Rodrik: Sense and Nonsense in the Globalization Debate

Rodrik, D., 2000. Sense and nonsense in the globalization debate. International Political Economy: Perspectives on Global Power and Wealth, 461-473.

The globalization debate is highly polarized. Economists and policy makers believe that it is beneficial, environmentalists, unions and other groups find it problematic.

“The postwar period has witnessed two apparently contradictory trends: the growth of trade and the growth of government” (25). The paper argues that the relationship between social spending and trade is logarithmic. “International economic integration thus poses a serious dilemma: globalization increases the demand for social insurance while simultaneously constraining the ability of governments to respond effectively to that demand” (26).

“The question…is how the tension between globalization and the pressure to mitigate risks can be eased. If the vital role that social insurance played in enabling the postwar expansion of trade is neglected and social safety nets are allowed to dwindle, the domestic consensus in favor of open markets will be eroded seriously, and protectionist pressures will soar” (27).

Many of the concerns that have arisen regarding trade should be explored thoughtfully, though a more rigorous debate is needed. For example, in discussions of the “race to the bottom”, low-wages are seen as the driving force of globalization. If this were the case, Rodrik points out, Bangladesh would be one of the world’s leading exporters. Instead, productivity is much more closely tied with capital investment.

“One need not be alarmed by globalization, but neither should one take a Panglossian view of it. Globalization greatly enhances the opportunities available to those who have the skills and mobility to flourish in world markets. It can help poor countries to escape poverty. It does not constrain national autonomy nearly as much as popular discussions assume. At the same time, globalization does exert downward pressure on the wages of underskilled workers in industrialized countries, exacerbate economic insecurity, call into question accepted social arrangements, and weaken social safety nets” (33).

Globalization could lead to more protectionism. It could also lead to two global classes emerging: those that benefit and those that do not. “A reorientation of public resources away from pensions and toward labor-market and antipoverty programs would be a more appropriate way to address the challenges of globalization” (35).