Saturday, November 18, 2006

Globalization's Broken promises - William Pfaff - International Herald Tribune

David Seaton's News Links
The greatest achievement of the post WWII western world was the creation of a massive, satisfied, new, working middle class. This gave a previously unheard of stability to these societies. Globalization is directly attacking the prosperity and aspirations of that middle class. Logically this will lead to a return of "class struggle", something that was supposed to be as out of date as the buggy whip... but if cars ever disappeared, back would come the horses and buggies and of course, out would come the buggy whips. Nouriel Roubini predicts a major recession for the first quarter of 2007, there is a Democratic Congress... Things might begin to move. Globalization was born in the USA and if it ever dies it will die there first. DS
Abstract: The U.S. midterm election was noteworthy for what analysts called voter "populism," which is to say, its element of economic protest. It is increasingly clear to voters in the United States - and in Europe - that the promise concerning globalization made to the public by economists, business leaders and politicians has not been kept. Workers in the rich countries were promised that they would ultimately benefit from globalization. Under the new corporate norms of the globalization era, wealth and rewards were to "naturally" trickle down to everyone in a company. Instead, workers find that their countries grow richer, as do corporations and executives, but ordinary working people grow poorer. The promise was that workers whose jobs were outsourced abroad might undergo transitional difficulties but eventually would have better and more sophisticated jobs. This was unconvincing. In the past year, it has become generally acknowledged in practice and in the economic literature that workers in North America and Western Europe have paid the price for the gains made by corporations through outsourcing production. Recognition of this affected the U.S. election and is a major factor in recent popular hostility to EU expansion and further extension of the EU's single market (as in services, to take the current controversy).(...) what we are talking about is taking skilled employment from people in advanced countries, accustomed to high wages, and awarding it to people in poor societies where high-labor competition exists at much lower wages for the same skilled work (wages that in the economic circumstances of these countries may nonetheless be adequate or even generous). The low-wage worker and his society benefit in most cases, but have also entered into what is a one-way movement, and a permanent one. The logic of the process dictates that the outsourced work steadily seeks even lower-wage societies. There are few if any manufacturing or professional skills in the advanced countries that cannot eventually be supplied elsewhere at much lower cost. It also has not until now been fully appreciated that the corporation itself and its management are eventually subject to this logic. Why should the Indian or Indonesian manufacturer of products sold in more sophisticated markets by American, European or Japanese corporate clients not eliminate that costly overhead, and himself take over the functions of corporate headquarters now in Chicago, London or Frankfurt? The formerly anonymous Chinese manufacturers of IBM products bought IBM, seeing IBM's existing American managers as a profit drain on their company. If you think in this way, globalization still has a long way to go. It may not prove a pretty process.(...) current international and national assumptions and ideologies concerning the economy are recent, arbitrary, open to challenge, and undoubtedly as transient as those of all their predecessors since Adam Smith (a humanist). Monetarism will not pass away with Milton Friedman, who died Thursday. But it will become a footnote to economic history. The ideas of John Meynard Keynes, which are attracting attention again, will have the more lasting influence. Why? Because of Keynes's fundamental humanism. READ IT ALL

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