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While this new globalization phenomenon may be beneficial for consumers looking to spend $10 for a shirt, compared to $100, one of the challenges of globalization lies in paying workers fair wages and still reaping a profit. Pro globalization economists argue that the standard of living has improved in many of these Third World countries and that the foreign-employed workers make more money than their neighbors. However, anti globalization activists argue that this increases the disparity between rich and poor, puts the local markets at the mercy of foreign businesses and puts many locals out of business. These are just a few of the challenges of globalization today.
The balance between fair consumer prices, fair worker wages and worthwhile profit for investors is the first of many challenges of globalization. For many businesses looking to go overseas, the infrastructure of building a new facility, in addition to the cost of training unskilled laborers and paying taxes is huge. Some employers are willing to make that short term sacrifice because the standard of living and wage requirements are lower, which will add more padding to their pockets in the long run. Obviously, the easiest solution for a business owner is to keep the factory at home base in the United States and cut their employee benefits or wages. Therefore, to keep foreign investment capital coming into under-developed nations, there must be an open door policy and trade strategy that provides either tax benefits or relocation facilitation in the overseas nation. However, in an effort to appease big spending investors, some leaders are quick to offer everything and demand nothing for their people, which is the crux of the globalization debate.
One approach the US government has tried was to offer tax breaks to companies starting up overseas so that employers could afford to pay the workers higher wages or offer salaried employment with benefits. However, this approach toward rectifying the challenges of globalization has sent many US companies overseas, resulting in a negative effect of globalization: the loss of American jobs (especially in the manufacturing sector) and no better deals for overseas workers, but a better profit for the slimy companies that made the move.
There are more effective ways of attacking the local challenges of globalization. Instead, products should be more expensive in the global markets so foreign workers can be paid fairly; tax breaks for the consumers can free up disposable income and offset the price difference. With a proposal known as "Fair Tax," people are offered a choice to pay a slightly higher price for something, knowing that they're conscientiously choosing to pay a fair price for fair work conditions.
Several independent fair trade impact studies have been examined to meet some of the challenges of globalization. In 2002, researchers at the University of Sussex examined fair trade as it related to the "Coocafe Cooperative" in Costa Rica and reported: "In light of the coffee crisis of the early 1990s, fair trade can be said to have accomplished its goal of improving the returns to small producers and positively affecting their quality of life and the health of the organizations that represent them locally, nationally and beyond." Similarly, "fair trade" coffee harvesters in Bolivia, Peru, Ecuador and Nicaragua have enjoyed greater access to credit and development funding, education, domestic food consumption and improved living conditions. After conducting a four year study, Michigan State University professor Daniel Jaffee concluded that fair trade is not a cure-all and requires wide-scale consumer participation to bring all participants out of poverty and create drastic changes.
The challenges of globalization are unique to each country, depending on resources, availability of resources, local markets and laws. For instance, the Dominican Republic enjoyed 10% growth in 2006, due to abundant resources, foreign investment and an open trade policy. On the other hand, their neighbor Haiti remains one of the least developed nations in the world due to political instability, government corruption, soil erosion and flooding. It doesn't matter how much foreign investment capital is coming in or what trade strategy is used if the GDP is mismanaged, squandered or put into the hands of rebels.
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