Trade and Industry

Monday, 01 January 2001

A Future for Labour in the Global Economy

  • Year: 2001
  • Organisation: TIPS
  • Author(s): Samuel Bowles
  • Countries and Regions: South Africa

From the standpoint of labor around the world the problem with globalization is not that it lowers market-determined wages and reduces employment - it is as likely to do the opposite, and which it does will vary from country to country. The more general problem is that labor depend on effective democratic states and trade unions to carry out policies of insurance, demand management, human resource development and redistribution; and the unimpeded movement of capital and goods may undermine their capacity do this and destroy the political coalitions which historically have pursued these objectives. But some of the more politically and economically successful examples of such policies -- for example Nordic social democracy and East Asian land reform-- have occurred in small open economies which would, on the above account, provide a prohibitive environment for egalitarian interventions. I seek to answer the following question: in a liberalized world economy, what programs to increase employment and real wages are implementable by democratic nation states acting independently? While in the absence of international coordination, globalization indeed makes it difficult for nation states to affect the relative (after tax) prices of mobile goods and factors of production and for this and other reasons may limit the effectiveness of some conventional strategies of redistribution, a large class of state and trade union interventions leading to substantial improvements in the wages, employment prospects, and economic security of workers is not ruled out by globalization. Included are redistributions of assets to workers in cases where the reassignment of property rights provides an efficient solution to incentive problems arising in principal agent relationships such as wage employment.