making globalization work

This week's economist magazine has a special survey on globalization issues. It focuses mainly on one of the major problem and discontents (particularly in United States) associated with globalization these days: growing inequaility among people in developed countries where people of those in upper half of income indstribution have seen their wages and salaries increase exponentially (benefitting from gains of trade) while those in the bottom half of distribution are facing stagnant wages.

The magazine urges for reforms in labor market, health care and education system to tackle this growing disconent against globalization, which might eventually lead to a wave of protectionism.

excerpts..
In the neat world of economics text-books the downside of globalisation looks much like Galax. Low-skilled workers in a rich country, such as America, suffer when trade expands with a poorer country with plenty of much cheaper low-skilled workers, such as China.
If labour markets are efficient in the rich country the displaced workers should find new jobs, but their wages will probably fall. Although the country overall gains handsomely, these people are often worse off. Hence the case for redistributing some of trade's gains and compensating the low-skilled losers. Traditionally, trade-displaced workers have also tended to be older and less educated than typical workers, and to have worked in only one industry. They take longer than average to find another job and, when they find one, are more likely to see their wages fall....

As public fears of globalisation rise, so will the political appeal of these schemes. But they will have less impact than getting other, more basic, policies right. Globalisation underscores the need for a flexible, dynamic labour market and a well-educated, adaptable workforce. And a worker whose health care is not tied to his job will be less worried about trade than one for whom job loss also spells the loss of medical insurance. The tasks of freeing up labour markets (in Europe), reforming health care (in America) and improving education (everywhere) are far more important than any amount of experimentation with wage insurance or retraining schemes. If politicians really want to respond to the worries caused by globalisation, those are still the best places to start.

link:
http://www.economist.com/opinion/displaystory.cfm?story_id=8548661
http://www.economist.com/research/articlesBySubject/displayStory.cfm?subjectid=423172&story_id=8559758