Globalization, Inequality, and

Human Rights/Environments
 Growing Inequality

 Inequality between (and within) countries

has increased over time.

 Causes?

 Does it matter?
How is Inequality Measured?
• Gini Coefficient: 0% means complete equality,
100% means one person has everything.
• Also, you can compare % of Income held by Top
10%, Top 20%, Bottom 10%, Bottom 20%
• Data are available through the World Bank.
From the World Bank
 GINI Coefficient Pre-Tax vs. Post-Tax
(source: OECD Statistics)

Canada GINI Index

Japan GINI Index (1976-
(1976-2010)
2010)
0.6
0.6

0.5
0.5

0.4
0.4

0.3 0.3

0.2 0.2

0.1 0.1

0
-8.32667268468867E-17
1975 1980 1985 1990 1995 2000 2005 2010
1975 1980 1985 1990 1995 2000 2005 2010

Post-Tax Pre-Tax
Post-Tax Pre-Tax
 GINI Coefficient Post-Tax vs. Pre-Tax
(source: OECD Statistics)

Denmark GINI Index

U.S. GINI Index (1976-
(1976-2010)
2010)
0.6
0.6

0.5
0.5

0.4
0.4

0.3
0.3

0.2
0.2

0.1
0.1

-8.32667268468867E-17
0
1975 1980 1985 1990 1995 2000 2005 2010
1975 1980 1985 1990 1995 2000 2005 2010

Post-Tax Pre-Tax
Post-Tax Pre-Tax
 Gini-index pre-tax and post-tax in South Korea
.32
Income Inequality (Urban, household )
.24 .26 .28 .3

1990 1995 2000 2005 2010 2015

Year

Pre-Tax (& Benefits) Post-Tax (& Benefits)

Income held by the top 5%, 1% and 0.01% in S.
Korea (source: 한겨례 )
 Rising Inequality: A Challenge to South Korea
 Rising Inequality in the era of globalization

• Income Gini Index: 0.258 (1990~95)  0.314 (2016) (World

Bank)
• Wealth Gini Index: 0.55 (1980s)  0.67 (2000s) [Cheon et al.
2015]
• Income share by top 10%: 45% (1st in the Asia-Pacific region:
World Bank 2013)
 The Size of the Middle Class (50%~150%)

75
The Size of the Middle Class (50%-150%)
60 65 70

1990 1995 2000 2005 2010 2015

Year

Pre-Tax (& Benefits) Post-Tax (& Benefits)

 FDI inflows to South Korea
15000

2
10000

1.5
FDI ($ millions)

FDI (% GDP)
1
5000

.5
0

0
1980 1984 1988 1992 1996 2000 2004 2008 2012
year

FDI ($) FDI (% GDP)

 FDI Stock in South Korea
200

15
150
FDI Stock ($ Billions)

FDI Stock (% GDP)

10
100

5
50 0

0
1980 1984 1988 1992 1996 2000 2004 2008 2012
year

FDI Stock ($) FDI Stock (% GDP)

 Not-So-Positive Trade Effects on Equality
 Decreasing Marginal Effects of Trade on Economic Growth
o 110% of GDP (2003)  less than 40% (2013)

 Growth without ___________

o Employment inducement coefficient of export (persons per $billion):
• 58.6 (1990)  19.2 (2000)  8.3 (2010)  7.7
(2012)

 ___________-Promoting Trade Policy

o Expansion of irregular workers (declining labor costs)
o Lower corporate taxes
 If globalization has Positive Effects on
growth, why does inequality matter?
• Globalization creates opportunity for faster growth:
more trade, more FDI
• In 1980, over 83% of people living in low-income
nations lived on under $2 per day.
• In 2010, after successive waves of globalization, that
had fallen to just over 74% (World Bank 2013)
• “Bad jobs at bad wages are better than no jobs at all”
(Krugman 1997)
 Krugman’s points?

• While fat-cat capitalists might benefit from

globalization, the biggest beneficiaries are __________
________.
• There has been measurable improvement in the lives of
ordinary people.
• As long as you have no realistic alternative to
industrialization based on low wages, to oppose it
means that you are willing to deny desperately poor
people the best chance they have of progress….
 Then, why does inequality still matter?

• Relatively, poor countries (people) become poorer,

promoting complaints: people are sensitive to
_________________
• Absolutely, some countries (people) are not necessarily
better off.
• Inequality may get worse and worse!
• _______________ (e.g. tax policies) may contribute to
growing inequality: e.g., (“compensation policy is the
real cause of rising inequality in the U.S.”, Krugman
1994)
 SOUTH KOREA CORPORATE TAX RATE

https://take-profit.org/en/statistics/corporate-tax-rate/south-korea/
 Stiglitz’s points
• The middle class is too weak to support the
_______________ that has historically driven our
economic growth.
• The middle class is unable to invest in their future
(_________)  negative effects on growth
• Weak middle class + tax avoidance by top class  lower
tax receipt, less development
• Economic inequality = economic _________
(2015)
 Globalization and Human Rights
 Competition = Policy ______________?
(environmental, labor, health and safety
regulations)
• The Race to the bottom
• MNCs tend to move to low-wage, low-standard
________ countries (e.g., pollution havens).
• Governments in the rich countries may ______ their
standards, too.
• The California effects (Climb to the top): higher
standards will be transferred to countries with lower
standards
 Findings and Issues
Findings
• MNCs pay higher-than-average wages in developing
countries
• Working conditions in foreign firms are better than the
ones in local firms in general.
 Issues
• It is not fair to directly compare the average wage in
domestic firms to the one in foreign firms: Make sure
that you compare the same industries to each other
• Gap between labor protection law and ____________
• The ______ of trade and FDI matters.
     
예외규정 : 16.9g 허용 (2018 년 )
[ 출처 : 중앙일보 ] 2018 년 4 월 10 일
(1a) Trends in Labor Laws
(1b) Trends in Labor Practices
Netherlands China

10 12 14 16 18 20 22 24 26 28 30
24.5
24
23 23 23 23 23.5 23.5

Labor Rights (China)

21
20.5 20.5 20.5
19.5 19.5
19.5
19 19.25 19
18.75
18
17.5 17.5 17.5
17 17 17
16
15 15 15 14.5
14 14
13.5

10.5

8 9

1985 1990 1995 2000 2002

Year
Figure 1. Collective Labor Rights (Labor Law: 1985-2002)
T-test: OECD (26.36) > Non-OECD (23.16) > South Korea (17.74)
28
26
24
22
Labor Laws
20
18
16
14

1985 1988 1991 1994 1997 2000 2002

Year

Non-OECD OECD
South Korea
 Figure 2. Collective Labor Rights (Practice: 1985~2002)
T-test: OECD (24.85) > Non-OECD (22.56) > South Korea (17.5)

28
26
24
Labor Practice

22
20
18
16
14

1985 1988 1991 1994 1997 2000 2002

Year

Non-OECD OECD
South Korea
Labor rights in the World
source: http://www.huffingtonpost.com/2014/05/28/worst-countries-workers_n_5389679.html?
ncid=fcbklnkushpmg00000063
Rana Plaza collapse (2013, Bangladesh)
Case Study: Bangladesh and Fast Fashion
 In April 24, 2013: 8-storey garment factory collapsed, killing
more than 1139 people (and 2 rescue workers) who were
making clothes for giant fashion chains such as H & M and Gap
• https://www.youtube.com/watch?v=9Fkhzdc4ybw

• https://www.youtube.com/watch?v=t_mA9L1DSr8

 Aftermath:
• https://www.youtube.com/watch?v=Ao9r1nDWQ1g

 Empty Promises?
• Government is slow to improve working conditions and

safety despite the warning that international buyers would

move their orders someplace else if conditions are not met.
But yet again, poverty alleviation…

• Ready-Made-Garment industry did pull estimated 4

million-people in Bangladesh out of poverty
• Export-driven growth as a part of “Trade, Not Aid”
campaign
• Garment exports account for 80% of their total exports
• Roughly 5,600 factories employ 4 million people
• For the last 20 years, Bangladesh grew average 5 to 6%
annually
• The second largest garment exporter in the world
(China is the first)
 Implications

 Two possible routes

 Economic liberalization  More economic growth 
more _________  more respect for economic rights
 lower inequality
 Economic liberalization  Less respect for economic
______  less democracy  higher inequality

 Economic liberalization might be necessary for

growth. However, it does not have to have negative
effects on human rights in both developed and
developing countries