8/8/2019 In the Shadow of Prosperity

1/2

Andra Manta

In the shadow of prosperity

The term globalisation refers to the integration of national economies into the

international economy through trade, FDI, capital flows, migration and the spread of

technology. The process of globalisation has winners and losers, advantages and

disadvantages.

The winners are especially the developing countries in which medical health care has

improved, as well as other technologies such as internet. Still, the most important advantage

of globalisation is that it created a global market. We can now exchange goods and capital on

an international common market.

Globalisation has also disadvantages and probably the most world-wide one is the

growth in unemployment. This can be caused by improvement in technology or a change in

economic factors. If the rate of unemployment is increasing it means that the job market is

shrinking. This situation is encountered mainly in poor countries and that is why it is said that

Third World countries are the biggest losers of globalisation.

However, this doesnt mean that globalisation can not affect other parts as the world

as, for instance, Galax, a small town from Virginia. The town has some factories in which

most of the inhabitants work. When globalisation stroke, Chinese and Mexican competitions

were to strong, so 1/6 of the towns labour force was laid off.

In America, labour markets are flexible and that it is why the impact of globalisation

is felt more on wages than employment, in contrast with Europe. As a result, in Virginia, the

unemployment rate has not increased, but wages have significantly decreased.

The most affected were the elderly ones, the youngsters were retrained and now they

are better off. Few were enthusiastic about globalisation; the majority view it with scepticism

because freer trade was the cause of the unemployment and later on, the grounds of the fall in

wages.

When the town acquired an Economic Crisis Strike Force for displaced workers,

which helped people apply for Trade Adjustment Assistance (TAA), the inhabitants were

grateful for the Governments support.

Nevertheless, we have to take into consideration that the gains from trade are

significantly higher than the budget allocated for supporting the unemployed. In comparison

with America, Europe spends a lot more money for helping displayed workers through

trainings and other forms of unemployment assistance.

In recent years, there have been some structural changes in world trade patterns.

More and more money are put in counselling and trainings, both in America and Europe.

8/8/2019 In the Shadow of Prosperity

2/2

Andra Manta

Even so, the gap between the pay of the low-skilled and the high-skilled workers is

rising. Some economists said the gap can be explained through technological changes, rather

than globalisation, but nowadays, the distinction between trade and technology is irrelevant.

We should focus more on policies which improve job prospect for all workers,

because global competition will affect individual jobs - skilled as much as unskilled. Denmark

has already implemented a system of flexicurity, a model which seems to offer a

combination of labour market flexibility in a dynamic economy and security for workers.

The European Union is urging its members to follow the model. In the EUs

approach, flexicurity is about striking the right balance between flexible job arrangements and

secure transitions between jobs so that more and better jobs can be created.

America doesnt consider implementing this model; it allocates only a small

percentage of its GDP to support those who had lost their jobs, while Denmark uses almost

2%.

However, America is willing to put more money into helping those who lost theirjobs due to globalisation and other factors, so it proposed an expansion of TTA through wage

insurance.

In conclusion, globalisation underscores the need for a flexible, dynamic labour

market and a well-educated, adaptable workforce. Politicians should focus more on improvingthe health care, the education and should free up labour markets. Experimentation with wage

insurance and retraining schemes can wait a little longer.