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Summary: “The social dimension of globalization: A review of the literature”

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This literature review, written by Bernhard Gunter and Rolph van der Hoeven, considers the impact of economic globalization on wages and taxes, poverty, inequality, insecurity, child labour, gender and migration. The intention of the survey is to summarize recent significant articles and publications on the various social dimensions and to suggest some key policy issues to make globalization a fairer and more sustainable process for all.

The recent globalization process caused some facts. World trade had been tripled and the GDP increased by two and a half, both in the past two decades and primarily caused by the relaxation of (Non-)tariff barriers. Either the FDI has grown 20 times than its level two decades ago. The marginalization of low-income countries in either share in world trade, share in world GDP and share in foreign direct investment (FDI) implies an increase in inequality. The size and evolution of portfolio investment (equity and bonds) is alarming, because the high-income countries have a share about 90% two decades ago and it maintains. Companies still assemble their products in one country, but today the input could come from all countries. Nowadays, all products are produced in the countries that are most profitable for the production of that specific (intermediate) product. There are also concerns about the power of multinational corporations as they account for two-thirds of world trade.

The relocation of manufacturing production to developing countries, caused structural unemployment in the industrialized countries and considerable reductions in wages and jobs in developing countries due to the increased competition to set up new production plants. Europe’s wage cuts and its maintenance of social protection have led to high unemployment but no significant changes in income distribution, while in the US the same competitive pressure has resulted in lower industrial wages and significant changes in income distribution (Stiglitz, 2003). In general, globalization reduced poverty, though many researchers have pointed out that the empirical analysis leading to that conclusion is deficient in various ways. (Oxfam International & Oxfam America, 2002). Agénor (2002) states that most low-income countries have been marginalized by the globalization process of the past 15 years. There is much literature that endorses the hypothesis of Simon Kuznets (inequality worsens when capita GNP rises, 1950). Despite, most economists also agree that there is no indisputable link between economic growth and equitable human development, for example increased income equality is more likely to be due to economic reform policies (Khan, Griffin and Riskin, 1999).

Though various researchers argue that the absence of political action has contributed as much as globalization, contributors to the literature seem to conclude that many poor and disadvantaged people suffer a disproportional share of the increased security. Child labour activities increased during the globalization process. After the pressure of industrialized countries, the developing countries have adopted restrictive child labour legislation, which is ensuring a decline in child labour activities. Despite the rising female participation rates, the more recent literature shows that discrimination against women continues regardless. The migration has never been so low as in this globalization period caused by the constraints set in industrialized countries’ immigration legislation. Many countries suffer from the fact that the best educated, increasingly from poor countries, emigrate to more industrialized countries (Solimano, 2001), but also benefit from the remittances migrants send back to their country of origin (Global Development Finance, 2003).

The outbreak of the Asian crisis in 1997 caused the public and academic opinion that the government had to take responsibility in reducing the adverse effects of globalization. There is either consensus on the facts that globalization has reduced the role of the State in economic matters and that it calls for increased State activity in social matters. Recent literature provided national policy actions that are applicable in all countries: investment in education and training; adoption of core labour standards; the provision and improvement of social protection; the tackling of rising national inequality; facilities to discuss globalization. There have also been proposed many international policy responses. Two sets of international policy actions are supported broadly in the literature: a
development round of trade negotiations, which is aimed at the increasingly unfair rules applying to international trade and the question of intellectual property rights on urgently needed medication to fight AIDS; a new financial structure, which is aimed at identifying gaps and weaknesses in the international financial system.

It can be concluded that the enormous range of contributions to the literature concerning globalization is showing that there is a continuing controversy over the social impact of globalization on poverty, child labour, gender and migration. Nevertheless, there is consensus on the issue that, overall, globalization has brought more benefits than costs. The main goal for the future is to manage globalization in the right way.

Analysis: “Toward a framework for Achieving a Sustainable Globalization

The reviewed article, “The social dimension of globalization: A review of the literature”, has been written by two researchers. The first is Bernhard G. Gunter, who is a freelance consultant specializing in development macroeconomics, poverty and debt. The second is R. van der Hoeven, who is secretariat of the World Commission on the Social Dimension of Globalization (WCSDG). As they have appointed in the introduction, the intention of this article is to summarize some recent significant articles and publications on the various dimensions of the economic globalization process and to suggest some key policy responses to make globalization a fairer and more sustainable process for all. The authors chose to write this article without too many jargon, thus in a legible manner for the public. They have chosen for this manner because their audience can be everybody that is interested in globalization on its whole and everybody who wants to know more about the recent literature on globalization and its (social) aspects. The authors have reinforced their recommendations by making frequent use of already published and supported literature. For example, they draw conclusions from observations conducted by reputed researchers in the recent past.

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