One of the most important economic facts to understand right now is what Richard Freeman explains in this excellent piece (pdf file): the world labor supply has effectively tripled over the past twenty years, from about 1 to about 3 billion employed persons in the common global market. Part of this is due to population growth, but most is because China and the ex-Soviet states were not in the common global market in the mid 1980s; effectively India was not either due to trade barriers. If these enormous countries had not entered our common economy, there would only be about half as many workers competing for the world's available jobs.
Freeman emphasizes that this is not simply an increase in low-skilled labor supply. He estimates that almost 40% of the world college enrolled population is located in China, the ex-Soviet Union, and India. We've only just begun to feel the impact of that growth, as information technology helps make it possible to outsource more sophisticated tasks.
This is almost certainly the largest and fastest growth in labor supply in all of human history. One can view this change as throwing us back into a situation that is *conceptually* (though not practically, things are too different) similar to the situation Marx was theorizing about in the mid 19th century, when the rural population was a huge "reserve army" whose availability helped to blunt wage growth. Capital owners have a huge pool of underemployed and underpaid labor to draw on, and this increases their power very significantly compared to labor. So what we are looking at is a huge shift in the relative bargaining power of capital vs. labor.
This is a very different perspective from looking at globalization as just a win-win increase in economic efficiency due to "free trade", accompanied by a lot of lectures about the wonders of comparative advantage, as economists tend to do. It emphasizes the effects of economic change on power differentials and distribution instead of the effects on overall wealth creation. This does not mean that the wealth creation effects aren't there; they most certainly are. The increase in effective productive resources has massively increased global wealth as well, but it has simultaneously made it harder for workers in advanced countries in particular to access that wealth. (Although we do get some benefits through drops in prices).
One of the difficulties in thinking about the "right" way to respond to this is that the interests of the world working class are somewhat divided, at least in the short run. Globalization appears to represent a substantial increase in wages for the "new globalizers" in India and China. But this increase in many ways comes from the pockets of advanced country workers. But in the long run, interests are not so divergent. Workers in all countries would like to see wages for workers in less developed countries (LDCs) increase rapidly and eventually equalize, so that there is no longer such a cheap labor pool for capital owners to draw on. This will take a while but it need not take an infinite amount of time; if Chinese wages grow by 10% per year they will be at U.S. levels in 21 years, by 7% per year in 30 years.
So the best long run strategy should emphasize increasing the bargaining power of workers in less developed countries, so that their wages increase rapidly. The problem is that our most powerful institutional structures all operate at the national level, so it is difficult to bring those kinds of pressures internationally. Fair trade agreements based on worker rights could be one way. Of course national institutions probably tend to be dominated by employer interests as well. But U.S. employers have some collective interest in increasing purchasing power in less developed countries if they can access them as export markets.
Another way to increase wages in less developed countries is by increasing U.S. savings rates to lower the U.S. balance of payments deficit. Right now, too much of the capital gained by LDC producers from selling to us is being loaned right back to the U.S. to finance our borrowing. It should be be invested to make the Chinese economy more productive and thus raise wages there. In effect money that should be going toward growing LDC economies even faster so that they can converge with us is instead being spent on U.S. real estate and military spending.
In the short run though what we should want in advanced countries is a redistribution from capital owners to workers of the benefits of global economic growth. We should all benefit from the wealth creation made possible by the expanded market without unfairly penalizing workers for a decline in bargaining power that is no fault of their own. In other words, globalization strengthens the case for progressive taxation and other ways of redistributing money from rich beneficiaries of globalization to those who are victimized by it. But you wouldn't know this from the neoliberal rhetoric about globalization, which has an ideological emphasis on wealth growth instead of changes in bargaining power.
Marcus
