U.N. report foresees worker backlash

By Bhushan Bahree, The Wall Street Journal, 16 September 1997

GENEVA—Western industrialized nations are the leaders so far in globalization, but they may face a political backlash from the middle class over growing job insecurity, a United Nations report says.

“Growth and development do not automatically bring about a reduction in inequality,” said Rubens Ricupero, secretary-general of the United Nations Conference on Trade and Development, which presented the report.

Mr. Ricupero, once Brazil's finance minister, cited the United Parcel Service strike involving issues that included parttime work, French strikes in 1995, and electoral changes in western Europe (presumably in the United Kingdom and France) as evidence of an impending backlash. “The 1920s and the 1930s provide a stark and disturbing reminder of just how quickly faith in markets and openness can be overwhelmed by political events,” he told a news conference.

In an interview, UNCTAD's chief economist, Yilmaz Akyuz, said a backlash could take any form, including “xenophobia in Europe and Islamic fundamentalism” elsewhere. Mr. Akyuz said UNCTAD's study of income distribution globally showed that “certain groups and classes are in absolute decline,” and there was apprehension, especially among workers, about globalization's benefits.

UNCTAD's report is likely to irk proponents of liberalized markets and officials of such institutions as the World Trade Organization, who contend that globalization and freer movement of goods, services, technology, and capital spread benefits all around.

The report said industrialized countries erroneously favor anti-inflation policies instead of job creation and adequate pay; that freer markets in many countries entice investors to seek short-term capital gains instead of long-term productive investment; and that liberalization so far favors industrialized countries and denies trade advantages to developing nations in such areas as textiles and agriculture.

The result, UNCTAD said, was a global glut of labor and easy exit routes for capital, resulting in a contest between countries. This was made worse in some countries that had embraced the Big Bang theory of liberalization, opening their doors wide before their economies were able to deal with the consequences of footloose funds. The report was written before the recent financial crisis that began in Thailand and spread to other countries in Asia, an area that otherwise was a main beneficiary of globalization.

UNCTAD found that the income gap between the rich and the poor, between nations and within nations, was widening. “Globalization was supposed to close the gap, but it hasn’t,” Mr. Akyuz said.