BIZCHINA> Review & Analysis
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BIZCHINA> Review & Analysis
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Free trade and globalization
By Wang Di and Ron Matthews (China Daily)
Updated: 2009-10-09 08:09 The final explanation, more worryingly, is that even if the international trade system runs exactly as theory suggests, the existing global financial architecture remains problematical because it represents a division of labor favoring rich-country knowledge-intensive exporters, whilst emerging economies mainly concentrate on exporting raw materials and low value-added goods. This "static" comparative advantage causes unacceptably high unemployment, the loss of potentially efficient industries, and results in irresponsible resource exploitation in emerging economies; the latter, as a consequence, face the dilemma of needing a buy-in to the globalization phenomenon, but by doing so, suffer from exclusive reliance on low value-added sectors. The danger of widening income disparities is that a tidal wave of rage against globalization is building. Yet, the greatest threat to globalization does not come from the awakening of working people in developing countries, and the poor in advanced ones, but, perversely, from the rich and powerful states failing to address the perceived and real deficiencies and "unfairness" of the present international trading and financial system. Bubbling to the surface are the twin evils of protectionism and economic nationalism. The policy response has been to more equitably share the gains from globalization, and some truly innovative policies have been introduced, such as the "UN Millennium Development Goals", social safety nets, and a variety of humanitarian assistance programs. These measures aim to transfer resources from rich to poor countries; they are thus meaningful, but only time will tell whether they will provide full or just partial economic antidotes to poverty. For emerging economies, social policy is the "flip-side" of an open economy. To avoid trading-off poverty reduction by chipping away the benefits of globalization, social policy should have a dual function: it must enhance social engagement in decision-making, but at the time same, give social direction to poverty reduction. Such a flexible, more socially responsible, approach to trade and development enables anti-globalization "radicals" to obtain a legitimate voice in support of greater social enterprise. Moreover, organizations and charities aligned with the anti-globalization movement should be entitled to participate in global conferences. Such fora would provide excellent opportunities for pushing advocacy goals in civil society and democratizing global policy-making, hence compensating losers from globalization. Violent protest, made worse by non-involved anarchist groupings, would thus, hopefully, give way to peaceful and constructive dialog. Harmonious development demands the evolution of "social enterprise" without jeopardizing profit-driven business models. The social enterprise concept embroiders "blended" value objectives into mission statements, focusing on sustainable profit but not at the cost of social and environmental imperatives, critical for securing poverty reduction. Moreover, as a form of social enterprise, micro-credit banks have been designed to combat poverty in developing countries. Wang Di is a researcher at the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University. Ron Matthews is a professor and deputy director of the Institute of Defense and Strategic Studies at RSIS.
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