactions on a global level. While changes in technology promote the globalization process, the globalization also expands markets, which in turn promote and expand technological revolution. Therefore, globalization and technology should be understood as integrated concepts. Globalization and technological change can be seen as two sides of the same phenomenon. In particular, from the perspective of developing countries, it is difficult to separate technology from the effects of trade opening. Selling goods and services in a global market requires the use of new technologies, and this technology is incorporated into the capital goods when imported by advanced countries. It is difficult to separate the effect of expanded market opening and international mobility of capital from the effect of implementing new technologies. Therefore, it is important to assess the labor market impact of the overall globalization package, rather than to simply decompose the impacts through trade and technology. In addition to advanced technology, policy plans to reduce national barriers to international transactions are another driving force of globalization. As Chang(2004) pointed out, while technology determines the limit of globalization, the real range and extent of globalization are determined by the policy decisions of individual countries and the global community. These policy decisions are influenced by globalization as well. Liberalization of international trade, expansion of FDI and inter-border transfer of financial capital bring the pressure of global competition into individual countries, and add pressure to internal reform and restructuring. From a broad viewpoint, globalization encompasses the expansion of international exchange and the ensuing social and political changes from a socio-political and cultural perspective as well as an economic perspective. Thus, globalization can be seen as a comprehensive concept that includes changes in ideological landscape such as neo- 2 liberalism, as well as the restructuring that accompanies such changes. Because globalization pressures national governments to carry out internal reform in order to acquire a more competitive position in the global market, promoting national competition and privatizing state owned enterprises can also be seen as a part of globalization. Therefore, globalization should be understood as a 'package plan' that includes not only expansion of trade and international transfer of capital and labor, but also technological change and the ensuing restructuring and reform processes. To respond to globalization as understood in this broad definition, the ILO has proposed an agenda called 'decent work.' The concept of 'decent work' as proposed by the ILO implies a meaning as broad as the understanding and definition of globalization itself. The ILO has posed a question asking “Does the advancement of globalization mean advancement in the work and life of individuals?" and is attempting to answer this question within the concept of 'decent work.' Advocates of globalization assert that the growth-enhancing effects of market liberalization will bring about convergence in the development stages of individual nations, and enhance employment and welfare in all countries of the world. They believe that globalization is a source of wealth and welfare, and that it is a viable and sustainable process that must be protected from uninformed and ill-intentioned assertions that state otherwise. They argue that the benefits of free trade and free capital flows outweigh the hazards, and that only through export and market opening can developing countries achieve growth and escape from poverty. On the other hand, opponents of globalization assert that globalization will only undermine the labor sector and worsen labor conditions. Rather than a source of advancement, they see globalization as a menace to humanity that systematically destroys domestic factories and workers for the benefits of a few select multinational companies. Opponents of globalization tend to overlook the potential benefits and gains of globalization. The expansion of trade throughout the world does promote growth and create new opportunities for more people. Nevertheless, the process of globalization is both worrisome and stimulating. While globalization does provide new opportunities and greatly enhances income and employment for some nations and individuals, it does also bring forth issues associated with the broader definition of globalization, such as unemployment, inequality, economic crises, the expansion of informal sectors, and instability. The world may look like it's full of a vast array of opportunities due to globalization, but many times individuals are unaware of how to incorporate these opportunities into their own lives. This is because the benefits and gains of globalization are not handed out equally to everyone. While there are nations and individuals that 3 benefit from globalization, there are also countless 'losers' that are left out of the process. Globalization means different things to different people. For sure, many empirical studies are showing that there is no direct correlation between globalization and the vices of unemployment, inequality and lowering of labor standards. However, these studies often produce different results depending on the data used for the analysis, and the parameters that are used to analyze the concept and definition of globalization. In addition, these studies often overlook the fact that the movement of capital and the ensuing economic hazards, transfer of technology, the movement of labor(immigration) and other aspects of globalization have larger effect on the labor market than trade policies(Freeman,2003). Feenstra(2001) also points out that these studies are based on weak empirical evidence. "Few economists would doubt the beneficial effects of trade, despite the adverse impact on some groups. Yet the hard evidence supporting such gains from trade - either in a dynamic or static sense - is surprisingly thin."(Feenstra, 2001) While the debate on the social effects of globalization is mired with conflicts both theoretically and empirically, recent trends show that the excessive progression of globalization is leading to a weakening of its support base.
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