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| GLOBALIZATION AND EMPLOYMENT |
| Opening Statement |
Padmanabha Gopinath
Assistant Director-General of the ILO
and Director of the International Institute for Labour Studies
The theme of Globalization and Employment is a familiar one, but it has taken on new significance because of two recent trends.
The first is a political development, of which we heard echoes in France last December, and more recently in the election campaign in the United States. It is what Klaus Schwab, President of the World Economic Forum, has called "the backlash against globalization". In its most general sense, it reflects the growing uncertainty and insecurity caused by global structural adjustment - the sort of uncertainties and resentments which were witnessed in the 1970s and 1980s in the South, and which now afflict the North. The mobility of financial capital and of production systems is being brought home to an increasingly wider section of public opinion. In 1980, nearly 70 % of the world's labour force were sheltered from international competition by trade barriers, capital controls, and planned trade. By 2000, less than 10 % of workers will be living in countries insulated from world markets. The newly industrialized countries of East Asia are already major actors, and the second tier of industrializing economies of Southeast Asia is now emerging on the scene. By 2000, China, South Asia and the countries of the former USSR, representing nearly half the world labour force, will enter the global market. These changes are occurring when the North is striving to overcome pre-existing problems of unemployment and wage inequality. Coincidence between globalization and unemployment becomes causation in public perception when stock markets plunge as employment figures rise.
It is this identification of globalization with employment problems which has led to the public backlash. Marc Blondel, the Secretary-General of the French FO, speaking in Davos, soon after the events of December 1995 in France, expressed a popular view when he said that "public authorities are at best subcontractors of the enterprise. The market governs, the government manages." In the United States, Patrick Buchanan feels that, "What is good for General Motors, is no longer good for America if General Motors is shutting down plants in Michigan and Ohio and opening them up outside Mexico City." Are globalization and its conduit - the transnational corporation - beginning to be seen as part of the problem, rather than, as hitherto, as part of the solution?
The second development is that while public perceptions associate globalization with increasing unemployment, there is increasing scepticism about such a causal link in academic circles. Neither trade nor capital flows, it is argued, provide a significant explanation for the problems of employment and wage-dispersion. It has been pointed out that industrial country imports of manufactured goods from developing and transition economies represent less than 4 % of GDP in OECD countries, while exports to these countries are a major source of counter-cyclical demand. The cumulative net transfer of capital to these countries represent only 2 % of the total capital stock of the industrialized economies. Academic opinion is moving to the view that the difficulties lie less with globalization, than with long-standing structural problems in the labour and product markets; with technological change; and with problems of macro-economic policy.
This gap between public perception and expert opinion is a striking feature of the debate today. Whatever the final scientific judgement may be, we have to recognize that the coincidence of globalization with unemployment represents an example of political, rather than economic, causation. Perceptions of global structural adjustment are generating political and social tensions, which will drive this debate well into the next century.
Professor Jeffrey Sachs brings unusual qualifications to address both the politics and the economics of the question. He is a professional economist of distinction, while being well acquainted with political realities. He is the Director of the Harvard Institute for International Development, the Galen Stone Professor of International Trade at Harvard, and a Research Associate of the US National Bureau of Economic Research. A list of his publications runs into 12 pages. As policy maker, he was the architect of the Bolivian Stabilization Program between 1986 and 1990, and subsequently an adviser to several Latin American governments on financial reform. He assisted Poland's first post-Communist Government in launching radical economic reforms. From 1991 to 1994, he advised President Boris Yeltsin on macro-economic stabilization and market liberalization.
Professor Sachs has delivered the Lionel Robbins Memorial Lectures at the London School of Economics; the John Hicks Lectures at Oxford University; and the David Horovitz Lectures in Tel Aviv. We are very happy to welcome him this evening to the ILO and to the International Institute for Labour Studies.
