Top“Is Globalization A Race To The Bottom?”
Higher levels of international trade in developing countries with relatively weaker labor market institutions lead to cutbacks in welfare spending and social security (Ruth, 2008). Labor power becomes a strong factor mediating the effects of economic globalization on social spending (Vyborny and Birdsall, 2013). This suggests that social spending tends to decrease as a developing country’s economy opens to international trade and globalization (p.63). These assumptions tend to support the “race to the bottom in host countries” hypothesis.
Thus, Rudra (2008) argued that since labor market institutions in developing countries are weaker than their counterparts in developed countries, such institutions account for higher levels of “race to the bottom” in the former compared to the latter. Another aspect of globalization that has come under increased scrutiny is the practices and investment decisions of MNCs with regards to host countries.
This aspect pertains to the labor rights of workers as corporations seek out countries that have lower labor standards. A “race to the bottom” tends to be anticipated as governments may restrict labor rights to enhance their comparative advantage in providing a pool of low-cost labor to attract foreign direct investment (FDI) (Blanton and Blanton, 2012).