WTO failing to help the world’s poor, WTO says

October 19, 2009

This is near the top of my to-read list, along with the Stiglitz Commission report on the financial crisis: a joint ILO-WTO report titled “Globalization and Informal Jobs in Developing Countries” (warning: big PDF download). According to this In These Times story, and corroborated by my quick scan of the executive summary, the report concludes that globalization has not helped the bulk of the world’s poor. The research presented here focuses on the creation of informal job sectors in developing countries which are unregulated and contribute little to overall development.

One nice tidbit:

Finally, globalization has added new sources of external economic shocks. For instance, global production chains can transmit macroeconomic and trade shocks through several countries at lightning speed, as observed in the current economic crisis. Moreover, in such circumstances developing countries run the risk of entering a vicious circle of higher rates of informality and rising vulnerability. Countries with larger informal economies experience worse outcomes following adverse shocks. Indeed, estimates suggest that countries with above-average sized informal economies are more than three times as likely to incur the adverse effects of a crisis as those with lower rates of informality.

Addressing informal labor markets is one side of the solution, but I am not convinced that this sentence must be as true as it is today: “globalization has added new sources of external economic shocks.” The aforementioned Stiglitz Commission report discusses how WTO-driven deregulation of financial services has made individual economies more exposed to global shocks. Reverse that trend, give countries more options for protecting (oops, there’s that word) their financial markets, and perhaps economic instability would not be quite so wildfire-like, consuming every country in its path in rapid succession. As long as chains of production are global, economic instability will always be global as well, but it seems to me that we’ve made things much worse than necessary by depriving individual countries of many of the appropriate tools for dealing with or forestalling such instability.

I’m sure I’ll have more intelligent things to say after I’ve actually read both of these papers.

Flying Whale


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