Can globalisation work for labour?
A growing chorus of skeptics blames globalisation for the world’s challenges: it has enabled many people and economies to prosper, but at what cost?
Global trade sits at the center of that critique. While evidence suggests the pros far outweigh the cons, it can be argued that the negative impact of globalisation on workers in global supply chains is inevitable and insurmountable.
Before everyday products like clothing and smartphones reach consumers, countless workers are involved in their production, despite the growth of automation. Some work in less-than-ideal conditions, where they are not always fairly compensated.
Can we do better?
Policymakers, leading economists and business executives are putting greater focus on the pitfalls of globalisation, as it becomes increasingly visible how economic pursuits have often not reached the workers that are integral to global trade and the goods and services we use every day.
While there is evidence that challenges are increasing in some countries – particularly in the context of a recessionary environment, decades of data show that globalisation has had a positive outcome, not just for economies but also for people.
Perhaps the greatest pro-globalisation argument is in how it has lifted hundreds of millions of people out of poverty and narrowed the income gap between developed and emerging markets over the past few decades. A recent simulation showed that free trade has created net social welfare gains in 54 low and middle-income countries, from the transfer of knowledge and technology to widening access to talent.
Ongoing criticism of globalisation often overlooks these enduring benefits.
However, it is clear that global trade must become fairer for people across the entire global supply chain. Add this to the need to make supply chains more sustainable and transparent, to address environmental harm and governance challenges, and the list of issues to address is daunting.
Technology is a game-changer
There is good news in emerging technologies like blockchain that promise to make these goals achievable by increasing visibility, traceability and transparency. Inaccurate data and poor information flow between the links in supply chains often make it difficult to determine whether a product has been sourced ethically and sustainably. The immutability of blockchain engenders trust among partners and makes it possible to incorporate control initiatives around things like the provenance of raw materials, level of emissions and human rights abuses.
In Australia, the World Wildlife Fund (WWF) trialed a blockchain-powered platform to combat illegally and unethically sourced tuna in the fishing industry, which is known for slave labour and human rights abuses. Success led the WWF to launch a new impact venture with a mission to drive increased responsible production and consumption through supply-chain traceability and transparency technology.
Other tech-driven improvements include the use of DNA tracing to identify where products are made. Every place in the world has a unique signature containing different types and combinations of micro-organisms. Analysing this signature can identify a product’s source and the stops it made along its supply chain journey. In turn, businesses gain a better understanding of a product’s provenance.
For instance, laboratory testing can reveal the source of production of garments and help confirm any association with adverse labour conditions. These capabilities help enforce sanctions and restrictions meant to prevent exploitative labour practices and enable officials to shape policies that have the potential to change labour laws and blacklist bad actors.
The need for human-centered supply chains
Technology alone cannot ensure that the people participating in global supply chains are treated fairly. Governments need to address the root cause, through policy and regulation, rather than limiting the free movement of people, goods and services that make trade work for global benefit.
As manufacturing evolves, governments will be under increasing pressure to help local workers adjust to structural change when jobs are exported.
Meanwhile, countries at the heart of global supply chains will need to balance expanding social assistance and improving compliance with labour regulations to extend jobs and earnings gains to more people across society. More importantly, they need to take steps to better protect their workers and the environment.
Corporations have a crucial role to play: a report published in 2016 showed that 50 of the world’s largest companies had a hidden workforce of around 116 million people. These global companies need to radically improve the transparency of their supply chains and adherence to ESG criteria, to ensure issues such as forced labour, human trafficking and environmental risks can be addressed. From policy to the adoption of digital tools that create greater transparency, they must take accountability and drive positive change.
The way forward lies in more sustainable, inclusive, human-centric supply chains that maximise the benefits and minimise exploitation. Now is the time for governments and businesses, including banks, to work towards a more sustainable trade model that uses technology and policy to build an enhanced global trading system that lifts all boats.
Produced in partnership with Bloomberg Studios.