Globalised labour is great benefit to all

In: Uncategorized

17 Apr 2007

My comment from Monday’s Fund Strategy on the globalisation of labour is published below. It is based on a chapter in the latest World Economic Outlook from the International Monetary Fund (IMF). As always there is much else in the Outlook for those interested in contemporary trends in the world economy.

One of the most important but least discussed topics in understanding the world economy is the globalisation of labour. It is therefore welcome that the International Monetary Fund has included a chapter on the subject in its key twice-yearly World Economic Outlook.

The IMF estimates that the effective global labour force has risen fourfold over the past quarter century. Most of this increase has taken place since 1990.

There are several channels through which this globalisation process occurs. Increasing trade, offshoring of production and migration all contribute to a more global role for labour.

The objections to this process are unconvincing. Labour’s globalisation should be supported as an unqualified good. Many of the objections are based on the common misconception that economics is a zero-sum game. In other words, one person’s gain is – erroneously – seen as another person’s loss.

In reality the globalisation of labour represents a more efficient allocation of resources in the global economy. The size of the world economic pie can grow larger because labour is distributed where it is needed. Everyone can benefit from the growth this process generates.

Critics who attack globalised labour for resource shortages blame the wrong people for such problems. For instance, it is not immigrants who are to blame for the chronic shortage of reasonable housing in the south east of England. Successive governments have discouraged housebuilding through excessive regulation. Often this takes the form of defending the “green belt” around London and other environmental regulations. In the name of defending the planet both migrant workers and the indigenous population have to rely on a stock of ageing and excessively expensive homes.

Another objection to globalised labour is cultural. The charge is that high levels of migrant labour will undermine the integrity of national cultures. Such views are insufferably parochial. The mixing of people from different backgrounds is a positive development. In any case, the similarities between people are far more important than the differences.

It should also be remembered that the globalisation of labour is immensely beneficial to developing countries. Remittances from overseas workers and the proceeds of international trade play a key role in the development process.

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