Wednesday, November 7, 2007

Is globalization unjust?

Globalization has many aspects. But consider this narrow definition: extension of international economic interdependence through unfettered international trade and investment. This process leads to a shifting of centers of economic activity as investors and entrepreneurs seek out favorable locations for business activity--mining, manufacturing, financial services, transportation and logistics, etc. Businesses will seek out low-cost environments for doing business activities. Among other factors, labor costs, environmental costs, and resource availability will drive patterns of investment. The process results in economic growth -- that is, an absolute increase in the wealth and income created by the system as a whole. The resulting patterns will have consequences for incomes, environmental effects, and the flows of wealth among places on the planet.

Neo-liberal trade theory asserts that this international trading system will be welfare-enhancing overall: the gains to winners will exceed the losses to losers. The theory also disaggregates: a poor country will make better use of its resources and will be better off than before globalization. Let's take these points as true for the sake of argument -- though many critics of neo-liberal economic theory would dispute the assumptions that this assessment makes.

So, once again, is this process just, or does it simply perpetuate the debilitating effects of past injustice?

Before we can even begin to answer the question, we have to decide what we mean by "justice" in a global economic setting. Is a just system one in which everyone gets what he or she deserves? Or one in which everyone's outcome corresponds to his or her contribution to the product? Or one in which everyone's outcome is sufficient to permit him or her to satisfy basic needs for human development? Might we say that a just system is one that treats all parties fairly? And where does "fair equality of opportunity" come into the formula -- would we want to say that an outcome is just whenever it has resulted from a non-coercive, rule-governed process in which conditions of fair equality of opportunity have been assured for all participants? And, of course, what do each of these formulas come down to in practical terms?

One reason why problems of justice are so difficult to think about in the context of global development, is the fact of the extreme inequalities that existed, and continue to exist, internationally -- both before and during the processes of globalization. Many of these
inequalities were manifestly unjust -- because they derived from coercive and unfair relations between countries of very unequal power (colonialism and conquest, for example). So what would be a just pathway of transition, from an unjust prior distribution of wealth and
power, to a later more just distribution of wealth and power?

We might also say that the situation of global justice is a bit similar to the situation of bargaining among parties with grossly unequal prior assets. Some people would judge that an unforced agreement between two parties is guaranteed to be fair by the fact of consent; the fact of consent implies that each party judges that he/she is better off with the agreement than without it -- so each has improved his/her welfare. (This is what underlies the theory of Pareto-optimality.) But if the bargaining situations of the parties are significantly unequal, then it is easy enough to see how the stronger party can "take advantage" of the weaker party (the central result of bargaining theory). The division of the benefits of cooperation will be tilted towards the more well-off party; so is this a fair division of the fruits of cooperation?

So consider three different answers to the question, is globalization unjust?

* No, globalization is not unjust in the ideal circumstance in which every country and region can make free choices about the use of its resources and the agreements it makes with other parties. Each country will strive to make the choices that maximize the creation of
wealth and income it produces within the global system. What would make globalization unjust is if the process depends on coercion, corruption, and fraud.

* Yes, globalization is unjust, because the benefits of global cooperation are enormously biased to favor the interests of the rich and powerful. And even if the rules of international cooperation are unbiased (a claim that is often disputed), the superior bargaining situation of the wealthy nations guarantees a division of the benefits of cooperation that favors the wealthy over the poor.

* It is too early to say either way. The answer depends on what the outcomes are in fifty years. If international trade theory turns out to be true; if every region is able to develop its resources and human talent; if every region experiences significant economic growth and improvement of human development -- then we may judge that globalization was a just process. If inequalities and human deprivation are even greater in some parts of the world in fifty years, then the process has proven to be unjust.

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