globalization not so good after all

I’m no economist, but in theory, I’ve always backed globalization– open doors to competition to force locals to step up and have a chance to join the world pool of the emerging rich. The playing field eventually, will level off. In theory.

But even that theory admittedly has loopholes– presumption is the locals are able to step up. What then for those who are not equipped to do just that?

Mexico is now feeling the brunt of this, with globalization benefiting the elite (or “skilled”) more than the poor:

How does globalization boost inequality? The question is too fresh to have definitive answers, but it is clear that international competition forces local firms to add skilled workers who can handle newer technology and shed workers who can’t. Foreign firms bring new technology to developing nations and boost demand there for skilled workers by paying 10% to 20% more than domestic firms, says Dirk Willem te Velde, a research fellow at the Overseas Development Institute, a U.K. think tank.

Access to education also plays an important role. Developing nations rarely crank out enough college-trained workers to match growing demand, boosting the wages for fresh graduates. Unskilled workers who get laid off can’t find retraining and add to the pool of workers looking for low-wage work.

Case in point is Volkswagen, which manufactures cars in Puebla, Mexico:

Volkswagen AG, the city’s largest private employer, has had an especially large impact on the local economy. The company for years produced “Vochos,” as VW Beetles are called in Mexico, on an old-fashioned production line where dents were banged out with mallets. But as Mexico opened its economy, VW ratcheted up the demands on its work force.

The company started building the new Beetle in Puebla in 1998 and followed with other models aimed at hard-to-please U.S. buyers. New machinery was imported. Now welds are done by lasers. Robots paint the exteriors of cars for an even finish. In the past decade, the company has doubled the number of engineers to 700 and is planning to add an additional 100 this year. They make between $400 and $600 a week and are college graduates.

At the same time, VW slashed its Puebla work force by about 15% since 2000, to 14,000, mostly eliminating assembly jobs, and outsourced production of seats, steering wheels and wire harnesses to factories in a sprawling industrial park outside the gates of the manicured VW campus. Assembly workers at those factories are paid about one-third the $225 a week VW line workers make. Many auto-parts companies won’t hire laid-off VW workers, figuring they can’t make the financial adjustment.

Ricardo Mosqueda Martínez lost his job at VW and worked for a time at a parts supplier. He says, “When I first saw the paycheck, I thought to myself, is this a joke?” He didn’t last long there. Like many other VW employees, Mr. Martínez ended up in Puebla’s informal economy, working as a gypsy taxi driver and doing other jobs.

Source: Unexpected Results: Globalization Has Widened Income Disparity (The Wall Street Journal)

I once had this grand idea that manufacturing was a very good business because it immediately gave people jobs– but it’s such an overwhelming concept, so many gray areas. Grandiose plans of “helping out” are just that– grandiose.

I’ve been dipping my fingers in the development world for two months, trying to get a feel of how institutionalized “outreach” really works… I have so much to learn, it’s so easy to submit to vertigo and say there’s just TOO MUCH to learn, but wow, I still believe there’s good work being done out there (i.e. “helping out” these days is not just lip service).

As for me, for now, I’m still bent on hailing “writing and painting away in the mountains” as my dream lifestyle.