Race to the Bottom Social Clause Refers Essay

  • Length: 6 pages
  • Sources: 3
  • Subject: Economics
  • Type: Essay
  • Paper: #74069823

Excerpt from Essay :

Race to the Bottom

Social clause refers to standards which contractors observe in order to cater for public contracts. They usually must be respected to avoid downward pressure on income and working standards. This is usually viewed to bring division between the rich (also referred to as the global north) and the poor (referred to as the global south). The difference between the north and the south has led to a competition that seems to be bringing the north down to the same level with the global south also called the 'race to the bottom'. I believe that the 'race to the bottom' is happening and modern trends such as globalization and liberalization continue to catalyze the process. This paper will look at the 'race to the bottom' theory and how it is gradually unfolding in present times.

Actually, in the real world the competition does exist. This can be proven by the importation of goods from china and Mexico to America which has led to a decline of production in the domestic industries and also unemployment to the citizens. Due to this, the United States market was only left with the option of offering low wage labor. The social clause led to the formation of the international labor organization (ILO). This organization works together with the world trade organization (WTO) in the regulation of standard labor in developing countries although their efforts have been futile in the recent past. The ILO's basic principles are usually the 'freedom of association and collective bargaining', the 'freedom from child abuse' and the 'the freedom from forced labor and discrimination' (Rudra, 2008).

In 1998 the states members adopted the basic principles rights to be observed at work although the U.S. And its allies later complained and rejected the ILO as it lacked authority to punish the offenders and so the developed countries involved said they opted for the WTO who were able to raise labor standards. This was in turn opposed by the south people who did not want the issue to even be discussed in WTO (Grandy, 1998).

At a millennium meeting organized by the United Nations General Assembly it was agreed that to reduce the poverty in developing nations there was need for introduction of a legislation that addressed the rights of the people in the south. The laws ("Freedom from hunger and poverty" and "Freedom to a descent living") were projected to implement higher labor standards in developing nations hence raising objections from the developing nations.

The developing nations were usually not in terms with the WTO's dispute settlement mechanisms. These are the abilities of the organization to punish offenders. The developing countries found the procedures followed asymmetrical. This is because it is very easy for an advanced nation to impose sanction to an advancing nation than vice versa (Grandy, 1998).

There have been academic contributions by the U.S. And non-U.S. academics which catered for labor standardization. In addition, the contributions were able to persuade organizations against child labor, providing least wage to the workers and also were able to convince the rich consumers to pay more for products with proper labor standards. The developing countries argued that their reason for slow application of the standard labor was not because of the government being corrupt but because of their economic situation (Rudra, 2008).

In simple terms the 'race to the bottom' theory can be examined in two ways. The simpler way shows that developed nations may suffer serious problems in the labor market due to globalization. Examining the theory in a more complex way shows that the advanced nations will suffer a great deal as the theory may lead to the attrition of labor standards in every nation including the developed countries.

Looking into the labor market in the developed nations over the last two decades, we can observe that it has had big problems such as increased mass unemployment, de-industrialization, and income dispersion increase (Rudra, 2008). These problems have been associated with globalization and in particular trade with low -- labor standards from developing countries. This has coincidentally occurred with the growth of industries in the south market and also it has led to the increase of employment to their citizens. However, the deficits of the north people nations' market have not only resulted from their trade with the south people, there are some other factors. As the poor and the rich in the market interact, the poor nations usually gain some benefits as their goods are of lower price and are usually of proper quality. The products from the two categories may be the same but due to the low pricing in goods from poor nations, the products of the poor nations may gain an advantage over the products from the rich nations. This in turn leads to the growth of the developing countries.

The 'race to the bottom' has mainly been influenced by the people and currency movement. The movement of people and capital to urban areas and to nations with low-priced labor has contributed to the unemployment of people or the hopping of people in jobs. The people have now changed to low paying informal jobs all this being contributed by the globalization. The competition brought about by the developing nations in the market leaves the industries with no option but to reduce their wages or their labor standards and this will in turn bring them down to the level of the south people with time.

Some countries usually allow investors in their countries with the aim of increasing the gross domestic product of the country. These countries may go to an extent of giving the companies the privilege of not paying taxes. The point they never care much to look into is the effects of this in relation to the wages of the workers in the country. The employees who are working very hard to get a good pay may suffer the disadvantage based on the wages that are not improving and sometimes even getting their wages reduced. These investors usually come into the country to offer competition and this they sometime achieve by producing cheaper products. This makes the local industries to lose their customers and so work very hard to fight the foreign investors and will only do this by lowering the prices of their products too and because their profit will reduce, the industries also reduce the wages of their workers.

The multinational investors usually take the advantage that they are very important to the nation and so do exploit the countries resources to the fullest before they move to another developing nation. They are always taking advantage because it is hard for them to be kicked out of that country as they are considered to be of much economic profit by the government not considering that they are leading to environmental pollution and even the closing down of local industries.

The effect of inviting investors in the developed nations can be clearly depicted from the United States of America who usually import products from china i.e. textile, electronic accessories and cutlery which come with cheaper prices. This has brought about the closure of many industries in the country and hence a lot of unemployment. The worker who previously worked in those closed industries may turn to working in informal jobs with very little pay.

The implications of the ILO to standardizing labor in all nation is to prevent the expected run to the bottom theory as there will be a lot of problems associated with it. This can be clearly shown when we look at the increase of slums in some nation due to the ongoing globalization and the liberization of trade (Tonelson, 2002). The people who are mainly affected by this are usually the female gender especially in Asia. In many countries the larger population moves to the urban regions and therefore when the wage is reduced they will be left with no option but to live in slums.

This problem of unemployment was experienced in the United States of America after a partnership they made by the name NAFTA which cost them an approximate 700,00 job opportunities and as they have made another treaty with the South Korean state there is a likelihood of another 150,000 job positions being lost. There is another partnership by the name trans-pacific partnership in which Vietnam is a member. Looking at the per capita income of Vietnam in one year was 1,068 dollars while in the same year that of the U.S. was 40,584 dollar. In this we can conclude that the laborers of Vietnam are paid very little wages and so if this partnership is operational contractors may opt to seek workers from Vietnam rather than the U.S. This will definitely bring unemployment to the Americans. The result of all this will be the Americans turning to lowly paid jobs bringing out the reality of 'the race to the bottom' theory.

The developing countries are usually at an advantage of growing as…

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