Globalization
Goodbye, Davos man
Pundits haven't realized it yet, but the age of economic globalization is over
Robert Rubin (Credit: AP/Cliff Owen) Now and then there are moments that clarify major trends in politics. Such a moment occurred recently, when François Hollande, the Socialist candidate for the French presidency, agreed with the French far right on the need to further limit immigration to France: “In a period of crisis, which we are experiencing, limiting economic immigration is necessary and essential.” For his part, Hollande’s opponent Nicolas Sarkozy criticized immigration in his first electoral run and as president of France has denounced deregulated markets.
This is not just a French phenomenon, nor is it limited to immigration policy. In most of the world’s advanced democracies, the egalitarian left and the nationalist right are growing in strength among voters. After three decades in which apostles of financial deregulation, offshoring and immigration liberalization dominated the capitals of major Western countries, the pendulum is swinging in the other direction.
You would never know this from the prestige press, which is owned by billionaires and populated by upscale journalists, many of whom were able to begin their journalistic careers as unpaid interns thanks to affluent parents. According to the consensus in the elite media, history runs in one direction toward the merger of national economies in a single global free market, the elimination of borders for labor and the relaxation of restrictions on the free movement of capital. Any moves in the opposite direction represent dangerous backsliding that can only be motivated by racism and xenophobia and that threaten to produce new Hitlers and Mussolinis and trade wars leading to world wars.
But the voters of the industrial democracies are not listening to the elite transatlantic chattering class. The late political scientist Samuel Huntington coined the term “Davos Man,” after the World Economic Forum at Davos, Switzerland, to symbolize the post-national, anti-populist global elite. Davos Man still exists, but he is in danger of going the way of Neanderthal Man. The Davos vision of a dawning post-national free market utopia was cracked by the al-Qaida attacks on Sept. 11, 2001, and then shattered by the global financial crash of 2008. Free market globalism continues to be the orthodoxy in elite economic and journalistic circles, but in politics it has been in retreat for years. It is increasingly clear that libertarian globalism was never the wave of the future, but merely a temporary blip in history between the fall of the Berlin Wall in 1989 and the fall of the twin towers in 2001.
Consider the case of immigration policy. In every advanced nation, including the United States, governments under pressure from voters have moved to tighten up surveillance and control of immigrants, for reasons of national security and protection of the wages and cultures of their citizens from real or imagined threats. Parties of the center-left as well as of the center-right have adopted positions on immigration that would have been considered far-right in the globalist 1990s. America’s Democrats and the Labour Party of Gordon Brown have been forced by voter sentiments to carry out tough immigration policies that elite pundits of the left, right and center have denounced to no effect.
In the world economy, the major trend of our time is the rise of nationalist state capitalism, not the disappearance of national economic boundaries that was predicted by the prophets of globalization like Thomas Friedman following the end of the Cold War. When the world economy collapsed in 2008, leading industrial countries rushed to bail out national firms like America’s GM and Germany’s Opel, giving the lie to the claim that major corporations no longer had national identities. Instead of liberalizing its economy as it developed, China has made its state-owned companies more rather than less important. Most of the world’s energy companies, and a number of major shipping and aerospace industries, are state-controlled. The response in the U.S. has been growing economic nationalism, which is tapped by presidential candidates like Obama and Romney who call for defending and promoting American industry — at least when they are running for office.
It is true that protectionist policies have been limited during the Great Recession, compared to the Great Depression of the 1930s. But this arguably reflects the interests of working-class voters rather than the triumph of libertarian globalist ideology. A dwindling majority of wage earners in advanced industrial countries work in manufacturing industries that can be offshored to other countries. Most work in the nontraded domestic service sector. Only a few of them need to worry that their jobs will be sent abroad, but it is rational for many to worry about immigrant competition within their own countries for local service sector jobs. At the same time, the working class in Western democracies benefits from low prices for imports. It is perfectly rational, therefore, for working-class Americans or Europeans to be more concerned about immigrant competition than about trade. On another front, the deregulation of finance, the centerpiece of Clinton Treasury Secretary Robert Rubin’s global economic strategy, is being slowly but inevitably reversed, in the aftermath of the global crisis to which financial deregulation contributed. Unwilling to wait for global agreement on financial regulation, nations are unilaterally re-regulating the financial industry within their own borders. The result will be to reverse much of the financial globalization of recent decades and replace it with a patchwork of different national financial systems.
The Balkanization of global finance along national lines will be accelerated in the decades to come as many governments choose to deploy moderate inflation to burn away much of the public and private debt built up during the Great Recession, as the alternative to politically unpopular spending cuts and tax increases. What is known as “financial repression” — forcing national banks and, through them, national savers to accept government bonds whose value is being eroded by deliberate inflation — is a policy that is helped by a degree of segregation of national banking systems from the world economy. In the future, countries pursuing debt reduction by means of moderate inflation will find it attractive to partly re-nationalize their financial systems for this purpose alone. Most retirees in advanced industrial nations depend primarily for their retirement income on inflation-adjusted public pensions like Social Security, not on private savings. As a result, financial repression will hurt economic elites the most, while doing little harm to the working-class majorities in the U.S., Canada and Europe. Even as nationalism further fragments the global economy along national and regional lines, populism will redraw the map of domestic politics in one country after another, including the United States. Nationalist populists who break with the elite libertarian consensus, even those who, like Ross Perot, are centrist rather than far-right, are routinely demonized by the pundits of the mainstream press, whose moderate libertarian orthodoxy reflects the values and class interests of the owners of the media. But while populist outsiders are marginalized in the media and usually fail at the ballot box, their issues are often co-opted by mainstream conservative and progressive parties, the way that populist opposition to illegal immigration has been co-opted by establishment parties throughout the West in the last decade.
Votes clearly count, even in plutocratic America. If American public policy reflected the objectives of the 1 percent, then long ago there would have been relaxation of border enforcement and amnesties for illegal immigrants, the privatization or means-testing of Social Security and Medicare and further deregulation of finance. On all of these issues, however, the oligarchic consensus is losing at the ballot box, if not in the editorial pages.
Davos Man is not dead, but he is on life support. The libertarian globalist moment in world history is over. Free market globalism peaked in the late 1990s, before the rise of al-Qaida and Chinese-style state capitalism, when it appeared briefly that the Reagan-Thatcher version of capitalism represented the future. Most of our politicians and pundits are still living in the mental world of the 1980s and 1990s, but the future has arrived and it is not what libertarian globalists predicted.
Here and there, trade and immigration liberalization will continue, when it serves the interests of particular nations or particular pressure groups. And it will always be important, even in a partly renationalized world, to resist nativist bigotry and misguided forms of protectionism. Even so, the fading vision of inevitable progress toward the free flow of money, goods and labor across national boundaries was never anything more than a utopian fantasy, like the Marxist dream of international fraternity in a socialist world. Capitalism in some form, partly private and partly statist, will endure. But less than a generation after the fall of the Berlin Wall, libertarian globalism has joined communism on the dust heap of history.
Michael Lind’s new book, "Land of Promise: An Economic History of the United States", will be published in April and can be pre-ordered at Amazon.com. More Michael Lind.
The secret to making American workers competitive
Despite GOP claims, big business won't bring us more and better jobs. Obama should outline how the government will
(Credit: AP) Who should have the primary strategic responsibility for making American workers globally competitive – the private sector or government? This will be a defining issue in the 2012 campaign.
In his State of the Union address, President Obama will make the case that government has a vital role. His Republican rivals disagree. Mitt Romney charges the president is putting “free enterprise on trial,” while Newt Gingrich merely fulminates about “liberal elites.”
American business won’t and can’t lead the way to more and better jobs in the United States. First, the private sector is increasingly global, with less and less stake in America. Second, it’s driven by the necessity of creating profits, not better jobs.
Continue Reading CloseRobert Reich, one of the nation’s leading experts on work and the economy, is Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. Time Magazine has named him one of the ten most effective cabinet secretaries of the last century. He has written 13 books, including his latest best-seller, “Aftershock: The Next Economy and America’s Future;” “The Work of Nations,” which has been translated into 22 languages; and his newest, an e-book, “Beyond Outrage.” His syndicated columns, television appearances, and public radio commentaries reach millions of people each week. He is also a founding editor of the American Prospect magazine, and Chairman of the citizen’s group Common Cause. His widely-read blog can be found at www.robertreich.org. More Robert Reich.
World on the verge of a nervous breakdown
Capitalism's ceaseless quest to cut costs made us more jittery in 2011, and there's no relief in sight.
Italian equities shape American realities (Credit: Tony Gentile / Reuters) For those looking for signs of how globalization has woven the world into a web of unexpected vulnerability, 2011 offered a bumper crop.
An earthquake in Japan sent the global auto manufacturing industry into a conniption.
A flood in Thailand drastically reduced supplies of computer hard drives, forcing even a titan like Intel to swiftly reduce revenue forecasts.
Continue Reading Close
Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21. More Andrew Leonard.
The “American Century” has ended
The Great Recession, the Arab Spring and the euro crisis show how global relations are fundamentally shifting
Barack Obama, Moammar Gadhafi and George Papandreou (Credit: AP) In every aspect of human existence, change is a constant. Yet change that actually matters occurs only rarely. Even then, except in retrospect, genuinely transformative change is difficult to identify. By attributing cosmic significance to every novelty and declaring every unexpected event a revolution, self-assigned interpreters of the contemporary scene — politicians and pundits above all — exacerbate the problem of distinguishing between the trivial and the non-trivial.
Did 9/11 “change everything”? For a brief period after September 2001, the answer to that question seemed self-evident: of course it did, with massive and irrevocable implications. A mere decade later, the verdict appears less clear. Today, the vast majority of Americans live their lives as if the events of 9/11 had never occurred. When it comes to leaving a mark on the American way of life, the likes of Steve Jobs and Mark Zuckerberg have long since eclipsed Osama bin Laden. (Whether the legacies of Jobs and Zuckerberg will prove other than transitory also remains to be seen.)
Continue Reading CloseAndrew J. Bacevich is professor of history and international relations at Boston University. His latest book is "Washington Rules: America's Path to Permanent War". More Andrew Bacevich.
How to solve the corporate tax problem
Our globalized economy creates too many loopholes for multinational firms. It's time to push for a universal system
(Credit: AP/Mary Altaffer) The United States is teeming for tax reform. Obama speaks eloquently of the rich “paying their fair share” while Republicans pledge never to raise taxes. Warren Buffett is taxed less than his receptionist. Occupiers rally for the 99 percent, while Tea Partyers rally behind 9-9-9.
Meanwhile, 25 of the Forbes top 100 companies paid their CEOs more than they paid Uncle Sam in 2010. Some of the big names are GE, Prudential and Verizon, all of which paid their CEOs well over $10 million, but paid no income tax whatsoever.
Continue Reading CloseKeriAnn Wells is a Master of Public Policy Candidate at the University of California, Berkeley. More KeriAnn Wells.
What’s the language of the future?
As English takes over the world, it's splintering and changing -- and soon, we may not recognize it at all
No language has spread as widely as English, and it continues to spread. Internationally the desire to learn it is insatiable. In the twenty-first century the world is becoming more urban and more middle class, and the adoption of English is a symptom of this, for increasingly English serves as the lingua franca of business and popular culture. It is dominant or at least very prominent in other areas such as shipping, diplomacy, computing, medicine and education. A recent study has suggested that among students in the United Arab Emirates “Arabic is associated with tradition, home, religion, culture, school, arts and social sciences,” whereas English “is symbolic of modernity, work, higher education, commerce, economics and science and technology.” In Arabic-speaking countries, science subjects are often taught in English because excellent textbooks and other educational resources are readily available in English. This is not something that has come about in an unpurposed fashion; the propagation of English is an industry, not a happy accident.
Continue Reading ClosePage 1 of 385 in Globalization