Troubled By Trade

Jagdish Bhagwati presents a hip and erudite response to globalization’s discontents, finds Ila Patnaik

Globalization is the catchy word that has been given to the global movements of ideas, capital, goods and people. It is one of the most powerful forces reshaping our planet.

All of us can remember a time when foreign goods were smuggled, foreign travel was a rarity, foreign books and magazines were hard to come by, where ISD calls required spending Rs 120 per minute, and where email did not exist. While that world is inexorably gone, there is considerable debate on whether its demise was a good thing.

Two prominent recent books have pondered the issues: one by Joseph Stiglitz, titled Globalization and Its Discontents, and the more recent book by Jagdish Bhagwati titled In Defense of Globalization. Stiglitz is a Nobel Laureate, for his brilliant work on the economics of information. Bhagwati is very likely to get a Nobel Prize, for his brilliant work on trade theory and the political economy of economic development. It may be said that he translated a ringside view of the cancerous growth of the Indian state in the 1960s into a Nobel prize.

The two books are sometimes caricatured in the press as representing opposite viewpoints. Bhagwati is portrayed as an ‘‘orthodox economist’’ (if there can be such a thing), and Stiglitz as a renegade and an iconoclast. Upon reading both books, I certainly did not come away with such a feeling. I found much wisdom and insight in both books, and felt that both authors would agree with each other about the impact of the mobility of goods, capital, labour and technology.

These may be summed up as follows. One, the movement of ideas is good: our lives are better off because we learned about vaccination or spark plugs. Two, the movement of capital is good: the growth of a poor country is hastened when foreigners bring capital in. Three, the movement of goods is good. This is the only subtle piece, where economic logic takes us a bit beyond common sense. Sometimes, we believe that trade cannot take place between two countries when one is superior to the other in the productivity of making all goods. But this proves to not be the case. Even though Bangladesh may be impoverished, trade between India and Bangladesh benefits both. Even though Bihar may appear to have nothing to offer to Maharashtra, trade between Bihar and Maharashtra makes both better off. “Gains from trade” is a profound insight of economics.

Finally, the movement of people is good. Whether Indian workers go to the US, or US worker migrate to India, in either case, both countries are enriched by these transfers.

Jagdish Bhagwati has written an impassioned and rich account of these ideas, and their critics, directed at a western mass audience. But the issues have limited resonance in India, where a ‘‘large mass of opponents of globalisation’’ do not exist. There are idealistic young people in the West who believe (however wrongly) that when FIIs buy shares in Bharti Telecom, or Hutchison runs a phone company in India, it hurts Indian interests. As Bhagwati points out, these young people tend to be educated in English or Art or French literature, and hence lack an understanding of the issues. His book is primarily targeted at such young enthusiastic people whose social concerns have outstripped their knowledge.

The Indian situation is different, where western-style NGOs, which he discusses at length, are absent. In India, debates about economic policy have coalesced into two camps. On one hand is the mainstream, where most people embrace globalization. They are happy with FDI if it brings more jobs, improves the quality of the food they eat, the clothes they wear, the phones they use. They are happy with trade if it brings competition and pushes down the prices of goods they buy.

On the other had are sections of the left and the Swadeshi Jagaran Manch and the RSS, who have deeply held beliefs of the exact opposite nature. In general, they are suspicious of globalization and want the government to refrain from international trade, keep out foreign capital and western technology. Domestic capitalists, of course, have a vested interest that these barriers to globalization are put up and they lobby for them. They are the biggest gainers in a closed economy.

Bhagwati’s book can help illuminate this Indian discourse, to the extent that people with left and right leanings will read his book. He also addresses the impact of globalisation on social issues like child labour, gender relations, culture, environmental damage, labour standards and poverty. For any reader who wants a full-fledged analytical and historical inquiry into the fascinating impact of globalization, the book is highly recommended.

Ila Patnaik