Globalization rewards only the elite

The world’s elite that meet every January at the World Economic Forum, in Davos, Switzerland, are now very concerned about the world’s “obscene” income inequality. The wealthiest 1% own more wealth than the remaining 99% ; and, the eight richest individuals own more wealth than the poorest 50 percent of the world’s population. Globalization and modern technology have increased global wealth which have been exploited by the rich to become richer; but the rest of the world has not benefited from these two phenomenons.

The cynical view is that the sudden concern of the rich about income inequality is caused by the rise of populism all over the world – a sign that the rest of the people, including the middle class, are getting angry at the economic elite who have become the biggest beneficiaries of globalization and modern technology.

Some analysts have said that we are about to see the “Age of the Strong Man” who can promise the people that the elite will be forced to share the rewards of increasing wealth in the world. The rich continue to refuse to accept that reducing worsening income inequality requires some sacrifices from the very rich.

Joseph Stiglitz, a Nobel Prize winner in Economics, said: “The stark reality is that globalization has reduced the bargaining power of workers, and corporations have taken advantage of it.” Globalization and income inequality

The International Monetary Fund ( IMF) identified four basic aspects of globalization: trade and transactions; capital and investment movements; migration and movement of people; and the dissemination of knowledge. Advances in transportation – jet engine and container ships, and telecommunications – internet and smart phones – have been major factors in globalization.

Defenders of globalization argue correctly that it has increased global wealth; and, has increased the wealth of many countries. The biggest problem is that the fruits of globalization have not been equally distributed; and, this has led to a rise in income inequality within countries.

In the Philippines, globalization has led to more jobs for the educated sector in the BPO industry. However, the influx of imported goods has led to increased poverty in the rural sector where small farms have become unprofitable. Even fishermen are now being displaced by modern fishing fleets. But these small farmers and fishermen do not have the education to look for jobs in areas which demand a certain level of knowledge.

In previous decades, the rural worker can find jobs in the manufacturing sector. But today, globalization has made the manufacturing sector one of the lowest paying vocation. Globalization has made the production of goods and services international. The iPhone is designed in the United States but physically manufactured in other countries like China. If wages increase in China, manufacturing will shift to Vietnam and later to Bangladesh or Africa. Globalization has led to loss of manufacturing jobs in the Philippines as factories moved to lower wage countries like Vietnam and Bangladesh.

This constant losing of jobs of one country to another lower wage country is the major reason why Donald Trump won in the United States. It is easy for a businessman to say that “business is business” and not charity. But the angry reaction of those losing their jobs cannot just be ignored.

The much talked about solution is to raise skill levels by offering job training to low skilled workers so they can match better with international job opportunities. Even if this solution was adopted, the question is who will pay to improve the skills of these farmers and fishermen? Who will pay to educate those laborers losing their jobs to lower wage countries? Who pays for their sustenance during the training period?

The workers themselves cannot afford to pay to improve their skills. The businessmen who will move his business to a lower wage country will not feel obligated to retrain the jobless people they leave behind.

The world’s rich elite have become rightfully concerned about the ill effects of globalization. They worry about trade protectionism and economic growth. Peter Goodman, NYT, explained that these worries are fuelled by fear: “If the world is indeed in the throes of a populist insurrection, the pitchforks could do worse than to point here. The Davos elite have enjoyed outsize influence over economic policies in recent decades as a growing share of the wealth has, perhaps, not coincidentally, landed in the coffers of people with a need for bank accounts in the British Virgin Islands, while poor and middle class households have seen their earning stagnate and decline.”

These discussions on solving income inequality have been going on for a number of years. The reason that this inequality continues is because the proposed ‘solutions” so far have been calculated to spare corporations and the wealthiest people from making any sacrifices. The rich elite are trying to find solutions that will reduce income inequality while allowing them to continue to hang on to everything they already have; and, to allow them to continue accumulating more wealth.

Stiglitz said: “People talk about inequality, how it is a major problem, the greatest threat to globalization and the global economy. You have to recognize that the way we have managed globalization has contributed significantly to inequality.”

There must be ways to change how globalization is managed. The solutions must include transferring some of the wealth and power from the rich elite to the ordinary workers and the middle class. This means more progressive taxation, increased bargaining rights for labor unions, greater protection for labor, and closing tax loopholes such as tax havens and bank secrecy laws.

Stiglitz, however, did not see how the Davos elite will accept these prescriptions; and, he said: “Which means that the global populism insurrection is unlikely to lose momentum anytime soon.” Creative writing classes for kids and teens

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