Globalization and the Race to the Bottom in Developing Countries: Who Really Gets Hurt?

Nita Rudra, Globalization and the Race to the Bottom in Developing Countries: Who Really Gets Hurt? New York: Cambridge University Press, 2008. Tables, figures, appendix, bibliography, index, 294 pp.; hardcover $90, paperback $29.99.

This study is motivated by three central questions: does greater integration of developing states into the global economy cause them to make significant cutbacks in social spending (social security and welfare, education, health) or lead to a "race to the bottom" (RTB)? Are the poor in developing states hurt the most economically when their country becomes more integrated into the global economy? Does that integration lead to fundamental changes in the countries' welfare (or distribution) models that would suggest convergence toward a single model (a liberal one)? These are important questions, given that observers who are skeptical about current developments in economic globalization frequently answer the first two in the affirmative yet rarely systematically examine the empirical record. The third question has largely been neglected in the comparative political economy literature.

Nita Rudra argues that while greater integration into the global economy has caused developing countries to cut back on social spending (presence of RTB) due to their fragmented labor market institutions (labor power), the middle classes in them have been the ones most affected by such cuts. Furthermore, she argues, specific and enduring labor-government relations in developing countries and the institutions underpinning their welfare models have prevented convergence among them. Finding significant empirical support for her hypotheses through statistical analysis and case studies, Rudra shows how both international economic and domestic political factors have shaped the welfare policies of developing states in the era of economic globalization.

Through statistical analysis of pooled time-series cross-sectional data on a diverse and large number of developing countries over the past few decades, Rudra finds (in chapter 2) that higher levels of international trade in developing countries with weaker labor market institutions are associated with such states' making larger cutbacks in social security and welfare spending. (The effects of capital flows on spending are inconsistent, while the interaction effects between various economic globalization variables and the labor market institution variable on health and education spending are also inconsistent.) These findings provide qualified support for the RTB hypothesis: labor power is a key factor mediating the...