Globalization anxiety - Lawrence H. Summers - Los Angeles Times

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What we call "democracy" in the developed world is basically the political expression of a huge and satisfied middle class. If this middle class is made unsatisfied by the economy failing to provide for them, either the economy will change or democracy will implode. DS

Abstract: Against all odds, we are living in a time of plenty.(...) one might have expected this to be a moment of particularly great enthusiasm and widespread support for free markets and for global integration. Yet, in many corners of the globe, there is growing disillusion with the market system and global integration. From the failure to complete the Doha round of global trade talks to pervasive Wal-Mart bashing, from massive renationalization in Russia to the increasing success of populists in Latin American and Eastern European politics, we see a degree of anxiety about the market system that is unmatched since the fall of the Berlin Wall and probably well before. Why is there such disillusionment? No doubt particular factors in individual countries enter into the equation. Some anti-globalization sentiment stems from opposition to the Bush administration's foreign policy misadventures. But there is a much more fundamental and troubling source of resistance: the growing recognition that the vast global middle is not sharing the benefits of the current period of economic growth — that, in fact, its share of the pie is not growing and may even be shrinking. John Kenneth Galbraith was right when he observed: "All of the great leaders have had one characteristic in common. It was the willingness to confront unequivocally the major anxiety of their people in their time. This, and not much else, is the essence of leadership." Meeting the needs of the anxious global middle is the economic challenge of our time.(...) Low-cost labor — ordinary, middle-class workers and their employers, whether they live in the American Midwest, Germany's Ruhr Valley, Latin America or Eastern Europe — are left out. This is the essential reason why median family incomes lag far below productivity growth in the United States, why average family incomes in Mexico have barely grown in the 13 years since NAFTA passed and why middle-income countries without natural resources struggle to define an area of comparative advantage. It is this vast group — which lacks the capital to benefit from globalization and cannot imagine competing on cost with Chinese workers — that is desperately seeking either reassurance about the shrinking world or a change in course. And yet, without its support, it is very doubtful that the existing global economic order can be maintained. The twin arguments that globalization is inevitable and protectionism is counterproductive for almost everyone have the great virtue of being correct — but they do not provide much consolation for the losers. Economists rightly emphasize that trade, like other forms of progress, makes everyone richer by enabling people to buy goods at lower prices. But this opportunity offers small solace to those who fear that their jobs will vanish. Nor can education be a complete answer at a time when skilled computer programmers in India are paid less than $2,000 a month. More can be done to strengthen protections for displaced workers. But such an approach is inevitably reactive and defensive. In the United States, and perhaps beyond, the political pendulum is swinging left. The best parts of the progressive tradition do not oppose the market system; they improve on the outcomes it naturally produces. That is what we need today. READ MORE