Thursday, December 14, 2017

The Backstory of Globalization, The One Not For Public Consumption.

Former World Bank chief economist and Nobel laureate, Joe Stiglitz, knows a thing or two about inequality. It formed the core of his PhD thesis and the son of a school teacher and an insurance salesman has been dealing with inequality and poverty ever since. He also backed Jeremy Corbyn for Labour leader. If you're interested, his Wiki entry runs to the length of a short book.

Stiglitz has also written extensively on our prime minister's favourite pass time, globalization. He doesn't see it the way Trudeau the Lesser sees it. Not at all the same. Stiglitz writes that globalization has two stories, one not for public consumption.

...discontent with globalization has fueled a wave of populism in the United States and other advanced economies, led by politicians who claim that the system is unfair to their countries. In the US, President Donald Trump insists that America’s trade negotiators were snookered by those from Mexico and China.

So how could something that was supposed to benefit all, in developed and developing countries alike, now be reviled almost everywhere? How can a trade agreement be unfair to all parties?1

To those in developing countries, Trump’s claims – like Trump himself – are laughable. The US basically wrote the rules and created the institutions of globalization. In some of these institutions – for example, the International Monetary Fund – the US still has veto power, despite America’s diminished role in the global economy (a role which Trump seems determined to diminish still further).
To someone like me, who has watched trade negotiations closely for more than a quarter-century, it is clear that US trade negotiators got most of what they wanted. The problem was with what they wanted. Their agenda was set, behind closed doors, by corporations. It was an agenda written by and for large multinational companies, at the expense of workers and ordinary citizens everywhere.

Indeed, it often seems that workers, who have seen their wages fall and jobs disappear, are just collateral damage – innocent but unavoidable victims in the inexorable march of economic progress. But there is another interpretation of what has happened: one of the objectives of globalization was to weaken workers’ bargaining power. What corporations wanted was cheaper labor, however they could get it.

This interpretation helps explain some puzzling aspects of trade agreements. Why is it, for example, that advanced countries gave away one of their biggest advantages, the rule of law? Indeed, provisions embedded in most recent trade agreements give foreign investors more rights than are provided to investors in the US. They are compensated, for example, should the government adopt a regulation that hurts their bottom line, no matter how desirable the regulation or how great the harm caused by the corporation in its absence. 

There are three responses to globalized discontent with globalization. The first – call it the Las Vegas strategy – is to double down on the bet on globalization as it has been managed for the past quarter-century. This bet, like all bets on proven policy failures (such as trickle-down economics) is based on the hope that somehow it will succeed in the future.

The second response is Trumpism: cut oneself off from globalization, in the hope that doing so will somehow bring back a bygone world. But protectionism won’t work. Globally, manufacturing jobs are on the decline, simply because productivity growth has outpaced growth in demand.

There is a third approach: social protection without protectionism, the kind of approach that the small Nordic countries took. They knew that as small countries they had to remain open. But they also knew that remaining open would expose workers to risk. Thus, they had to have a social contract that helped workers move from old jobs to new and provide some help in the interim.

The Nordic countries are deeply democratic societies, so they knew that unless most workers regarded globalization as benefiting them, it wouldn’t be sustained. And the wealthy in these countries recognized that if globalization worked as it should, there would be enough benefits to go around.

American capitalism in recent years has been marked by unbridled greed – the 2008 financial crisis provides ample confirmation of that. But, as some countries have shown, a market economy can take forms that temper the excesses of both capitalism and globalization, and deliver more sustainable growth and higher standards of living for most citizens.

To his credit, Trudeau has at least been talking the Nordic talk in his pursuit of ever more free trade pacts, reaffirming the rule of law, reintegrating labour and environmental regulation, but it's not clear that it's going to sell, especially where that matters, NAFTA.

What if he can't deliver a 'Nordic' solution to our trade arrangement with our largest trading partner? Are we ready for drawing lines in the sand? Are we ready to tell Trump to shove NAFTA?


Toby said...

Anybody who was paying attention knew that the trade deals favoured trans national corporations. We knew that Free Trade wasn't really about either free or trade. We knew that the deals meant a loss of sovereignty, in spite of denials from true believers.

Trailblazer said...

Sounds good though; doesn't it?
Nothing like a good sound bite to start the day!
Who did it best?
Harper, Horgan Clarke,Trudeau?
When did Canada last have a frank and honest leader at any level of Government?
You have three guesses the first two don't count.
Because that's the way Governments do it!