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And now for the bad news

  • Tim Weber
  • 24 Jan 07, 01:05 PM

Ok, after my upbeat blog entry just now, I want to post a second piece on the economy, just so that you can't accuse me of running through the snow wearing rose-tinted glasses.

Globalisation is good for you, that's the unspoken assumption of most of the business leaders here, regardless of whether they hail from the West or developing countries.

But many discussions here now revolve around what's happening to the losers of globalisation.

Laura Tyson, economics professor in Berkeley, points to recent research that suggests that most of the benefits of globalisation have gone to the top 10% of society.

Unskilled and low-skilled workers are not faring that bad either, because they mostly do jobs that have to be done on the spot.

It's the middle classes that are smarting, if the research got it right, she says.

As I write this, a panel of experts is discussing just these issues. Economics professor Robert Shiller (who famously and correctly predicted that the stockmarket bubble of the late 1990s was about to burst) just warned of a backlash from the middle classes who are increasingly worried about job security.

Economic power is shifting, new giants are emerging. The bottom line says that this is a good thing, for both developed and developing countries. Let's not forget, the past decade of low inflation and interest rates has been brought to us courtesy of the cut-price imports from China et al. And without these exports, millions would still live in abject poverty in places like Malaysia, China and India.

But a good bottom line hides a lot of personal pain of those who lose out, because it does not take into account income distribution.

The solution? Beats me. But here in Davos hundreds of very clever - err, and very rich - people are discussing the impact of these inequalities, and what to do about them.

Comments   Post your comment

  • 1.
  • At 02:21 PM on 24 Jan 2007,
  • E. Chung wrote:

"And without these exports, millions would still live in abject poverty in places like Malaysia, China and India."

I wonder when Malaysians were living in "abject poverty"?

  • 2.
  • At 05:00 PM on 24 Jan 2007,
  • Gary Dare wrote:

I'm pro-globalization and free trade but there is a definite impact upon middle class workers in services and manufacturing in the developed world. The disquiet has helped Lou Dobbs' show on CNN's North America feed to become #2 just behind Larry King, with a sensationalist hour of nationalism, xenophobia, isolationism and protectionism.

  • 3.
  • At 08:51 PM on 24 Jan 2007,
  • diogenes wrote:

And the gist of those discussions is how to finesse the subject and maintain the status quo. Not turn the effects around.

If the investor class wished, they could resolve the woes of the middle class any time they chose. Give them a job, a raise, etc.

Simple, yes?

You say, "Unskilled and low-skilled workers are not faring that bad either."

Well let's say you travel 2-3 hours from your slum to you job.

Let's say you moved from your broken down rural village to that slum (leaving family behind) and can't find work and so you deal with the contractor who'll loan you the money at usurious rates to take you to the Middle East to work as a near slave.

Yeah, not faring too bad!

I hope the debate about the losers of globalization will not be eclipsed by the hoopla about the shifting of media power, etc. You post seems to be the only one (I found) that touches upon the issue.

  • 6.
  • At 09:20 PM on 24 Jan 2007,
  • V. Sethuraman wrote:

In India it is not the job security that is the concern of the burgeoning middle class but the wide gap in the salary levels of IT workers and the rest which is causing heart burns.

  • 7.
  • At 11:03 PM on 24 Jan 2007,
  • Dave Chapman wrote:

I have suffered a great deal because
of the H1-B visa program, and I want
to make the advocates of globalism
feel my pain.

The backlast against globalization
and oursourcing will not be confined
to purely political venues.

People who are in favor of bringing
Cheap Slave Labor to America in order
to replace US workers deserve what's
coming to them.

This is no longer theoretical, and
the current investigations into stock
options fraud are only the beginning.


  • 8.
  • At 01:59 AM on 25 Jan 2007,
  • S. Martin wrote:

It is narrow minded to focus solely on the middle class that is losing.

For example, if money gained through globalization was not spent on nuclear weapons and missiles to shoot down military satellites, millions of more citizens in China would be elevated from poverty.

The environmental degredation resulting from uncontrolled globalization also needs to be considered. This is especially true when jobs are lost in western countries to businesses in foreign countries who keep the cost of their goods low by avoiding investments in pollution reduction technologies.

  • 9.
  • At 02:04 PM on 25 Jan 2007,
  • C P Madhusudan wrote:

Globalization is not a new phenomenon and has always thrown up winners and losers. The invention of the power loom coupled with the British version of globalization (Imperialism in the 1800s) destroyed the Indian handloom industry. The first wave of manufacturing outsourcing saw the rise of the Asian tigers; the second wave has unleashed China. There is optimism that India will catch up too. The rise of China is already benefiting producers in Africa and Central/South America. Doubtless there are people in the western world who have been adversely affected but the please remember that even the rising middle classes in the developing world cannot take for granted, the facilities and infrastructure that even the poorest of Europe can legitimately expect.

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