Bernard Hickey: Tough reality in a world of hurt

Does globalisation work to make most people better off most of the time?

Until recently it was mostly the more left-wing fringes of academia and political life that asked this question and didn't like the answer. The events of the past four years have shoved this debate firmly into the mainstream and now even the most conservative of economists and academics are questioning the drive to globalise everything.

These doubts are relatively new. The globalisation of companies, factories and money markets appeared for almost all of the past 30 years to be the ultimate proof that unfettered capitalism was the best way to run our economies and lives.

It seemed the most efficient way to do things and the fairest. People in Third World countries could get jobs in factories and get richer. People in rich countries could buy gadgets and other knick-knacks at cheaper prices without having to do the dirty, labour-intensive and boring work needed to produce them.

It seemed the perfect solution. Until it wasn't.

Four years on from the Global Financial Crisis and we're now in a second round of a global debt crisis. Economies in the West are slipping into Zombie-like states of perma-recession with high unemployment, falling real wages and intense social pressures.

High-paid manufacturing jobs that underpinned healthy middle classes have been gutted in the drive for globalisation and replaced by often insecure and lowly-paid jobs in fast-food joints, hospitals, shops and hotels.

Now a debate is growing after the publication of a research paper by mainstream economists in the United States with the dry title:The China Syndrome: Local Labor Market Effects of Import Competition in the United States.

It shows a quarter of America's manufacturing job losses are due to the effects of cheap labour in China and that the shift in jobs has significantly increased government spending on unemployment benefits, healthcare costs and retraining costs.

And the debate is starting in Australia too with reports of 7000 jobs likely to be lost in banking this year. This next wave of outsourcing of high-paid services jobs in IT, healthcare and banking to India and China will intensify the debate.

Globalisation makes things cheap and helps lift millions out of poverty, but the costs are borne largely by the developed world's middle classes. It is easy to shift capital and goods and money across borders. It is much harder to shift people, to expect them to uproot their families and history for the sake of an economic model that delivers many of the benefits to the very rich and the poor somewhere else.