Globalization creates a race to the bottom

The argument

The "race to the bottom" hypothesis states that if the global market opens to all countries, including low-wage and developing ones, then competition will force those nations to relax key environmental, economic and tax regulations — at the cost of social values — in order to attract investment. The mechanism is competitive rather than corrupt. A developing country seeking foreign investment has limited means of distinguishing itself. It cannot offer the infrastructure or the consumer market of a wealthy economy, so what remains within its control is the cost of operating there: the wages employers must pay, the environmental standards they must meet, and the taxes they must remit. Each of these can be lowered by decision. Once one country lowers them, the others competing for the same investment face a choice between matching it and losing the investment, and the standard that results is set by whichever government is most willing to give ground. Nothing in the process requires any individual actor to intend the outcome. Major economists like David Autor and Mariya Mileva have directed global attention to this growing threat, which becomes more ominous as more low-wage countries enter into the global fold — each entrant adds another competitor and pushes the floor lower still. This makes the hypothesis pertinent to today's changing world rather than a theoretical worry. The need to focus on wage equality and the environment, over the false tenets of "free trade" within a global market, is on this view more essential than ever before, because those are precisely the values the competition erodes first. The conclusion drawn is institutional: international standards for financial regulation should not be restricted by a globalized market that has no regard for common social value or for accountability among its constituent nations. If the market cannot generate those standards, they must be maintained from outside it.

Premises

Counter-arguments

Globalization does not automatically entail a global, unregulated “free market.” The precepts of globalization do not always coincide with those of an open economic system that ranks some countries above others. It could be within the context of social value, trade under particular nations’ regulatory practices, or several other inter-relational scenarios not outlined within the argument here. Additionally, a global free market does not necessarily mean a “race to the bottom” in social values - it depends on what a particular country views as most important to its citizens. It could keep regulatory practices in place while engaging in free trade on a global scale. The concept that globalization will inevitably lead to a race to the bottom is illogical.

Rejecting the premises

[Rejecting P1] “Race to the bottom” is a phrase that indicates economic disadvantage, but an open market does not necessarily incentivize countries to lower their regulatory standards. All countries possess different frameworks for their economic and social operations. [Rejecting P2] Globalization is not automatically tied to a race to the bottom because it is not always associated with a global open market. Additionally economic investment might be more important to developing nations, while environmental and social regulation should be emphasized by more developed nations. An open global market does not always lead to economic turmoil. [Rejecting P3] Globalization is not always bad based on the aforementioned arguments.