Reginald Budhan, Contributor
GLOBALISATION IS often defined as the free movement internationally of goods, investment capital, and intellectual services. These are equivalent to the three legs of a table.
From an economic perspective, by allowing the factors of production to move freely internationally, there can be a more efficient allocation and combination of resources.
The free movements of goods, capital and services, enable companies to take advantage of competitive sources of capital, raw material, labour and so on. They will, therefore, be able to produce increased levels of outputs of goods and services at low unit cost. This increases consumer surplus and the welfare of society.
If we permit the free movement of the factors of production (inputs), the firm is no longer constrained to use the factors of production available in a particular geographic area.
It can draw on factors worldwide. This means that the world can now supply factors to that firm and the world now becomes the market for the outputs.
A firm with global reach can truly benefit from economies of scale. Under a system of globalisation, world output of goods and services will increase and so will world Gross Domestic Product (GDP) and Per Capita Income (PCI). The implication is that the standard of living of people should increase internationally.
If the objective of globalisation is to increase the standard of living of the world's population, then globalization must be seen within that context.
In that case, true globalisation should involve the free movement internationally of all the factors of production (land, labour, capital and management/entrepreneurship).
Land is the only factor that is fixed and not moveable. All the others are quite mobile. In the case of land, since we cannot move it freely, the other factors should be free to move to it.
THE FOURTH LEG OF GLOBALISATION
Labour, a very critical factor of production, should therefore be permitted to move freely. The free movement of labour is the fourth leg of the table of globalisation which is not yet in place.
It is ironical that labour is not permitted to move freely internationally since technically it has legs and can move on its own.
If the objective of globalisation is to increase the welfare of the entire human race and to improve the world's Gini Coefficient, then globalisation of labour is the single most important item that must now be put on the agenda of the World Trade Organisation for consideration.
No one in the academic community will disagree that Pareto Optimality will be best served by the liberalisation of labour. So why are they not calling for the liberalization of labour?
Just as how the economists correctly supported capitalism and the market economy as the more efficient form of economic system for the allocation of productive resources, they should "come on board" and champion the call for the liberalisation of labour.
When you think about it, man considers himself to be at the top of the hierarchy of life forms. He even believes that he was created to have dominion over all the other life forms.
Yet the other animal forms enjoy free movement internationally, while man does not. The fish can swim from one territory to another if there is water connecting the territories. The birds can fly from one country to another. Other land animals can do the same. They do not require visas. Man is the only animal that requires a visa.
If the objective of globalisation is to improve the quality of life of mankind, then there are millions of people whose quality of life and standard of living can improve dramatically if globalisation includes the free movement of people.
Persons have different skills level, different expectations of life and if permitted to move freely can find employment consistent with their skills and income expectation.
Jamaicans who cannot find jobs locally, if permitted to migrate will find jobs that they can do at wages that they are happy to accept. By confining globalisation to the movement of goods, capital and intellectual services only is not enabling the world's population to benefit from the true virtues of globalisation.
The free movement of labour, or the "liberalisation of labour" is an important agenda item that the multilateral development institutions such as the WTO, the United Nations, the World Bank and especially the International Labour Organisation should seriously consider.
We know that liberalisation of labour is not in the interest of some countries. In a similar way, it is not in the interest of some countries to liberalise trade in agricultural products, liberalise government procurement and harmonise foreign direct investment protocol.
There is no doubt that globalisation will, in the long run if implemented successfully, lead to a better world with higher standard of living and improved human welfare.
However, in making that transition, in the short term there could be dislocation to some economies that are not able to compete. While globalisation has its virtues, it also has the potential to concentrate the world's wealth among the most competitive firms in the most competitive countries.
There could be mass poverty among those countries that are unable to compete. This could form the basis for social and economic instability among the world's poor, which could out-number the rich.
It could also contribute to the failure of governments such as we see in Afghanistan. If globalisation is not implemented in a fair way to benefit everyone, then you could end up with dualistic and unstable world in the long run.
THINKING OUT OF THE BOX
We could put the liberalisation of labour on the WTO agenda by inviting unemployed and under-employed persons in countries to form themselves into a non-government organisation (NGO) with branches in different countries.
That NGO could then mount a massive international lobby for the liberalisation of labour. This could be one way of fast tracking the matter. It could become a powerful bargaining chip for those countries that want liberalisation of labour.
Those that do not want it would have to make certain trade-off by providing incentives that would encourage persons to stay where they are. It would also hammer home to some countries that it is not in their long-term interest to dominate the markets of others to the detriment of firms operating in those countries since that will create economic and social instability and persons will want to migrate to the more prosperous countries.
But do not despair, whether we like it or not, it is just a matter of time before we have full liberalisation of labour.
By the formation of regional trading blocks (RTBs) such as the Caribbean Single Market and Economy (CSME) and the Free Trade Areas of the Americas (FTAA), these will become stepping stones to the liberalisation of labour in the long run.
With the formation of RTBs, we force the creation of economic, social and political homogeneity in each RTB. As soon as there is homogeneity among RTBs, the pressure will be so strong, that no one will be able to hold back full integration of the world economies. At that time, labour will be fully liberalised and people will be able to go wherever they can achieve a better standard of living.
Reginald Budhan is director of policy, planning and research at the Ministry of Commerce, Science & Technology and external lecturer at the University of the West Indies and the University of Technology. Views expressed in this column are those of the author and do not reflect those of the Ministry.
