However, while globalization may in

However, while globalization may increase the need for governments to protect
certain sectors of the population, the fear is it will reduce their ability to do so. MNEs
can choose to locate around the globe, and so countries will compete to attract them by
reducing corporate tax rates and offering large subsidies. This process is called “the
race to the bottom” as governments compete with one another to offer the lowest cor-
porate tax rates. If governments do cut corporate tax rates, then unless they can in-
crease labor income taxes, they will not have enough revenue to finance the welfare
state and will have to reduce their generosity. Globalization therefore may remove the
ability to protect workers at the same time as it increases the need for this protection.
The same argument can be applied to government regulations concerning environmen-
tal protection, working standards, and minimum wages. One way to overcome this
problem is for governments to agree to common standards. For instance, the EU has
rules restricting the subsidies that its member countries are allowed to pay to firms in
order to prevent a race to the bottom, and efforts to create global environmental stan-
dards such as the Kyoto agreement are ongoing.
The race to the bottom argument rests on three assumptions:
1. MNEs do not have a strong reason to locate in one country rather than another,
so they are easily tempted away by subsidies.
2. MNEs do not bring substantial spillover benefits to offset the lower tax rates
they pay.
3. Corporate taxes are at the appropriate level to begin with and are not too high.
What is the evidence regarding the race to the bottom? Considering the overall tax bur-
den paid by firms, expressed as a percentage of GDP, there is little support—the corpo-
rate tax take has not declined over time. This does not invalidate the threat of the race
to the bottom; it just suggests that it has not yet operated strongly.

CULTURAL AND POLITICAL CONCERNS
We have focused above on the economic implications of globalization, but many of the
criticisms are more politically focused. Globalization produces a greater role for mar-
kets, so naturally globalization is seen critically by those with anticapitalist views. Glob-
alization also means that more resources are being allocated by market mechanisms
and this may lack legitimacy. For instance, consider the case of a country that has
banned child labor but now, because of globalization, finds itself importing textiles
made using child labor. No democratic decision has been made in the importing coun-
try, yet market forces have brought about this change. This is also an example where
countries begin to lose their national sovereignty—domestic rules cease to have juris-
diction. Other examples of this loss of sovereignty are connected to the power of MNEs
and the rules of the World Trade Organization (WTO) that lead domestic governments
to alter their policies. A loss of cultural sovereignty is also a common criticism of glob-
alization. Globalization has led to a proliferation of global brands and an alleged ho-
mogenization of cultures—“Americanization” or “Europeanization.”
This is a wide and varied list of criticisms of globalization. We have covered cul-
tural change, environmental problems, inequality and poverty, the monopoly power of
MNEs, instability, and insecurity. What is interesting is that these were precisely the
criticisms made of industrialization in the nineteenth century as domestic markets




211

Results (Indonesian) 1:

Namun, sementara globalisasi dapat meningkatkan kebutuhan bagi pemerintah untuk melindungisektor-sektor tertentu dari populasi, ketakutan adalah akan mengurangi kemampuan mereka untuk melakukannya. MNEsdapat memilih untuk mencari di seluruh dunia, dan jadi negara akan bersaing untuk menarik mereka denganmengurangi tingkat pajak perusahaan dan menawarkan subsidi besar. Proses ini disebut "_FITTEDras ke bawah"pemerintah bersaing satu sama lain untuk menawarkan terendah cor-tarif pajak yang porate. Jika pemerintah memotong tarif pajak perusahaan, maka kecuali mereka dapat di-lipatan pajak penghasilan tenaga kerja, mereka tidak akan memiliki penghasilan cukup untuk finance kesejahteraannegara dan akan memiliki untuk mengurangi kemurahan hati mereka. Globalisasi karena itu dapat menghapuskemampuan untuk melindungi pekerja pada waktu yang sama seperti meningkatkan kebutuhan untuk perlindungan ini.Argumen yang sama dapat diterapkan pada peraturan pemerintah mengenai environmen-Tal perlindungan, standar kerja, dan upah minimum. Salah satu cara untuk mengatasi hal iniMasalahnya bagi pemerintah untuk menyetujui standar umum. Misalnya, Uni Eropa telahaturan yang membatasi subsidi yang negara-negara anggotanya diperbolehkan untuk membayar untuk firms diuntuk mencegah perlombaan ke bawah, dan upaya untuk menciptakan lingkungan global stan-dards seperti perjanjian Kyoto sedang berlangsung.Perlombaan untuk argumen bawah bersandar pada tiga asumsi:1. MNEs tidak memiliki alasan yang kuat untuk menemukan di satu negara daripada lain,Jadi mereka mudah tergiur pergi dengan subsidi.2. MNEs do not bring substantial spillover benefits to offset the lower tax ratesthey pay.3. Corporate taxes are at the appropriate level to begin with and are not too high.What is the evidence regarding the race to the bottom? Considering the overall tax bur-den paid by firms, expressed as a percentage of GDP, there is little support—the corpo-rate tax take has not declined over time. This does not invalidate the threat of the raceto the bottom; it just suggests that it has not yet operated strongly.CULTURAL AND POLITICAL CONCERNSWe have focused above on the economic implications of globalization, but many of thecriticisms are more politically focused. Globalization produces a greater role for mar-kets, so naturally globalization is seen critically by those with anticapitalist views. Glob-alization also means that more resources are being allocated by market mechanismsand this may lack legitimacy. For instance, consider the case of a country that hasbanned child labor but now, because of globalization, finds itself importing textilesmade using child labor. No democratic decision has been made in the importing coun-try, yet market forces have brought about this change. This is also an example wherecountries begin to lose their national sovereignty—domestic rules cease to have juris-diction. Other examples of this loss of sovereignty are connected to the power of MNEsand the rules of the World Trade Organization (WTO) that lead domestic governmentsto alter their policies. A loss of cultural sovereignty is also a common criticism of glob-alization. Globalization has led to a proliferation of global brands and an alleged ho-mogenization of cultures—“Americanization” or “Europeanization.”This is a wide and varied list of criticisms of globalization. We have covered cul-tural change, environmental problems, inequality and poverty, the monopoly power ofMNEs, instability, and insecurity. What is interesting is that these were precisely thecriticisms made of industrialization in the nineteenth century as domestic markets 211