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What is a Race to the Bottom?

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  • Written By: Brendan McGuigan
  • Edited By: L. S. Wynn
  • Last Modified Date: 12 July 2014
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A race to the bottom is a socio-economic concept that occurs between nations. When competition becomes fierce between nations over a particular area of trade and production, the nations are given increased incentive to dismantle currently existing regulatory standards. Such a race may also occur within a nation (such as between states or counties), but this occurs much less frequently because the federal government has recourse to enact legislation slowing or halting the race before its effects become too pervasive.

The term is often used pejoratively, to describe the elimination of what is seen as beneficial legislation: environmental safeguards or workers' rights, for example. It should be noted, however, that in many instances a race to the bottom proves to be a force for good by eliminating pointless bureaucracy or graft.

In the modern age, a sharp increase in races to the bottom has been seen as a direct result of the World Trade Organization and its policies. By actively eliminating what are seen as barriers to trade (often including labor and environmental laws), the WTO begins a push towards "freer" trade, which escalates quickly into the dismantling of standards so that countries can better compete.

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It may be seen that with the global push towards free trade in the 1990s, labor is now very susceptible to the race to the bottom model. With an extremely large labor pool to draw from worldwide and a virtually unrestricted ability to move capital, multi-national corporations may now freely move their operations from country to country, following the most affordable labor. This in turn affects labor laws, particularly in developing countries, where things such a minimum wage or required overtime pay create a large barrier to lowest-cost labor. The race, therefore, dictates that more and more nations (again, particularly in the developing world) will eliminate their labor laws.

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Discuss this Article

Certlerant
Post 4

I understand the frustration with that sort of situation, Glasis, and I sympathize.

But, I also know that the city of Pittsburgh is cleaner than it ever was in the steel producing times, and residents are proud of its renaissance.

Glasis
Post 3

Certlerant, you might change your opinion if you lived in the Pittsburgh area in the 1980s.

Up until that point, steel mills were the lifeblood of western Pennsylvania.

Then, the EPA came in and not only imposed new laws on environmental filtering systems for the mills, but required the companies to complete multimillion dollar changes in a very short time frame.

As a result, most of the mills were forced to move to other countries or other parts of the United States where, for some reason, the rules were less restrictive.

It has taken the area about 30 years to reinvent itself, and some mill communities will never be the same.

Certlerant
Post 2

A race to the bottom that eliminates environmental codes may benefit the countries or municipalities trying to compete in trade, but could have a disastrous effect on the world as a whole.

Environmental laws and codes are usually not popular in the business world and can be painful to the company's bottom line, but they still help to make the air we breathe and water we drink cleaner and safer.

Many people like to think that the Environmental Protection Agency and other agencies impose restrictions in some attempt to hurt business in a specific area, but that is simply not true.

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