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December 28, 1998
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Rethinking globalization

Globalization seems to have us in its jaws.

The International Monetary Fund has just cut its forecast for Canadian growth next year - for the third time in the last 14 months - citing the impact of the Asian crisis on the world commodity markets on which we depend.

The Canadian banks used the globalization of financial markets to justify their attempts to merge.

Finance Minister Paul Martin argues for the need to change our tax system to make it more like those of our global competitors.

Despite these effects and constraints on the way we do things, most economists see the growing interdependence in the world economy as a plus.

But a few wonder whether globalization has, in fact, gone too far.

In a recent book asking that question, Dani Rodrik, a Harvard University professor of international political economy, blames globalization for increasing the income disparity in the U.S. by keeping wages low.

He claims that there are various channels through which the international economy impinges on domestic labour markets:

  • By giving corporations a great deal more leverage or bargaining power over their workers.

  • By changing norms and institutions.
  • By undermining social support systems.

    Globalization effectively forces economies to restructure. The shake-up that follows makes some people winners, some losers.

    But as Rodrik asks, how can labour expect to win when employers can credibly say: ``Don't ask for wage increases, don't ask for improvements in labour standards or in work conditions, because if you do, we can go elsewhere.''

    Recognizing that some Canadians would lose because of its free trade deal, the Mulroney government promised in 1988 to bring in the best adjustment package ``in the world.''

    But there never was an adjustment package.

    And our governments subsequently have forgotten about the impacts of free trade - and globalization generally - when they cut welfare, unemployment insurance and money for training.

    Critics of the Canada-U.S. free trade deal no doubt would find many parallels between Rodrik's analysis and the concerns they raised a decade ago.

    As Rodrik's book reminds us, those concerns, unfortunately, have not gone away.

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