Trade Liberalization and Inequality Dynamics

Abstract

Inequality in a community occurs when there is inequitable access of its members to resources, whether material or immaterial.

Inequality is therefore synonymous with a lack of social equity.

Inequality takes different forms. There are, in fact, as many inequalities as there are resources. Thus, we distinguish between socio-economic inequalities, cultural inequalities and political inequalities....

A distinction must be made between 'fair' inequality and 'unfair' inequality where deprivation exceeds the thresholds of tolerance.

There are voices pointing the finger of blame at globalization and blaming it for the worrying increase in intra-and inter-regional inequalities.

Globalization is, therefore, a source of social inequality, particularly through trade liberalization, which is its main manifestation.

Free trade penalizes those countries that are ill-prepared for trade openness, especially those whose human capital is not a powerful weapon in the merciless competitive war being waged in the various markets.

Thus, in order to face up to the international competition implied by the opening up of trade, companies are seeking either to win the price battle through cost control or to differentiate their offer from competing offers.

The first strategic option often involves Northern companies relocating their production to developing countries with skilled and cheap labor, thereby destroying jobs in the countries of origin and feeding unemployment, deprivation and social inequality.

Firms opting for differentiation show their need for highly skilled labor, which results in the disadvantage of unskilled work and the widening of social inequalities.

All these accusations are, in our view, not sufficiently well-founded in the sense that inequalities are more a matter of domestic policy choices than of trade liberalization.

That said, it must be stressed that social inequalities are particularly glaring in developing countries, where growth only benefits a minority that holds the bulk of the wealth of the countries in question.

This is how their populations ended up rising up against the precariousness and injustice of the social systems in these countries (especially in the Arab world).

In developed countries, the succession of economic crises over the last decade can only lead to deterioration in living standards, exacerbating inequalities between different social classes.