False Promises on Globalization from Oxfam

Trade Alert ^ | 4/16/02 | Alan Tonelson

[madeinchina]

The good news about Oxfam International's new report on international trade and third world poverty is that it isn't a piece of completely thoughtless anti-capitalist, anti-American baloney. The study, titled "Rigged Rules and Double Standards," makes several important points about both the limits and potential of conventional trade liberalization to raise third world living standards. It's full of useful data as well.

The bad news is that the study shows once again that Oxfam's agenda is not promoting balanced, realistic reforms of the global economy. Instead, the humanitarian organization continues to agitate for ever larger, better disguised international handouts for third world governments while indiscriminately blaming the industrialized world for all of the developing countries' largely homegrown problems. The flip side of that coin is equally important for American globalization critics to recognize - that the welfare of America's workers and even its working poor isn't even on Oxfam's screen.

"Rigged Rules and Double Standards" focuses on how globalization could meaningfully boost third world economic development if only the wealthy countries would drop what Oxfam sees as their selfish and short-sighted trade barriers. The report's greatest strength is its well-documented insistence that today?s version of globalization is unlikely to bring any semblance of widespread prosperity, even to developing countries that have become champion exporters.

The study's authors, for example, rightly observe that the flow of foreign manufacturing investment to countries like Bangladesh and Honduras has largely trapped them in "low-value added ghettos" - industries such as the assembly of basic apparel and even simple consumer electronics - with only the slimmest prospects of escape. Because foreign investors transfer little technology to these operations, and because their factories are often isolated in export-processing zones from the rest of these national economies, industrialization has produced only the skimpiest wage growth and innovation. For similar reasons, critical masses of workers in Mexico and China face dim futures as well.

But the report consistently misses the target on the larger issues of why certain countries fail and succeed nowadays, and what roles trade and rich countries' trade policies have played in this process. Underlying Oxfam's misjudgments are three seriously off-base themes:

First, the organization determinedly soft-pedals the immense effect of government corruption on third world economic performance.

Second, it ignores how powerful population pressures have been undercutting the benefits of export-led growth in the developing world and will continue to do so for the foreseeable future.

Third, it vastly underestimates the costs to the United States in particular of its already impressive and ever-expanding openness to third world imports. Indeed, "Rigged Rules" actually ranks the United States as the industrialized world?s second worst protectionist - slightly behind the European Union but way ahead of hermetically sealed Japan!

All of these problems are on display in the study's examination of regions that have generally benefitted from globalization (e.g., East Asia) and those that have not (e.g., sub-Saharan Africa). Oxfam is right to note that East Asia's progress has had little to do with textbook free trade and lots to do with government subsidies and protectionism for critical industries. But Oxfam's implicit assumption that Africa and other areas could duplicate this performance if wealthy countries would import more from them is inane. After all, East Asia also succeeded because of reasonably good governance. Crony capitalism has long pervaded the region, but unlike their African counterparts, most East Asian leaders didn?t steal everything under the sun. Many, moreover, instituted valuable land reform programs and promoted education.

"Rigged Rules" also misses how America's willingness to buy East Asia's output without demanding reciprocity also powerfully promoted Asian development - and in the process, devastated vast swathes of the U.S. industrial base and manufacturing workforce. Europe and Japan never suffered such consequences because, despite Oxfam's claims, their markets have never been nearly as open to Asian goods. To make matters worse, "Rigged Rules" basically calls for the rest of the third world to adopt Asian-style mercantilism - and for the wealthy countries not only to accept these practices, but to help the developing world adopt them.

If any of these measures could truly lift the third world's billions out of abject poverty, they might in theory justify the enormous additional costs they would impose on U.S. workers (including the millions of third world immigrants the country has absorbed in recent years). But "Rigged Rules" completely neglects the main cause of wage stagnation in the third world - the worldwide labor glut encouraged by the last decade of breakneck globalization.

Unless Oxfam wants to start setting wage rates around the world, no matter how open developed markets become, the sudden influx into the world economy of regions with hundreds of millions of bright, industrious workers, combined with the enhanced mobility of capital, will continue to sabotage labor?s bargaining power and enable employers to skimp on wages. Even high-tech industries are turning into low-wage ghettos thanks to the globalization of economies like China and India.

If Oxfam really wanted to encourage broad-based economic development, it would press Europe and Japan to open their markets more, and developing countries to root out corruption - all the while emphasizing that significant progress will remain painfully slow. The organization would also recognize that alleviating poverty in developing countries is unacceptable if it worsens poverty in the United States and other wealthy countries.

As it is, "Rigged Rules" boils down to a call for soaking industrialized-country (and especially American) taxpayers and workers to subsidize third world kleptocrats and protectionists. And it raises false hopes among third world workers. This kind of humanitarianism no one needs.

[madeinchina]

Once again, the trade issue confounds the traditional left-right dichotomy.

[traderkirk]

Do you suppose OxFam has received any large contributions lately?