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.

Continue Reading...

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.

The National Science Foundation has just released its biennial report on global investment in science, engineering and technology. The NSF warns that the United States is quickly losing ground to Asia, especially to China. America’s share of global R&D spending is tumbling. In the decade to 2009, it dropped from 38 percent to 31 percent, while Asia’s share rose from 24 to 35 percent.

One big reason: According to the NSF, American firms nearly doubled their R&D investment in Asia over these years, to over $7.5 billion.

Continue Reading...

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.

State-subsidized solar panel production in China crushed a U.S.-subsidized solar start-up, thereby igniting a Washington political scandal.

It is child's play to find further examples. The underlying reality is that unexpected consequences make everyone nervous. Sensibilities are on hair trigger. Just two weeks ago, the New York Times captured the new jitteriness in a single quote. In a story reporting how U.S. stock traders were increasingly setting their alarm clocks for the middle of the night, in order to absorb the latest news from Europe as soon as it started to break, one stock analyst, Michael Mayo, complains in a tone of bemused wonder: “Who would have thought we would have to be looking at Italian sovereign debt yields to figure out what Morgan Stanley’s stock will do?”

Continue Reading...

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.)

Anyone claiming to divine the existence of genuinely Big Change Happening Now should, therefore, do so with a sense of modesty and circumspection, recognizing the possibility that unfolding events may reveal a different story.

Continue Reading...

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.

That’s right, they paid nothing. This is especially strange since the U.S. recently surpassed Japan as the country with the highest corporate tax rate, weighing in at 35 percent.

Continue Reading...

Continue Reading...

No wonder Jim O'Neill, who coined the neologism BRIC and is now chairman of Goldman Sachs Asset Management, has been stressing that "the world is no longer dependent on the leadership of the U.S. and Europe." After all, since 2007, China's economy has grown by 45 percent, the American economy by less than 1 percent -- figures startling enough to make anyone take back their predictions. American anxiety and puzzlement reached new heights when the latest International Monetary Fund projections indicated that, at least by certain measurements, the Chinese economy would overtake the U.S. by 2016. (Until recently, Goldman Sachs was pointing towards 2050 for that first-place exchange.)

Continue Reading...

No, I'm not going anywhere, and yes, I'll still be writing about most of the same things I currently cover (though maybe with a little bit less emphasis on Washington horse-race politics). There are interesting projects in the works, some of which will incorporate more honest-to-goodness reporting than I've been doing for a while. There'll still be an RSS feed for everything I write, but it'll be hooked to my byline rather than the title "How the World Works."

Continue Reading...

Granholm and I are sitting in a corner office of a building on the University of California at Berkeley campus, where Granholm is spending a year of "sabbatical." She leans over her desk, looks me in the eye, and demonstrates how the the Chinese official rubbed his hands together like a kid unable to contain his glee right before unwrapping Christmas presents. "'Take your time,' he tells me," says Granholm. "'Take your time.'"

She shakes her head as if in disbelief at how short-sighted the American political establishment has become. Her point is obvious, and oft-repeated during the course of our interview: In a globalized world, the U.S. economy will not thrive unless we get serious about targeting strategically important sectors of the economy. The rest of the world is playing the economic development game for keeps, while the U.S. seems willing to abandon the board all together.

Continue Reading...

There is, however, one government agency attempting to do its part to boost union power in the United States, in the best tradition of the principles that theoretically underlie Labor Day. The NLRB, a relic of the New Deal empowered to enforce the National Labor Relations Act, has been a busy bee. In recent weeks, the NLRB has issued a series of rulings, that, taken together, make it a little easier for workers to unionize, and a little harder to roll back unions that are already in place.

Most controversially, the NLRB has also brought a complaint against Boeing, claiming that the airplane manufacturer's decision to locate a plant in South Carolina represented an illegal reprisal against its unionized workforce in Washington. The decision precipitated a storm of outrage from the right, and even inspired befuddlement and sharp criticism from commentators not normally associated with the crowd that automatically sees socialism in Obama's every eyebrow twitch.

Continue Reading...

First: Mexico. Damien Cave's story in the New York Times on changing trends in Mexican emigration to the United States is a true blockbuster. There are many reasons why illegal immigration into the United States is down sharply -- new punitive laws in American states, the impact of the recession on the construction business, reforms that make it easier for Mexicans to get legitimate visas, demographic changes resulting in smaller Mexican families -- but one crucial factor with enormous implications for the future is the growth and maturation of the Mexican economy.

Continue Reading...

Today, shrill free traders continue to debate strident protectionists, as though we still lived in a world where purely national corporations shipped finished products to other countries in return for different kinds of products. The picture of globalization as the inevitable emergence of a single global market in which countries specialize along the lines of absolute advantage (Adam Smith) or comparative advantage (David Ricardo) has long been at odds with reality. The majority of the world’s trade is intra-industry trade in similar goods among the advanced industrial regions, not inter-industry trade in complementary goods among countries with different land or labor endowments. The U.S. and Europe sell each other cars and computers, while Japan deviates from the pattern by using nontariff barriers and currency manipulation to keep out imports. In addition, the world economy is highly regionalized. Trade within each of the three parts of what some called "the triad" of North America, Europe and East Asia is more important than trade among the members of the Triad.

Continue Reading...

Hatch, who has questioned the Obama administration's requirement for passage of Trade Adjustment Assistance (TAA) in tandem with trade deals with Panama, Colombia and South Korea, said there's no appetite on Capitol Hill for more spending, even for a program that re-trains workers.

"We don't have the votes to pass TAA through this Congress, so why hold up three trade agreements to do this," Hatch said during a Thursday hearing on the U.S-Korea agreement.

"It doesn't make sense to me."

I don't care what your position on "free trade" is -- the vast majority of ecoomists, left, right and middle, agree that trade produces both winners and losers. Ask almost any blue collar worker in the Midwest: even if it possible to show that the United States gains a net benefit from trade overall, that's hardly comforting to a middle-aged man or woman who has just lost their job due to competition with China or Mexico.

Continue Reading...

The answer is that so-called free trade agreements (i.e., NAFTA, bilateral NAFTA replicas, the WTO regime, etc.) are free only of protections for human beings -- that is, free of provisions that preserve, say, labor rights, human rights and the environment. But those deals' "hundreds of pages" are chock-full of protectionist provisions for multinational companies -- provisions that, for example, allow foreign firms to sue governments for lost profits and empower international panels to unilaterally override a nation's domestic laws if those laws reduce corporate revenues.

Continue Reading...

In Chapter 1, "Markets and States," Rodrik discusses the "amazing fact" that the richest countries also have the biggest governments: "with very few exceptions, the more developed an economy, the greater the share of its resources that is consumed by the public sector." His explanation: efficiently functioning markets require strong government institutions and oversight and intervention.

Continue Reading...

The president emerged today from a meeting with the heads of state and finance ministers of the 20 biggest economies, in Seoul, South Korea, saying they had agree to "get the global economy back on the path of recovery."

But where are the specifics? The three-page communique that also emerged from the session brims with bromides about the importance of "rebalancing" the global economy, "coordinating" policies, and refraining from "competitive devaluations."

All nice, but not a single word of agreement from China about revaluating the yuan, or from the United States about refraining from further moves by the Fed to flood the U.S. economy with money (thereby reducing interest rates, causing global investors to look elsewhere for higher returns, and lowering the value of the dollar).

China and the U.S. are the only big players in the currency game. And with neither of them stepping up to bat, the game is in dangerous territory. Other nations will now do whatever they can to reduce the value of their currencies in order to stimulate more exports -- and therefore create more jobs.

Continue Reading...

The New York Times:

In a letter to other leaders of the Group of 20 economic powers, released shortly after he arrived here, Mr. Obama tried to calm the currency tensions that have roiled global economic relations, though he did not mention by name the two most prominent sources of the tension: China's foreign-exchange interventions and the Federal Reserve's recent decision to inject $600 billion into the economy

Continue Reading...

• China's Vice Foreign Minister Cui Tiankai: "It would be appropriate for someone to step forward and give us an explanation, otherwise international confidence in the recovery and growth of the global economy might be hurt. "
• Germany's Finance Minister Wolfgang Schaeuble called the policy "clueless" and sure to create "extra problems for the world."
• South African Finance Minister Pravin Gordhan declared that "developing countries, including South Africa, would bear the brunt of the US decision to open its flood gates without due consideration of the consequences for other nations."
• Brazil's finance minister called Bernanke's move an "error" and Brazil's central bank president said it would have "negative consequences for other countries."

Continue Reading...

Note the word "majority." Opposition to free trade in the U.S. is now a bipartisan position, as common to Tea Partiers as to organized labor.

"The rising hostility seems a delayed reaction to a slow economic recovery and high unemployment," write reporters Sara Murray and Douglas Belkin.

That's part of it, sure. A down economy always seems to go hand in hand with tensions over trade. And never mind the fact that so-called free trade pacts are really just vehicles through which powerful American corporate sectors such as the pharmaceutical industry seek to leverage access to American markets for their own specifically crafted opportunities. The phenomenon that the Journal is noticing reflects a much deeper distrust of engagement with the global economy that goes back a lot further than the Journal appears prepared to admit. The economic argument for free trade -- that everyone benefits when countries maximize their comparative advantage -- has little sway when the on-the-ground reality is that the winners from free trade in the U.S. seem to be far outnumbered by the losers.

Continue Reading...

Brazil, China, and India. I name-checked those three countries in my post yesterday on Malthus and the Discovery Channel gunman as likely sources of the human capital that might help us innovate our way through the challenges of the 21st century. But while skimming the headlines today, I realized that even I, ostensibly a writer about globalization, had not been paying enough attention to what's been going on in the "emerging" world.

Continue Reading...