At the same time, these inequalities are not simply outcomes, as they are often understood to be in debates about labour standards. Rather, echoing an insight well established in classical theories of political economy, the advance of production depends on a set of prior enabling conditions of inequality—and this brings us to the second dimension of the triangular structure depicted in figure 1. How do these enabling social asymmetries come about, and what forms do they take? There are three aspects that deserve attention. Across the world, as much in the United Kingdom and United States as in India, Argentina, Mexico or South Africa, new laws were passed to dismantle previous regimes of worker protections and to provide employers with maximum flexibility in handling labour.
In a contribution in , Robert W. This expanding population is largely comprised of the global working poor—a category that orthodox economic and development policy thinking has long struggled to accommodate, as work is envisaged in this thinking as the route out of poverty and the key to poverty reduction. The question of marginality in this sense has never been more pronounced or pressing; but the marginality stems as much from the terms of in clusion in global economic activity as from conditions of ex clusion. The third aspect of particular relevance relates to the inequalities which stem from migration.
Ending Poverty is Possible, but it Means Facing up to Inequality – Within & Between Countries
Migrant labour was identified above as one of the most important constituencies in this new global labour force—and here, obviously, our interest is in the low-paid, low-skill segments of the labour force, which are also significantly feminized in many sectors. The dynamics of precarious employment and adverse incorporation are magnified by the particular vulnerabilities of migrant workers, especially where they are working in the informal economy.
Migrant workers lack the power to engage in political action around wages and conditions, and they lack the rights and entitlements associated with citizenship or residency. Laws governing immigration or internal movements also often act to strip these workers of labour or welfare protections, constrain their ability to seek satisfactory working conditions by changing employers, and provide mechanisms that employers can use to manipulate them, particularly perhaps when the worker is undocumented, such as the threat of denunciation to immigration authorities.
Forced labour and child labour are strongly, although not exclusively, associated with the inequalities which attach to the migrant labour force. These existing social inequalities provide the environment in which the commercial dynamics within GVCs outlined in the previous section can flourish.
Conversely, where labour is scarce, employers are more likely to raise wages and improve conditions in order to attract and retain workers. A final layer in our discussion relates to the asymmetries of social power which come into play in generating these patterns of exploitation and inequality. It is through these mechanisms that inequality, in Tilly's phrase, becomes durable, and often intergenerational: exclusion from access to value-producing resources and arenas of opportunity is perpetuated by the consequences of exploitation in GVCs, perhaps particularly in those forms associated with forced and child labour.
Let us then take the argument on to the third point of the triangular scheme in figure 1 , returning to our starting-point of the geographic fragmentation of global production. We have explored the business case for this kind of model and its social foundations, but now need to incorporate a more explicit recognition of the asymmetries of political power which underpin it.
These asymmetries take many forms across diverse arenas of governance and policy, some of which such as the governance of immigration and mobility we have already touched on. Given constraint on space, this final section will focus on the politics of global business and regulation. We have established that the geographic fragmentation of production is driven in large part by the search of many firms in many sectors for permissive regulatory and political environments, particularly in relation to labour and environmental standards.
However, it is not simply that these conditions exist and firms take locational decisions on that basis. Rather, lead firms mobilize vast political power to create those conditions and ensure that they are maintained. In the competition to attract foreign investment and to increase their exports, many developing countries have incentives to be the low-cost point in GVCs.
Similarly, enforcement mechanisms remain either underdeveloped or unimplemented. For many states, these outcomes emerge from the significant asymmetries of political and bargaining power that exist between their governments and transnational and some local firms. For others, the pressures of compulsion are less pronounced, but the competitive dynamics of the global economy and the demands of economic development push in the same direction, given additional impetus by the political power of transnational business. Evidence of these political dynamics abounds. China's Labour Contract Law of , for example, increased wages and protections for workers.
A large number of big firms responded by moving their operations to sites in countries such as Vietnam or Cambodia where the regulatory environment remained even more permissive and labour costs even lower.
Assessing knowledge inequality in global governance - LegGov – Legitimacy in Global Governance
Arguments about political incentives against regulation are just as relevant to the more advanced economies as in the so-called developing world, where political dynamics between governments and big business, as well as ideological affinities between them, have substantially the same outcomes in terms of a retraction of regulation.
As indicated above, it is firms, not states, that now play the major role in determining what will be produced, where and on what terms, and what will be traded internationally. Specifically, firms also play a major role in determining how production will be regulated, including through labour and environmental standards. In consequence, the debate has recently shifted to an important and fascinating consideration of what kinds of governance initiatives, under what conditions, can make a difference in improving labour and other standards in the global economy, and what kinds of effective regulation can be conceived in the context of a world dominated by powerful business actors and the competitive dynamics of GVCs.
At the same time it must not be forgotten that there are plentiful examples of firms that have engaged in meaningful responsibility and accountability initiatives with some positive outcomes, and that not all firms are engaged in strategies of continually seeking to circumvent or undermine public regulation.
Income Inequality and the Future of Global Governance
It is interesting that in Britain, during the process of drawing up the Modern Slavery Act of , some businesses agitated for at least an element of government regulation inasmuch as they perceived a need for a level playing field in relation to labour practices. At the same time, the relentless pressure on electronics firms from media and NGOs, noted above, has led to some significant initiatives to address the problem of labour abuses in their value chains. A final caveat is in order.
Some states are more politically willing than others to challenge big business, through regulation or other means.
Similarly, intense political contestation occurs between states and firms, as they tussle for control over the terms of production and the value created in the global economy. Tax scandals represent one case-study of this contestation.
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Another is the tension between business and government in relation to immigration policy and its consequences for labour supply. In relation to labour standards, there has emerged a politics of blame, where firms are apt to place responsibility on state regulation and blame its deficiencies, states are apt to insist that these are supply-chain issues, consumers receive appeals from each side, and workers continue to labour in conditions of systematic exploitation.
Asymmetries of political power thus form a critical part of the picture of how inequalities are produced and reproduced in a GVC world. Governance and politics matter, in short, and political power—both public and private—fuses in dynamic ways with market power and social power to produce the patterns of inequality in the global political economy that have been so amply observed over recent years.
At the time of writing in early , public discourse had renewed its focus on inequality in an attempt to understand seismic events such as the UK's referendum vote to leave the European Union, the election of Donald Trump as president of the United States, and the rise of the populist right in several countries. Questions of disadvantage, alienation and exclusion are all critical to this conjunction of events and trends. Yet a focus on those people and sections of society alienated from globalization and crushed by its distributional dynamics cannot capture the full complexity of the political moment in which we find ourselves.
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Equally relevant is the question of for whom the system works: how, politically, the opportunities are protected for the massive concentration of wealth, power and advantage that we have explored here, and how economic, social and political inequalities can be manipulated and created afresh for that purpose. Whether this means that we are seeing a significant crisis of capitalism, of an order which could usher in a substantively new order, remains an open question and one which deserves continued careful attention.
To this extent, the inescapable conclusion is that incremental change will not be sufficient to address the distributional implications of the GVC world. The nationalistic, nativistic response of the political right in this context is deeply unpalatable and alarming to many, but has not yet been met with a coherent challenge from the centre or the left. A compelling vision is needed of a progressive, internationalist politics that is capable of addressing the issues of power and inequality in the global political economy which have led us to this juncture, and capable of producing a foundation for significantly more equitable and inclusive forms of growth and development.
Programmes should aim to help diversify and make structural changes in economies dependent on commodities and help the producers adjust to the inevitable price declines. The report notes that the suspension of the Doha Round of global trade talks means that anticipated improvements in the trading of agricultural products and supportive measures, such as the aid-for-trade mechanism, are unlikely to materialize over the short term.
As a result, policies to develop the commodity sector should target least developed country producers and others left out of the development process. Technical assistance and capacity building intended to improve the competitiveness of commodity producers is very important. Aid-for-trade should be used independently of developments in the Doha Round and not be considered solely as a means to help countries adjust to trade liberalization. This mechanism should help improve the trading capacity of these nations and have a strong commodity focus.
It should be adequately funded and brought into operation quickly. Indeed, world financial volatility had been reduced between and the present, reflecting the growing independence of central banks and better economic policies across the globe. Emerging-market economies in Latin America and Asia, which borrowed at more than 6 to 14 per cent of the market rate, now paid no more than an extra two per cent. Inflation, too, was significantly lower, in contrast to 15 years ago, when many countries suffered from hyperinflation of over 1, per cent.
However, he stressed that the explosion of global finance since called for better global governance. Overcoming significant barriers to growth, such as war, disease and climate change, required United Nations leadership. So far, the Organization had done a great service by broadening the notion of well-being, as contained in its Human Development Reports , and had helped contribute to transparency by collecting a large array of statistics.
The United Nations, IMF and World Bank should become stronger advocates for trade liberalization, since most countries suffered far more from the trade barriers erected by their own Governments than from foreign barriers. Also, the transfer of large amounts of money from richer to poorer countries, while morally compelling, could be counterproductive since the funds were funnelled through institutionally frail Governments. Such transfers needed re-examining and smaller projects like microfinance, which had greater chances of success, should be promoted.
In the ensuing discussion, delegates asked about the effect on developing countries of growing income inequality, the disorderly unwinding of global imbalances and international migration. Regarding global imbalances, some asked whether the keynote speaker shared the outlook that there would be a hard landing for the United States, while one representative asked about the role of multinational corporations in causing unequal development. ROGOFF said, in response, that increases in inequality were typical during periods of growth and required different solutions for each country, such as a graduated income tax policy or more spending on education and training, among others.
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IMF efforts to broker a multi-region deal in order to ensure smoother adjustment were encouraging, but a slowdown of the United States economy was not a grave concern since it would be balanced by growth in Japan and Europe. On migration, he said that, over time, developing countries with a large outflow of migrants gained when those migrants returned, so what would seem like a brain drain in the short run, might be helpful in the long run. Small States did not have economies of scale, but with good global governance and a rules-based global market, even small nations could operate their businesses on a large scale.
Other questions focused on what level of inflation a government could accept without undermining its ability to increase expenditures where they were needed, such as in social services reserves.
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If possible, Governments should aim for single-digit inflation and try to trade off lower inflation with other problems. While the erection of trade barriers could be a good thing in theory, in the real world, trade barriers often became entrenched. Politics played a role in the persistence of protectionism in rich countries, of which agriculture supports were the worst example, while China was an example of a country that had successfully removed trade barriers to promote growth.
With respect to shifting from aid-based growth to self-sustained development without shocking the economy, he remarked that many developing countries did not need loans and could even lend money to the IMF. Developing countries could establish adequate foreign exchange reserves to insure macroeconomic stability.
Geopolitical events could always influence the economy and, in fact, the end of the cold war had been a large factor in promoting better policies. Only in the case of sub-Saharan Africa had the financial transfers been positive, though those had declined in Post-war expectations had held that growing populations and the relative scarcity of capital in developing countries would attract financial resources from developed countries. Instead, the industrialized countries had been the major destination of net outward transfers from developing and transition economies.
Crisis prevention, multilateral cooperation in addressing systemic imbalances and the expansion of a stable flow of financial resources to developing countries were the key challenges to the international financial system. Yet, the improvements should not lead to complacency, as the future was fraught with uncertainty and risks.