These are some of the main arguments that advocates of globalization are concerned about. Clearly, from their point of view, it seems that multinational companies are getting out of the control of the state. Firms will locate wherever economic advantage is, they will seek to dump costs on local governments and taxpayers, they will threaten to move if challenged, and they will seek to drive down both wages and social costs. But this is just an exaggerated view of multinational firms. In fact, if such companies really pose such threats, why don t we ask whether output and employment in the internationally traded sectors of the world economy as well as in the industrialized countries are being dominated by multinational firms? The answer is that they are not. In terms of the amount of internationalized production, the share of production by multinationals is far from being a big player. As Paul Hirst and Grahame Thompson claim: the share of internationalized production by multinational firms outside their home countries in world output was only about 7 percent of world GDP in 1990 (Lipsey, Blomstrom and Ramstetter 1995). This source is quite old (from a 1990 study) but today s percent of share wouldn t be too different from the 1990 figures since past figures had a quite slow and steadily increasing trend. In 1970, 4.5 percent; in 1977, 5.4 percent; in 1982, 5.7 percent; in 1988, 6.6 percent; and in 1990 6.8 percent (Lipsey, Blomstrom and Ramstetter 1995). These figures show that the share of production in GDP by multinational firms is very steady, and hardly a share of world output that would alarm the domination of world markets in the way the more pessimistic proponents of the globalization thesis claim.
Alarmists might respond that the real fear of multinational corporations is not their amount of contribution in the world s output, but the significant loss of jobs in their home countries as their production shifts to exploit places where there are benefits of low wages. As was mentioned form an above example, NAFTA brought many rumours that the agreement will result in massive loss of jobs in the United States and Canada as firms will shift south of the US border to exploit low wages. But by looking at the FDI, it is not a valid claim to state that there would be a shortage of jobs in industrialized countries. Firstly, theoretically speaking, when economies engage in liberalized trade, they often engage in trading something that they specialize in. In other words, multinationals would only trade something that they can specialize in producing so they can have a comparative advantage. An example would broaden the understanding here. For example, Canada enters in a free trade with Mexico. Canada has lots of forests so it can specialize in lumber. Here, Canada has the comparative advantage regarding natural resources. Mexico, on the other hand, has lots of sugar cane, and therefore, will specialize in producing sugar. It would not make any sense for Canada to attempt trading sugar with Mexico since Mexico has its own sugar market. Therefore, Canada will trade with Mexico only those materials that Mexico does not have or cannot produce. Open trading between countries certainly means that employment in those sectors in which the country does not have a comparative advantage is likely to shrink. But it is also the case that opportunity for new employment in sectors where the country does have a comparative advantage is likely to increase. As a result there are certainly job displacements, but alarmists of globalization must not forget that there will also be job creation, as the economy specializes in the production of a different mix of goods. Secondly, to think that liberalized trading leads to unemployment is often due to think that increase trading is to increase employment. But in fact, an increase trading is to increase wealth, not work. Once countries start to trade, it increases individuals income. When individuals are wealthier, they consume more goods and services, both domestic and foreign. In doing so, more opportunities for employment arise because consumer demand increases. The reason free trade is desirable is that it increases wealth, and thereby enables us to consume more of all goods leading to an increase in employment. Thirdly, capital flows from industrialized countries to industrializing countries totalled over $100 billion in 1993 (Leisink 37, 1999). This figure is so small compared to the combined Gross National Product output (GNP) of North America, Western Europe and Japan totalling $18 trillion, to assess that this mass of capital movement to the developing nations really leads to a loss in investment of creating new jobs in developed countries. These staggering numbers foul alarmists to believe that the loss of investment at home is caused by the outflow of FDI. Furthermore, the Alarmists claimed that TNCs are responsible for about 80 percent of total FDI worldwide. But 80 percent is of what? If it is a total percentage of the total capital flows from industrialized countries to industrialized nations, then this figure is too small to generate some kind of panic over the massive outflow of investment to developing countries. But even if such FDI had no real effect on reducing developed countries employment, those figure are just not big enough to create panic. As Hirst and Thompson claim, those figures are just as small as some economic aid or contribution from developed countries or a transfer of capital during a crisis from a developed nation to developing nation. Fourthly, despite the big capital flows from developed countries to developing ones, FDI and trade remains massively concentrated within the advanced countries. Closer integration is above all between only three blocks: North America, Japan, and the European Union. Statistically, in 1992, the triad represented about 70 percent of total world trade where its members invested mainly in each other and in other developed nations (Leisink 41, 1999).
The issue of lowering the quality of employment in developed nations due to globalization is another irrelevant claim by pessimists. Their claim is that because of a more liberalized trading system, third world countries like Mexico will be able to exploit low wages to gain competitive edge and penetrate into the developed nation s markets. And with a transfer of relatively well-educated workers combined with a technological transfer, they will be able to match developed countries quality in manufacturing. The result will be that those developed countries standards and conditions will be forced to equalize downwards. If one thinks about it, how can this scenario be possible? How can a developed nation like Canada lower its wages to the same standards as those in Indonesia to attract TNC. In other words, this means that governments in developed nations will be changing their whole labour structure to the same level as those in the developing countries. To lower its own standards to compete is something that governments would never do. Even if they could, they will be faced with internal obstacles, such as labour unions, interest groups, worker s compensation boards, environmentalists, and so on. Therefore, domestic labour regulations are the last things that government would do to remain competitive. In fact, under treaties like NAFTA, each sub-national jurisdiction within each country is allowed to set their own labour standards as high as they want, provided that a scientific basis is provided and both imports and domestic producers are treated the same way . For example, Canada is allowed to set its own safety standards regardless of its southern neighbour countries standards. Furthermore, the supplemental agreements to NAFTA include a commitment by the United States, Canada, and Mexico to harmonize food and health regulations upwards . Hence, concerns that globalization will result in a downward slide in health and food safety regulations are simply unfounded. If anything, these standards are likely to move standards upward rather than downwards.
In addition, critics claim that due the forces of globalization, new inventions and technologies, changing preferences and external shocks are constantly changing the structure of the markets. This only occurs because of the new creativity of a capitalist society in an era of the free market economy. Other studies that have been done, such as the OECD Jobs Study, forecasted high unemployment among those developed nations during the next wave of technological change . So far, all these studies and claims have all wrong. Firstly, theoretically speaking, when technological progress accelerates, so do growth, living standards, and employment. A recent study by the Conference Board of Canada can be brought up as a Canadian experience. Its findings indicate that industries that intensively purchase and use information technology (IT) goods and services have created more jobs than industries that do not, and are outperforming these industries in terms of production. All of the major occupational groups in the high IT intensive industries have grown, while most of those in the low IT intensive industries have contracted. Even though unemployment rates have been rising, a greater proportion of Canadians have held jobs. In 1966, when unemployment was low (3.4 percent), only 55 percent of Canadians over the age of 15 considered themselves part of the work force; in 1989, that had grown to 67 percent, and 65 percent in 1995 . Compared to the past, more Canadians now have work, and the gender balance is much better. Secondly, those who claim that information technology is the cause of unemployment often see the problem from a broad perspective, and the issue they blame it on is globalization. But what they often forget is that unemployment is a very complex phenomenon. It involves both macro and micro economic theories. On the macro level, they omit many effects such as disruptions in the market, union pressures, governmental policies, increase of minimum wage, inflation, and so on, when all of these factors could be a combined effect leading to unemployment. On the micro level, the information technology that globalization brings causes both structural and frictional unemployment, but not demand-deficient unemployment. Structural unemployment is unemployment due to the mismatch between the needs of employers and the skills and training of the labour force. For example, the big impact by the Japanese house market left the 5000 workers in the lumber industry in British Columbia jobless. It will take them time to learn new skills and technologies to move to other industries. Frictional unemployment refers to the time that jobseekers are unemployed during the search for jobs, preparing resumes, contacting new employers, and so on. These two types of unemployment are the natural rate of unemployment which is considered as being harmless to the economy because there are jobs out there and it only takes time for jobseekers to find their jobs. In other words, these two types of unemployment will prevail in any economy. On the other hand, demand-deficient unemployment refers to the fact that there are no jobs throughout the industries. This is what really concerns most economists because it means there is a lack of employment in the whole economy. Therefore, Alarmists should not be concerned about the dislocation between jobs because at least, there are jobs available. Thirdly, this brings us to the issue of whether or not information technology really contributes to this natural unemployment rate or is it the unemployed him or herself that does not want to work anymore because of discouragement or lack of motivation. For example, an autoworker has been laid-off from a car manufacturing industry because the industry brought new technology into the plant. Days later, that same person was offered a job at a steel industry, at a higher pay than the previous job, and refused the job because it was not the area for which he was trained. Is the car-manufacturing worker really willing to work at the going wage? or should just be considered out of the work force because of his unwillingness to work given the opportunities available to him? The point I want to make here is that information technology does create other opportunities for new jobs, but whether to take those opportunities or not, depends on the individual. Sometimes, due to the lack of motivation or discouragement, people are unwilling to start a new job at a new location. Therefore, they should not be counted as unemployed due the change in technology.
In conclusion, the claim by critics that globalization is the cause of unemployment in many developed nations like Canada, comes under scrutiny and questioning when it seems that the role played by multinational corporations on the labour markets is ambiguously defined. True, more and more corporations have gone multinational and moved to developing countries, but they have not taken the jobs with them. In fact, they have created employment through extensive trading between countries. Furthermore, as mentioned earlier, transnational businesses are heavily concentrated in the industrial world where most of the trading occurs. Therefore, concern that these transnational corporations will be out of the government s control just because of a huge FDI figure is just an overly exaggerated concern. In the same respect, the view that the increase in information technology has increased or will increase unemployment is another fallacious argument by critics. Clearly, with increased technology, there will be more jobs available. But the question is whether the population is willing to accept these new jobs or not.
All the issues that have been discussed have been centred on globalization. It seems that this phenomenon is truly a global phenomenon that is deteriorating our lives. But even before considering whether globalization is the real cause of unemployment or not in Canada, or whether globalisation is deteriorating our lives, my perspective is that globalization is not even global to start with.
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