"Globalization Has Not Yet Gone Far Enough"

I stumbled across this review of Dani Rodrik's book Has Globalization Gone too Far? (1997) written by Brad DeLong in December, 1998:

Globalization Has Not Yet Gone Far Enough, by Brad DeLong: Dani Rodrik is trying to create space in the debate over globalization for a rational middle--for positions that neither lead the cheers for the onrushing economic integration of the world, nor m mindlessly condemn international economic integration in a fit of reactionary nostalgia for a past that never was.

Dani Rodrik's argument is an updated and better-written version of an argument made by Karl Polanyi--in a book called The Great Transformation--long ago, back at the end of World War II. Polanyi argued that the developing market economy tended to destroy the web of social realtionships that held human society together. The market for labor pressured people to move around the globe to where they could earn the most--at the potentially substantial sociological price of creating strangers in strange lands. The market for consumer goods rewarded people for being fortunate or for responding to the incentives provided by factor markets--and in so doing made human status rankings the product of responsiveness to market forces rather than the result of social norms and views about distributive justice. And, Polanyi argued, in the long run this undermining of sociological order by the market economy threatened to destroy the social and institutional bases on which the market economy rested.

You can disagree with virtually all of Polanyi's argument. You can say that the market for labor offers people opportunities, not constraints. You can point out that the "social norms" and "views about distributive justice" that underlie non-market distributions of income give the most to those with the biggest spears or those who can most effectively perform the confidence trick of convincing their lessers that obedience to the powerful is obedience to God. Market distributions of income at least have a meritocratic component, as well as a positive entrepreneurial component that makes it possible to do well by doing good.

Yet there remains a sense in which Polanyi's argument cannot be dismissed. The distribution of economic welfare produced by the market economy--roughly that one's weight in the social welfare function maximized by the market is approximately proportional to the market value of your endowment--does not fit anyone's conception of the just or the best. We have considerably more confidence in the correctness and appropriateness of political decisions made by democratically-elected representatives than we do of decisions made by those with large spears or large temples. So there is a powerful place for government to manage the market--in the interest of avoding large depressions, in the interest of providing social insurance to transform the market distribution of income into one that produces higher social welfare, in the interest of avoiding pointless churning of the structure of industry produced by the fads and fashions that sweep the minds of financiers.

Post-World War II social democracy in the advanced industrial economies has produced the wealthiest, best, and most just societies the world has ever seen. You can complain that the redistributional and industrial policies of social democracy have been economically inefficient, but they have been--politically--very popular. It seems a good bet that the stable politics of the post-World War II era in the advanced industrial economies owe a good deal to the coexistence of rapidly-growing, dynamic market economies and social democratic polities.

And this is where Dani Rodrik comes in. For Dani Rodrik is concerned that economic integration is undermining the ability of countries to shape their own versions of social democracy, or indeed to shape any version of social democracy. Rodrik fears that--unless a way is found to strengthen social democracy in the face of international economic integration--that either sociology and politics will bring a halt to increasing economic integration, or increasing economic integration will erode the market economy's social foundations and lead to increasing political instability.

How does Rodrik believe that globalization undermines social democracy? First, because globalization has undermined governments' ability to carry out social insurance programs. Social insurance is the redistribution of income and wealth by transferring wealth from market winners to market losers, thus insulating domestic groups from those market risks deemed "excessive." A principal tool for funding social insurance has been the taxation of capital. Perhaps the most important aspect of globalization has been the sharp increase in the mobility of capital. This increase in capital mobility "has rendered an important segment of the tax base footloose." The consequence is that governments seeking to fund social insurance are left with the unappetizing option of increasing tax rates disproportionately on labor income.

Second, globalization has increased the degree of competition in the labor market. Most economists (me included) have argued that this increase in labor market conditions has had little impact on the wages of American workers. But as Rodrik points out, "...saying that the impact of globalization on advanced-country labor markets is quantitatively rather small in the real world and is overshadowed by other phenomena (such as technological change) is no different [in the Heckscher-Ohlin-Vanek framework] from saying that the gains from trade have in practice been small." There is a problem of cognitive dissonance here.

Many economists would look at increased labor market competition--the undermining of unions--with approval. Doesn't union monopoly create inefficiency?  But as Rodrik points out, reduced union power increases economic efficiency "only to the extent that employment expands in industries in which artificially high wages previously kept employment below efficient levels.... It is difficult to make [this]... case ...in... sectors where [union] monopsony wages were ...most prevalent" in the United States.

Rodrik's conclusions are essentially those of Polanyi: create space for social democracy, recognize that markets are the servants of societies and polities, make the world economy a moral community with standards and practices of fairness.

I do not know if Rodrik will be successful in his attempt to create space in the debate over globalization for a rational middle--for positions that neither lead the cheers for the onrushing economic integration of the world, nor m mindlessly condemn international economic integration in a fit of reactionary nostalgia for a past that never was. But it is an effort well worth making.

Comments

[evagrius]

"Market distributions of income at least have a meritocratic component, as well as a positive entrepreneurial component that makes it possible to do well by doing good."

Ten years later- Is this argument still valid?

[Gegner]

Even heavyweights like Bill Gates are acknowledging that maybe it's time to 'rethink' capitalizm.

Mostly due to the real 'bottom line'...that all economies are local.

If global competition turns your community into an economic desert, you're 'well and truly' if you fail to see and heed the signs in time.

Which also brings to the fore the issue of 'marketable skills' and how some skills are leaving for places the average individual isn't solvent enough to follow.

Under it all is the creation of wealth...if the 'race to the bottom' proceeds unabated, the logical end result will be famine and war.

[ken melvin]

Strange god we worship, this capitalism. Still, in this the twenty-first, we sacrifice the lives and dreams of others. At least we now know that globilization is one pile of manure without a Nobel in it. Maybe Milty was just lucky and quick.

[paine]

confidently hurled mush
"Yet there remains a sense in which Polanyi's argument cannot be dismissed"

"the rational middle.... an effort well worth making."

enough with these contending camps

up with splittin the difference

the vital middle
and its shallow syncretisms

no matter how vigorously whipped
and piled high
its slop shapeless slop

a blue plate special
(like squashed turnip...)
still on the menu
over at delong's diner

[save_the_rustbelt]

Globalization will be the secular religion until tenured economics professors begin to lose their jobs..... and that will not be in our lifetimes.

[Publicus]

Brad is such a tool.

Hillary, call me!

[John Emerson]

Back in 1968 or so I had just read Polanyi's "The Great Transformation" and really liked what he said. I happened to have a friend in the U of Minnesota econ PhD program, and I mentioned that I had really liked the book. He did that little academic double-take, recovered and mumbled "Um... well, in economics we don't really do political economy any more. The field is going in the direction of mathematical modeling."

I had a bad feeling then, and every year since then the feeling has gotten worse. He had just told me that, in the name of science, economists were going to quit thinking about whole large categories of "normative" or "qualitative" or "historical" questions. And as a result economics would become ethically inane and blind to large areas of reality, and it would become easy for economists to make themselves guiltlessly (and even unknowingly)the advocates and lackeys of whichever special interest happened to pay the most.

And now, forty years later, it is starting to be realized that there were certain costs in this change of direction -- even from a purely analytic, scientific point of view. And after sneering at non-economists as innumerate sentimentalists and Luddites during those forty years, the triumphant economists are starting to generously recognize that maybe they were wrong about a few things. And the rest of us are supposed to praise them for that.

[Bruce Wilder]

evagrius says...
"Market distributions of income at least have a meritocratic component, as well as a positive entrepreneurial component that makes it possible to do well by doing good."

Ten years later- Is this argument still valid?

I'm not sure that it was ever valid. Notice how DeLong transitions in his next paragraph from "market distributions" (plural) to a singular "the":

The distribution of economic welfare produced by the market economy--roughly that one's weight in the social welfare function maximized by the market is approximately proportional to the market value of your endowment--does not fit anyone's conception of the just or the best.

That "maximized" is in there to justify the singular, to suggest that a particular distribution is, somehow, singularly best, without inviting further investigation.

High theory in economics suggests that, under conditions of uncertainty, a perfectly efficient market economy requires perfect, pervasive insurance. Every actor has to act on the basis of (mathematically) expected outcomes, without the costly burden of risk aversion influencing decision-making, and then to receive as a reward that expected outcome -- not more or less, and most certainly not the actual outcome. That's what perfect insurance does: actual outcome plus insurance nets the expected outcome. And, it is expected outcomes that guide the decision-making of all actors.

The winners and losers in a real economy, an economy that is, inevitably, short of insurance, is chock full of winners and losers, who have received far more or far less than the expected outcome of their choices.

The outcomes imposed by a market economy short of insurance are a mixture of luck and "hard work" (economic virtue of whatever kind). They also fall far short of "maximizing" anything, because uninsured risk results in either inappropriately risk-averse or desperate choices, which result in less-than-optimal outcomes, outcomes that fall short of what they could be, if everyone just bet as if mathematically expected outcomes were a virtual certainty.

Well-designed provision of insurance improves the efficiency of an economy, by reducing risk aversion. And, also, not incidentally, reducing manipulative domination by the wealthy, who can use their wealth to provide "private" insurance on terms that allow them to skim the cream, from an economy made risky by design.

Reasoning about "competition" and rents, without acknowledging that the distribution of income is tied directly to the distribution of risk through the distribution of wealth and insurance, is more than a trifle dishonest.

Setting up the narrative in a way that implies that social insurance is necessarily a step away from a maximally efficient outcome, putting quotes around "excessive" in characterizing how the aims of insurance, and several other narrative tricks are reprehensible, as well as being bad economics.

Paine complains that Brad is serving up mush. I think the problems are a bit more serious. Brad's narrative is more than a little like that of a concern troll. I don't think Brad is being disingenuous, though. I just think he wants to be liked by the Tories, as well as the Whigs. The mush is him straddling the divide, trying to make a virtue out of mindlessly standing in the middle of the road, looking around in all directions, waiting to get run over, instead of using the road to go somewhere. People, who travel on the road, head in one direction or the other; you can not accompany both at the same time. One wants what you want and is going foward; the other doesn't, and is headed back. Brad, tempermentally, does not want to accept this.

[reason]

I'm curious that the erudite John Emerson is guesting here. Did Crooked Timber cross reference this?

[Lafayette]

There are three conjectures, in this article, one that leads to another and then another:

The market for labor pressured people to move around the globe to where they could earn the most--at the potentially substantial sociological price of creating strangers in strange lands.

Which,

… made human status rankings the product of responsiveness to market forces rather than the result of social norms and views about distributive justice.

And

… in the long run this undermining of sociological order by the market economy threatened to destroy the social and institutional bases on which the market economy rested.

They are pretty neat conjectures, admittedly.

Firstly, Polanyl explains a human tendency that is as sold as two anthropological facts. The first is that nomad humans became sedentary and the second is that, once sedentary, humans discovered the division of labor.

The division of labor leverage human agricultural output to an excess of produce beyond present consumption – and therefore the desire to trade for other goods that the community did not produce. (Which is why, for instance, Marco Polo went off to China to find silk – the process for which they eventually smuggled back to Europe. And he brought back pasta as well.)

What is the evolution of this process into today’s global market? The simple fact that the “earth is flat”, not literally, but figuratively. Meaning that, for any transaction between to market agents to occur, necessary information must be exchanged.

Once upon a time, and today still somewhat, that exchange (both verbal, visual and tactile) required a physical meeting between the two parties. The “flat-earth Web” has diminished greatly that requirement. Consequently, the physical contact that was the foundation for such transactions, negotiations, exchanges has diminished.

And not without consequences. Sociologically, we are a species that likes, seeks and enjoys the physical contact with other human beings – whether it be for leisure or work. The physical presence of the other human comforts us and reinforces the relation. We are conditioned by this contact, in a Pavlovian sense of stimulation and reward, reward and stimulation. Contacts that please us (which are non-aggressive) make us want more contacts.

In the cyber-world, however, those contacts are no longer “real”, but virtual. Does that mean that they change? Not at all. It means that they are less physical and more virtual and our sense of confidence is established otherwise.

There is no “destruction of the social bases” on which transactions/negotiations are made, simply a transformation into another form. That form is far more efficient and results in an acceleration of the process.

It is this acceleration that is perturbing us, because our sensate reactions are still defined by the previous manner of interacting. Meaning this: When you meet and transact with someone physically, you become a known, identifiable quantity. This, in turns, modifies your behaviour.

In the virtual world, one can remain an unknown quantity, employing a pseudo, to transact virtually goods/services. This conditioning is still a bit difficult for some and the sub-prime mess is a prime example.

Debt could not have been salami-sliced and resold by the portion just a few decades ago. There would have been necessary a physical contact between the buyer and the debt-vendor. The buyer would want to have a sensate confirmation that the debtor existed and was solvent.

When those confirmations are tweaked, faked, modulated … changed substantially; then the consequences can be disastrous. The virtual world must build another process by which sensate confirmations are re-established and effective. Those existing, I submit, are not doing the job adequately.

Ebay, perhaps, has gone the furthest in developing this process. Ebay tries to show that past experience is a good judgment of present experience. We are all assured that others have found the purveyor “honest and dependable” and so we transact with them.

This sensate confirmation was faked by accrediting agencies, I suggest, to give a false sense of the debtors’ capacity to repay debt. And, it was done on a huge scale globally.

[wjd123]

Market distributions of income at least have a meritocratic component, as well as a positive entrepreneurial component that makes it possible to do well by doing good.--Brad De Long

In a global economy there is no meritocratic component of income distribution. Labor's power to negotiate with capital as equals is destroyed and the laborer is made naked once again in negotiating for wages. A company that wins competitively in the global economy relies as much on its skill to extort as its skills to efficiently use the factors of production. What meritocracy of income distribution could De Long possibly have in mind.

I found some interesting takes of "meritocracy" here:

http://en.wikipedia.org/wiki/Meritocracy

The term 'meritocracy' was first used, in a pejorative sense, in Michael Young's 1958 book Rise of the Meritocracy, which is set in a dystopian future in which one's social place is determined by IQ plus effort. In the book, this social system ultimately leads to a social revolution in which the masses overthrow the elite, who have become arrogant and disconnected from the feelings of the public.

....he [Michael Young] wrote the influential satire The Rise Of The Meritocracy in 1958, originally for the Fabian Society although they refused to publish it. It led to a change in Labour's thinking on equal opportunities and coined the word meritocracy. Young intended the word to have negative connotations, and he later became disappointed with the way in which subsequent governments (especially New Labour) came to suggest that a meritocracy is something worth striving for[2]. It was at this time too that Young began work on the Consumers' Association, the National Consumer Council and the Open University....

For a possible modern day example of a meritocracy leading to arrogant elitism see the reference to Singapore. They could have given an example closer to home.

[Lafayette]

We have only ourselves to blame

Gegner: Under it all is the creation of wealth...if the 'race to the bottom' proceeds unabated, the logical end result will be famine and war.

The above is traditional European-socialist, myopic sloganeering. The only "race to the bottom" is in comprehension.

Do you think the Chinese are racing to the bottom? Rather, they see their wealth creation as a race to a decent middle-class existence of the kind that you
have already enjoyed for half a century. Just ask them.

That the race is to the bottom is YOUR point-of-view, because the competition behooves you to leave your protected cocoon and compete in a steadily changing world. Which upsets your comfort zone, doesn't it.

That evolution is whose fault? The Chinese? The Indians? The Taiwanese? The Thais? Ask them. I suspect you will not like what they have to say about your
"race to the bottom". Because, they are already there and scrambling desperately to get up to our level.

We have only ourselves to blame for the transfer of work to lower cost countries. The destruction of communism doubled the world's supply of semi-skilled labour, virtually overnight. We had no idea that what had happened would happen?

Present circumstances, as described above, are not what our politicians, in either the EU or the US, will tell us. But, it is closer to the truth than the media-pap they are serving, particularly in the election campaigning that I watch on both continents.

Politicians, like generals, tend to fight the "last war". Elector sentiments tend to be anchored in the past, not the future. Perhaps, that is human nature.

This war is different and another political mindset is necessary. Straight talkers who promise that the war can be won; that we can indeed attain decent standards of living for all. But not without a good deal of sweat and tears in doing so.

[Lafayette]

That's what I call Creative Capitalism!

wjd: Labor's power to negotiate with capital as equals is destroyed and the laborer is made naked once again in negotiating for wages.

That is just not so. Do you really think that GM wants a three-month strike whilst negotiating a labour contract? Of course not, it still has to pay financial debt and idle operational activity. It's costly. So, Labor, if well organized, is not totally denuded of bargaining influence.

If unions are sheep in the US, who's to blame ... management? Maybe American unions don't have enough true grit?

This aside, it is obvious, to anyone who takes the pains to look, that the Socialists over the years have alloted much more power to unions in Europe. In Germany, they can even sit on the Board. In France, during strikes, striker wages were paid for by the government. (Sic!)

At the same time, the unions went overboard. I remember once, changing a temporary office in Munich, wanting to take a table lamp to the other office. The (internal) movers fell on me like a ton of bricks. I was taking "food out of the mouth of their children". Or, some such idiocy.

The regimentation of work inevitably was their undoing, particularly in a country with one of the highest labor costs in Europe. Ditto France, which has a total labor cost more like that of the US. The FrenchSocialists, God bless them, undermined productivity by introducing the 35-hour week for the same pay as the 40 hour week. Which is one damn fine reason for management to dislocate jobs elsewhere.

Still, the right to work is a stronger legal notion in Europe than it is in the US. In the US, management can, by comparison, get away with bloody murder (figuratively speaking, of course).

So, there is a "fair middle-ground" that must be sought. I maintain labour should negotiate a decent but non-extravagant wage in exchange for more of the profit pie. That makes total remuneration a matter of accounting. And, there, the devil is in the details. (But, also, tax-wise it is also more interesting, if income tax is more than capital gains tax. I dunno.)

It would be nice to see Corporate Governance legislation that accords Board-oversight rights to ordinary stockholders (i.e., elected members of the Board) -- and, as stockholders, that Labor sit on the Board. (That would likely result in a lot less hanky-panky there.)

Still, management likes to announce profits, because they enhance stock market valuations and they keenly appreciate that particular attribute of equity values. So, both labour and management would be, at least, pulling in the same direction.

NB: The Banque Société Genèrale debacle in France is a good lesson. Should the Board of SocGen want to sell itself to the highest bidder, then it needs the approval of a sizeable chunk of the stock-ownership -- which just happens to be in the hands of the SocGen employees (7%, to be exact). Wouldn't it be nice to see that 10% of outstanding company stock should be alloted commonly to all employees of a publicly quoted company? And, once an employee, you become part owner in that allotment? That's what I call Creative Capitalism!

[bob]

>> Market distributions of income at least have a meritocratic component

Man if you can believe there is meritocracy in this country you can convince yourself of any crazy thing.

Kozlowski, Ebbers, Lay, Skilling, Milkin, Marchello, Trafficante, Cheney, Rice, Rumsfeld, ect, ect...

and most of all the Bush.

We are the United States of nepotism, ass kissers, old boy networks and who you know not what you know.

[bob]

>> If unions are sheep in the US, who's to blame

Conservatives and their 28 year old war against labor.

I lost a job in the early 90's after being fired for spearheading the union drive for some of the poorest
FULL TIME WORKING women in the NYC area.

I'd do it again in a second.

[Lafayette]

Where's the courage?

Article: You can complain that the redistributional and industrial policies of social democracy have been economically inefficient, but they have been--politically--very popular.

I could but I wont. No economy is perfect, but I prefer that, if it must go wrong, it errs on the lower side of the class spectrum than the upper side.

The exaggerated accumulation of riches, never killed anybody. Some rich, bored, simply kill themselves. But the lack of adequate wealth amongst the poor is a killer, for sure. Just look at the rich, then look at the poor. Which is the more afflicted with obesity? The poor. Why? Because carbohydrates are cheaper than protein, and they have no choice between the two.

It seems a good bet that the stable politics of the post-World War II era in the advanced industrial economies owe a good deal to the coexistence of rapidly-growing, dynamic market economies and social democratic polities.

Tut, tut. He has a bent for word “social” doesn’t he. With a bit more courage, he might even use the word …. Socialist! Lead-head will then put him on the FBI's Watch List for illegal anti-American propagandizing!

Social democracy is menaced. Not by Capitalism, mind you, but by Globalization. As we have seen in this forum, the anguish about job losses and permanent unemployment runs fairly high. People can’t understand what happened to the “American Dream” – if not the pot of gold at the end of the rainbow, at least for Durable Employment.

The post-war years, particularly amidst the reconstruction of Europe, sparked growth rates that created a fairly even distributed wealth. People became ensconced in the notion that it should go on forever. The "feel good" factor had an air of permanency about it.

It didn’t last. In Europe it started coming apart in the early 1990s, in the US a decade later. So, people are asking themselves, Where are we going? And, the politicians, curiously at a loss for words, are talking enigmatically. They propose themselves for office because they have “character” or a “vision” or they “Want Change” …. or maybe they just have a “Smiley Face”. As if these attributes were sufficient for the office of PotUS.

People are kinda dumb, but politicians are smart. Which is why they try to manipulate us. And, on the question “Where’s the beef”, they spin a yarn that is barely believable.

I’d bet they all know what the problem is. We call it here Income Inequality. But, upon the lips of which candidate have you heard pronounced the cure for that problem. Oh, a bit of Universal Coverage here and some Ecology there -- but nothing like the undertaking necessary. We have systemic failure staring us in the face and they suggest system tweaks as a solution.

Not a one, boys and girls, not a one has a clue. If change means upsetting the Apple Cart, then, I guess, they’re not for that kinda Change.

It not a question of "Where's the beef?", but "Where's the courage?" No where to be seen.

[Lafayette]

Anybody want to start the Social Democratic Party?

Thought not.

[hari]

[I sort of missed this post!]

Dani - "Has globalization gone too far?"

Brad - "Globalization has not yet gone far enough."

The discussion above is quite interesting and useful in current context of US domestic politics and coming election.

However let's take a more global perspective and see how this argument between Brad and Dani is likkely to end. [It's important, in this regard, to note that Brad invited Dani to join the Berkeley tenured staff, but he didn't.]

Globalization was unleached, Lafayette, officially by Clinton/Rubin policy framework to which Dani speaks about "foot loose capital" that one can't tax. This was done in circumstances which no serious person present understood fully in terms of its global impact - we now know what it really means in terms of internationbal division of labour and its comparative advantage. The rise of China and India, in particular.

Doha Round must finally come to an end under Frenchman (Socialist) Lamy. I am not sure it will be a success because there're still serious items still not negotiated including subsidies on agri-EU and US.

Let's assume it ends in a stalemate. What then?

Nation-States have been more or less sidelined during the Doha negotiations because globalization has takenover a trajectory of its own - with domestic labour/employment consequences in US/EU.

My opinion is that we're about to get a reality-check in the event Doha Round ends without fulfilling its agreed terms and conditions (mandate).

ANd it brings us back to the thread above, from all of you, namely that D-G Lamy will most likely not renew his contract with WTO.

They'll have to start a search for a new D-G of WTO. Dani will come in here, with his argument that the process has not only gone too far, it has, in fact, made the existing nation-state system impotent in terms of its sovereign power. That's diplomatic for countries inability to protect their domestic labour union agreements and preferences, etc.

Brad is a political economy wonk with tremendous mileage to boot in terms of economic history. He probably has not the faintest idea what country X or Y faces in terms of globalization of its own (domestic) terms of trade, as was known under GATT negotiations.

I've been there since Gatt II Round of negotiations and witnessed a lot of good and bad developments per se. But if current Doha Round ends in a stalemate or whatnot, I take it we're in for a very critical period of not only review of what (has) transpired or not but WHY?

My own view is that Dani is more or less feeling the real pulse of the government-to-government debate.

Brad is NOT.

[hari]

After the Revised EU Treaty is finally adopted by EU-27 parliaments and/or referendum (Ireland), I understand the EU Commission will give top priority to issues affecting Globalization...and may be issue an official White Paper.

The debate inside EU is more than serious with respect to the economic/political implications of globalization on member countries domestic economic policy. There will be retrenchment, I suppose, there's no question. The forces of globalization (UK in particular) will fight for continued liberalization of external trade policy - with all its implications!

[hari]

Brad Setzer - "State-led Globalization" is also an interesting think-piece on this post which takes a different take on SWF and its implications.

[wjd123]

I believe that it's Dani's opinion that there aren't much more gains to be had in agreements to lower tariffs. The big gains in globalization still out there for the pickings would be in open borders or maybe it's just much greater immigration. I'm not saying that Dani supports open borders--I don't know where he stands on that question--however, he does think that much greater immigration is where the gains to globalization now lie.

[wjd123]

I found this while I was serching for his quote about immigration.

I do think those items in the NYT's policy agenda have an important place on the policy agenda. My earlier book Has Globalization Gone Too Far? was largely about the need for a serious social-insurance complement to the trade agenda. But it is also time to recognize that the WTO rules need to become much more flexible to provide a better balance between international trade and domestic regulatory and other policy priorities--in other words, to assure domestic electorates that their values and preferences are not being sacrificed to the demands of some globalization agenda constructed, in any case, by a narrow elite.--Dani Rodrik

[wjd123]

Here is Dani's quote about the gains to be had from greater immigration.

The third paradox is that globalization remains restricted in precisely those areas where
further relaxation of barriers would yield the greatest economic benefits. Barriers on labor
mobility in particular are inordinately higher than they are anywhere else. It is easy to show that
even minor reductions in labor-market barriers would generate gains that are vastly larger than
those from the conventional areas under negotiation in the WTO and elsewhere. Consider for
example a temporary South-to-North labor mobility scheme that would expand the industrialized
countries’ labor force by about 3%. (The existing share of immigrants and of foreign-born in
advanced country labor markets is about 10 percent on average.) Let’s use as our estimate of the
earnings gap the figure $17,500, which is Mark Rosenzweig’s estimate (in unpublished work) of
the earning premium for a Mexican worker in the United States. Given a Northern labor force of
around 0.5 billion, the net gains generated for nationals of poor countries would amount to
0.5x0.03x17,500, or $262.5 billion per annum. By contrast, current estimates of the gains to
developing countries from the completion of the Doha Round do not exceed $30 billion....--Dani Rodrik

http://ksghome.harvard.edu/~drodrik/Saving%20globalization.pdf

[hari]

You've to include here what I put up last week on EPA (Economic Partnership Agreement) initiated by EU with African ACP Group due to WTO ruling (on case from Latin American bloc, in particular) on Lome Convention non-reciprocal treatment of goods from Africa, Caribbean and Pacific (ACP) countries into EU.

Although the ruling demanded discontinuation of Lome preferences and its discriminatory effect on non-Lome Convention members, the real bone of contention was bananas imports into EU.

El SAlvador and others complained trade "discrimination" and finally won their case thus removing benefits enjoyed by some of the least developed countries (LDCs) in Africa.

What Dani is arguing, then, is if you're going to impact trade (in LDCs) in this way, what choice do they've for any trade adjustment policy? Sovereign states are being reduced to this globalized cartel (or whatever you wish to call it) in which they've no leverage whatsoever in Africa.

Thanks wjd for that useful quote from Dani because it also goes to illustrate (my point) that non-reciprocal preferences was the political choice of EU policy under Lome Convention to protect national interest of weaker/poorer states in ACP Group - until they're able to move up the ladder, sort of.

[hari]

Mark -

I must also add that I was ACP/EU Trade and Development Advisor under Lome III, and also part of the negotiating team under Lome II.

[wjd123]

payne,

If you see this I have a question for you. Even though you write in similar styles I take it that you and "berry payne--the economist" are two different people?

[EE]

"If unions are sheep in the US, who's to blame ... management? Maybe American unions don't have enough true grit?"

THEY DONT HAVE ANY LEVERAGE LEFT, OPEN BORDERS + NO TARIFFS MEANS NO LEVERAGE FOR DOMESTIC LABOR.

GOT IT YET?

THEY DONT HAVE ANY LEVERAGE LEFT, OPEN BORDERS + NO TARIFFS MEANS NO LEVERAGE FOR DOMESTIC LABOR.

HOW ABOUT NOW?

You want to strike? well, I already produce widgets elsewhere, go ahead.

[Lafayette]

hari: Globalization was unleached, Lafayette, officially by Clinton/Rubin policy framework to which Dani speaks about "foot loose capital" that one can't tax.

You may wish to look at it in that way. I don't.

It has existed since the dawn of time. The word is just newspeak for "International Commerce/Finance". Florentine bankers were offering loans to their Northern Neighbors in Switzerland and Germany in the 15th century.

This was long before the Clinton administration. I don't see why you attribute the globalization of finance to the Bill & Jerry Show.

Please explain further.

[Icarus]

Given that globalization has allowed for the cost of labour to be reduced, and the price of products to become more and more affordable for the masses...can we not argue that the aforementioned "american dream" of a middle class life for high school educated working class people was actually a tax on the rest of us?

Are we not better off now? We don't (and shouldn't) pay $50/hour for auto workers in the US (more in Germany)...we should not produce electronics in the US.

In a few years, Tata will export a car to the US for around $6000. Now, it may not sell (aka the Yugo)...but, if it does, should we not celebrate it, regardless of the effect on domestic labour?

[Lafayette]

Chicken Little

Ic: Given that globalization has allowed for the cost of labour to be reduced

Let's not amalgamate all the present economic misery under one umbrella, please.

Globalization did NOT reduce the cost of labor. It was doubling the Supply of labor available in the mid-nineties, by the demise of Communism, that is the culprit.

This allowed the Chinese, et al, to open themselves to foreign markets with cheaper labor.

Besides, the competition in labor is sectoral. Not all sectors are hit. Textiles, manufacturing and particularly assembly have been deeply affected because these jobs entail un- and semi-skilled labor.

I do not share poster opinion here that IT has been as affected. Perhaps somewhat by the advent of competence from India, but to an extent that any future IT expansion will likely recuperate the loss.

Shall we blame our own incompetence, as seen in the sub-prime mess, on Globalization? No, but the European countries that have been affected can do so.

More over, World Commerce has been expanding uniformly for a decade, and despite what is happening in Europe and the US, globalization is still doing pretty good. It has developed middle-class economies in countries that never had them, namely China, Thailand, Indonesia, parts of Africa. This middle-class will start buying from abroad. (Example: Gucci has opened its 50th store in China just this week.)

Patience, please ... Chicken Little did NOT yell that the sky was falling. Not yet, anyway.

When unemployment reaches 10%, head for cover.

[wjd123]

That is just not so. Do you really think that GM wants a three-month strike whilst negotiating a labour contract? Of course not, it still has to pay financial debt and idle operational activity. It's costly. So, Labor, if well organized, is not totally denuded of bargaining influence.--Lafayette

Lafayette,

Naked labor is labor without the power to form unions. Your GM example misses the point. Why oh why must I always have to correct your comments about my posts?

[Lafayette]

wjd: Why oh why must I always have to correct your comments about my posts?

Because you don't articulate your thoughts adequately? I don't pick on you. I simply disagree with you. Stop being thin-skinned.

Just look at this phrase: "Naked labor is labor without the power to form unions." I know of no such example in Europe. (The last example I know happened a month ago, where Romanians were being worked in agriculture in the south of Italy at slave wages. Those who enslaved them are now in jail awaiting trial.)

So, now let's see your examples of non-unionized labor in the US. Start with Wal-Mart, if you like, and do tell us why it was not unionized labor and how it was Wal-Mart's wicked fault. Any example will do, cuz I'd like to learn how the right to unionize has been abrogated/diverted in the US.

Article 23. (4) of the Universal Declaration of Human Rights stipulates: Everyone has the right to form and to join trade unions for the protection of his interests.

WikiP: In 1966 the General Assembly adopted the two detailed Covenants which complete the International Bill of Human Rights; and in 1976, after the Covenants had been ratified by a sufficient number of individual nations, the Bill took on the force of international law.

The US never got around to ratifying this treaty? Surely because it was "fatally flawed" ...

[Lafayette]

In fact, if the US signed the Treaty document at the UN, I was wondering IF the US had ratified it. It hasn't. The Senate balked at ratifying it.

Along with such progressive countries as Botswana, Mozambique and the United Arab Republic.

Yessiree, yet another "fatally flawed" Treaty.