In Defense of Globalization

By Jagdish Bhagwati | Go to book overview

10
Wages and Labor Standards at Stake?

Marx was famously wrong when he predicted the progressive immiseration of the proletariat. 1 The real wages and living conditions of the working classes improved over the span of the nineteenth century, reducing the squalor that has been captured for posterity by social critics such as Chadwick and Hegel and by writers such as Dickens. 2 Marx got the effects of accumulation under capitalism wrong: it can, and often will, raise wages by increasing the demand for labor. But the improvement in working conditions was a result of social legislation such as the Factory Acts of England, which paved the way for the protection of workers.

Anti-globalizers fear that Marx is striking again: that, thanks to globalization, his prediction of falling wages is finally coming to pass. Labor unions in rich countries fear that trade with poor countries with low wages will drive down the real wages of their own workers and produce paupers in their midst. They also sense a threat to their labor standards, achieved through well over a century of anguish and agitation, as trade with poor countries with lower standards intensifies and some multinationals are seen to move to these low-standards locations, “taking jobs away.” The resulting pressure to lower standards produces in this view a race to the bottom as these rich countries abandon their high standards to ensure competitiveness.

These fears appear plausible, no doubt about it. Yet the facts strongly suggest that they are not supported by evidence. Most studies of the real wages of workers assign to trade at best a small fraction of the decline in real wages in the 1980s and much of the 1990s. I will argue here the stronger proposition that trade has actually helped the workers, not just harmed them insignificantly, by moderating the decline that was

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