TCS Daily

Liberté! Egalité! Sororité!

By Jan Arlid Snoen - June 10, 2004 12:00 AM

OSLO -- The case for globalization is most often made in economic terms, pointing out beneficial effects on economic growth, welfare and poverty reduction. Although important, such benefits, even if difficult to refute, fail to persuade many, especially women. That's perhaps why the prominent trade economist Jagdish Bhagwati devotes a whole chapter in his new book In Defense of Globalization to its impact on women. Foreign Policy magazine looked into the same subject in the 2004 A.T. Kearney/FOREIGN POLICY Globalization Index. In this fourth edition of the annual index, the magazine compared results from the globalization index with the latest U.N. rankings in the Gender-related Development Index. The latter measures women's well-being across a range of indicators, including health, literacy, access to education, and earned income, all adjusted to account for inequalities between men and women. The results clearly show that women tend to be better off in the most globally integrated countries.

The last few decades women have been increasingly empowered through better employment opportunities outside of the home. As Nobel Laureate Amartya Sen points out, women's status in society and especially within the family is enhanced by the ability to earn their own income. Globally the gender gap in labour participation rate has been closing. In many poorer countries a more open economy has contributed to this trend by increasing industrial production, not least in sectors dominated by women. The Georgetown University economist Theodore Moran has shown in his book Beyond Sweatshops that the export industry has become an important gateway into the formal labour market for women. Edward Graham, in his book Fighting the Wrong Enemy, and with his colleagues at the Institute for International Economics in Washington, has presented research that strongly indicates that companies involved in the international economy -- whether they are multinationals or companies producing under contract with multinationals or simply local export-oriented companies -- tend to pay higher wages than domestically oriented companies. Thus the export industry not only creates employment opportunities, but wages and labour conditions are also in general better than what would otherwise be available.

Bangladesh illustrates these points. The garment export industry was practically non-existent before 1979, and was then established in close cooperation between a local entrepreneur with government contacts and the giant Korean Daewoo conglomerate. In took only a few years for the know-how to spread from the original partners, creating a vast industry that accounts for half of Bangladeshi exports and employs some 1.4 million people, of which a large majority are women. In fact, two out of three Bangladeshi women employed in the formal sector are working in the garment industry, where the wages are some 25 percent higher than the country average. This breakthrough for female employment is particularly astonishing in a Muslim country, where women often are prevented from working outside the home.

But isn't it the case that employers in poor countries prefer women precisely because they are paid lower wages? This is true, but market forces works to reduce discrimination, not to strengthen it. If discrimination exists, a woman of comparative ability would be cheaper to employ than a man, and rational employers would bid up their wages until reaching equilibrium.

In his classical work The Economics of Discrimination, Nobel Laureate Gary Becker showed that discrimination is economically irrational. To put it bluntly: A company that prefers to hire a stupid man instead of a clever woman, will soon loose out in a competitive economy. But Becker also points out that when a company is shielded from competition, the cost of irrational discrimination can be reduced and perhaps even eliminated. Building on Becker, Bhagwati stresses that not only lack of competition may protect those who discriminate, but also all-embracing prejudices. Then everybody might refrain from breaking ingrained custom and putting aside prejudices, even if that would mean reaping the economic benefits of going against irrational discrimination. Opening up the economy to foreign companies not only increases competition, but it almost certainly also breaks such universal prejudices as foreign companies do not carry the same cultural legacy.

Fortunately Becker's theory can be empirically tested. There is no doubt that competition has increased in most countries and most industries over the last twenty years, through internal market reforms as well as increased economic openness. In the same period (1980-2000) OECD Employment Outlook 2002 identifies a clear narrowing of the gender wage gap in most OECD countries. Narrowing our focus to the 1990's, the result is the same. The American researchers Sandra Black and Elisabeth Brainerd tested the correlation between the unexplained gender gap and increased trade, using U.S. data from 1977-1994, and confirmed Becker's hypothesis. Up to the 1980's both the gender wage gap and international trade were relatively stable, but since then trade has increased and the gap narrowed. Since their seminal paper, much research has been done on the same subject, also including many developing countries. Hildegunn Kyvik Nordaas at the WTO sums up this research, and some new evidence has recently been presented by Remco H. Oostendorp at the World Bank. In most countries a connection between more trade and lower wage gaps has been established, although there are some exceptions.

The labour market and economic growth are not the only channels through which globalization provides a positive impact on women's welfare and liberty. Globalization also stimulates democracy, which tends to give women a stronger voice, and traditional societies are more exposed to western liberal values, including feminism. It's a pity that most Western feminists seem to be anti-globalization, combating the forces that help liberating themselves and their even more unfortunate third world sisters.

Jan Arild Snoen's book on globalization (in Norwegian) has just been published by the new think tank Civita in Oslo.


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