Social policy in open economies: Forces for Upward Harmonization
social policy in open economies
Social policy in open economies: Forces Increasing the Demand for Social Policy Initiatives
Although various forces foster downward harmonization, other forces, often associated with globalization and open economies, foster upward policy harmonization.
Consumer groups and nongovernmental organizations, often internationally organized and coordinated through the Internet, can put pressure on brand-name multinationals through various mechanisms including consumer boycotts, ‘‘Internet outings,’’ and requiring a ‘‘social label’’ indicating the conditions under which the product was produced.
Multinationals themselves can foster upward harmonization by ‘‘exporting’’ the more advanced practices they follow in their home country and applying amore uniformset of their company practices across their different operations. Multinationals associated with brand names are especially sensitive to their public image and want to appear as good corporate citizens in the countries inwhich they operate. They often operate under voluntary corporate codes of conduct and follow International Labor Organization/ Organisation for Economic Co-operation and Development guidelines.
Open economies can also foster upward harmonization of social policies through the use of social clauses and side accords in trade agreements, such as the labor and environmental side accords under the North American Free Trade Agreement and the Social Charter of the EuropeanUnion (EU). In such circumstances, countries thatmay not have enforced their labor standards are required to do so or even to raise themto the higher standards of trading partners, perhaps with the aid of funds such as the EU’s Social Funds.
Social policies may also be harmonized upward through the emulation of best practices in the policy arena. To the extent that openness and globalization foster income convergence, themore rapid growth of the poorer countries may also enable them to afford more extensive social policies, again fostering upward harmonization. Empirical evidence supports the proposition that as income increases, the demand for social policies also increases (e.g., Fields 1995). Rodrik (1997) also emphasizes how social policies that assist thosewho are adversely affected bymarketoriented policies such as free trade can foster efficiency by reducing public resistance to such market-oriented policies; equity and efficiency need not always conflict.