Distributing the Benefits of Globalization: A Challenge for the 21st Century (1 Hour Essay)

Economics 101 teaches that globalization benefits everyone. Even if a factory worker in the United States loses his or her job because of lower, more competitive wages in other parts of the world, that worker will experience the benefits of cheaper consumer goods and will also be retrained to perform a job that better suits their country’s comparative advantage in the global marketplace. While this situation holds true in theory, economists in the vein of Joseph Stiglitz appropriately argue that it does not always hold true in reality. With market globalization, individuals in all countries experience unique challenges as well as opportunities. The spread of free markets does not benefit all individuals equally or simultaneously. Globalization is inevitable, but it does not have to occur in an unregulated and unchecked form. As market integration continues into the twenty-first century, the greatest challenge for international leaders will be to regulate the distribution of its benefits. It is important to monitor this distribution not only among states, but also among the individuals who compose those states. This is a challenge that applies to both advanced and developing economies.

An interconnected world enhances the prosperity of most nations involved. In partaking in the feast that gains from trade deliver, nations see their GDPs rise. As Stiglitz writes, however, there is a legitimate concern that, while raising GDPs across the international arena, globalization is still failing to significantly improve the welfare of many individuals within those nations. This concern affects rich and poor nations alike. The introduction of poorer nations into the international marketplace must be accompanied by guarantees that the most powerful citizens in these nations will not monopolize the benefits of globalization. This involves a delicate balance. In the process of obtaining these guarantees, leaders in the international political economy must respect host nations’ culture and political sovereignty; however, if developing countries’ institutions fail to promote the equitable distribution of gains from trade, then changes must occur to ensure that the entire society can reap the rewards.

As advanced industrial nations continue to reduce and eliminate barriers to free trade with developing nations, they also have an obligation to ensure that the short-term costs and the long-term benefits to globalization are distributed among the entirety of their populations. As a recent blogpost, “Behind the New View of Globalization,” by Edward Alden of the New York Times shows, American manufacturing employees have suffered disproportionately from globalization in the past few decades. Compared to their peers in other sectors, these employees have encountered increasing unemployment rates and stagnating wages. This is expected as advanced industrial nations like the United States lose their comparative advantage in manufacturing; however, the United States and other advanced nations need to ensure that the short-term costs of globalization are distributed throughout their populations. Cheaper consumer goods are little consolation to the long-term unemployed. By investing in education and high-tech vocational training as well as temporarily distributing globalization’s costs through trade adjustment assistance, advanced nations can ensure that increases in GDP benefit society as a whole.

As globalization enhances the economies of both rich and poor nations, it can serve to benefit all individuals within those nations. The equitable distribution of these benefits, however, does not emerge as naturally as the most unapologetic defenders of free market capitalism like to claim. Even as measures of overall economic activity reveal progress across the international spectrum (and, it should also be noted, not all countries do benefit equally from globalization), the situations within those nations reveal a divergence between those who benefit disproportionately from globalization and those who pay disproportionate costs. If a more integrated world is to continue to emerge, then it is appropriate to focus as much on globalization’s effect on individuals as its effect on nations. The barriers between nations become less consequential as globalization marches forward. With this change, the relative position of nations becomes less important than the relative position of individuals.