Globalization

Globalization 1

GLOBALIZATION

AND EMPLOYMENT

by

Jeffrey Sachs

Geneva , 18 March 1996

Opening Statement

Padmanabha Gopinath

Assistant Director-General of the ILO

and Director of the International Institute for Labour Studies

The theme of Globalization and Employment is a familiar one , but it has taken on new significance because of two recent trends .The first is a political development , of which we heard echoes in France last December and more recently in the election campaign in the United States . It is what Klaus Schwab , President of the

World Economic Forum , has called "the backlash against globalization . In its most general sense , it reflects the growing uncertainty and insecurity caused by global structural adjustment - the sort of uncertainties and resentments which were witnessed in the 1970s and 1980s in the South , and which now afflict the North . The mobility of financial capital and of production systems is being brought home to an increasingly wider section of public opinion . In 1980 , nearly 70 of the world 's labour force were sheltered from international competition by trade barriers , capital controls , and planned trade . By 2000 , less than 10 of workers will be living in countries insulated from world markets . The newly industrialized countries of East Asia are already major actors , and the second tier of industrializing economies of Southeast Asia is now emerging on the scene . By 2000 , China

Globalization 2

South Asia and the countries of the former USSR , representing nearly half the world labour force , will enter the global market . These changes are occurring when the North is striving to overcome pre-existing problems of unemployment and wage inequality . Coincidence between globalization and unemployment becomes causation in public perception when stock markets plunge as employment figures rise . It is this identification of globalization with employment problems which has led to the public backlash . Marc Blondel , the Secretary-General of the French FO , speaking in Davos , soon after the events of December 1995 in France , expressed a popular view when he said that "public authorities are at best subcontractors of the enterprise . The market governs , the government manages " In the United States , Patrick Buchanan feels that "What is good for General Motors , is no longer good for America if General Motors is shutting down plants in Michigan and Ohio and opening them up outside Mexico City " Are globalization and its conduit - the transnational corporation - beginning to be seen as part of the problem rather than , as hitherto , as part of the solution ? The second development is that while public perceptions associate globalization with increasing unemployment , there is increasing scepticism about such a causal link in academic circles . Neither trade nor capital flows , it is argued , provide a significant explanation for the problems of employment and wage-dispersion . It has been pointed out that industrial country imports of manufactured goods from developing and transition economies represent less than 4 of GDP in OECD countries , while exports to these countries are a major source of counter-cyclical demand . The cumulative net transfer of capital to these countries represent only...