Globalization and Human Welfare

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International free trade has become the foundation of neoliberal globalization. The main organizations for carrying out free trade are World Trade Organization (WTO) established on 1995, International Monetary Fund (IMF) and World Bank (WB). The main aim was to promote development and trade. Trade has become the lens through which development is perceived, rather than the other way round . The concept of trade evolved right from Adam Smith and David Ricardo who introduced the concept of comparative advantage which compares the productiveness across countries. Here countries make use of their natural resources, climate, skills etc. According to Paul Krugman trade reflects arbitrary or temporary advantages resulting from economies of scale or shifting leads in close technological races. Thus comparative advantage can be created through technological innovations. Globalization is propelled by economics but shaped by politics; the same applies to free trade both in developed and developing countries. Since developed countries focuses on capital intensive goods and developing countries on labour intensive goods especially agricultural commodities, there is always a difference in ‘real’ terms. But developing countries like China, India, Korea has been shifting to manufactured and service products for exports since 1970’s. According to Paul Samuelson trade has a strong influence on income distribution, since wages are smaller for labour intensive goods and in low wage countries this has a major influence on the wages on high income countries when products are exported from low wage countries to high wage countries. But Paul Krugman states that this relationship cannot be quantified. When we look into the current global scenario income ... ... middle of paper ... ...ca and smaller countries who are largely dependent on aid and foreign investment are highly vulnerable. The main variables that seem to sustain growth include more equal income distribution, democratic institutions, openness to trade and foreign investment, and an export structure favouring manufacturing and relatively sophisticated exports underpinned by a competitive exchange rate. We have to move towards a more social system where human welfare and climate change have to be given importance by focusing more on localization since we have seen that globalization has serious repercussions on human well being and ecosystem. What needs to be done is there should be a transformation of the current institutions that govern the politics of globalization. Human welfare needs to be integrated into the system and trade should be fair rather than resort to protectionism.

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