"A Strategy to Promote Healthy Globalisation"

Larry Summers continues his conversation on how to promote broad based support for globalization:

A strategy to promote healthy globalisation, by Lawrence Summers, Commentary, Financial Times: Last week, in this column,... I suggested that opposition to ... economic internationalism ... reflected a growing recognition by workers that what is good for the global economy and its business champions was not necessarily good for them, and that there were reasonable grounds for this belief. ...

This ... was ... emphasised years ago by Robert Reich... The normal argument is that a more rapidly growing global economy benefits workers and companies in an individual country by expanding the market for exports. This is a valid consideration. But it is also true that the success of other countries, and greater global integration, places more competitive pressure on an individual economy. Workers are likely disproportionately to bear the brunt of this pressure. ...

In ... an open economy where investments in innovation, brands, a strong corporate culture or even in certain kinds of equipment can be combined with labour from anywhere in the world. Workers no longer have the same stake in productive investment by companies as it becomes easier for corporations to combine their capital with lower priced labour overseas. Companies, in turn, come to have less of a stake in the quality of the workforce and infrastructure in their home country... Moreover businesses can use the threat of relocating as a lever to extract concessions regarding tax policy, regulations and specific subsidies. Inevitably the cost of these concessions is borne by labour.

The public policy response of withdrawing from the global economy, or reducing the pace of integration,is ultimately untenable. It would generate resentment abroad on a dangerous scale, hurt the economy as other countries retaliated, and make us less competitive as companies in rival countries continue to integrate ... with developing countries. ...

The domestic component of a strategy to promote healthy globalisation must rely on strengthening efforts to reduce inequality and insecurity. The international component must focus on the interests of working people in all countries, in addition to the current emphasis on the priorities of global ­corporations.

First, the US should take the lead in promoting global co-operation in the international tax arena. There has been a race to the bottom in the taxation of corporate income as nations lower their rates to entice business to ... invest in their jurisdictions. Closely related is the problem of tax havens that seek to lure wealthy citizens... It might be inevitable that globalisation leads to some increases in inequality; it is not necessary that it also compromise the possibility of progressive taxation.

Second,... prevent harmful regulatory competition. ... Financial regulation is only one example of where the mantra of needing to be “internationally competitive” has been invoked too often as a reason to cut back on regulation. There has not been enough serious consideration of the alternative – global co-operation to raise standards. While labour standards arguments have at times been invoked as a cover for protectionism, and this must be avoided, it is entirely appropriate that US policymakers seek to ensure that greater global integration does not become an excuse for eroding labour rights.

To benefit the interests of US citizens and command broad political support, US international economic policy will need to focus on the issues in which the largest number of Americans have the greatest stake. A decoupling of the interests of businesses and nations may be inevitable; a decoupling of international economic policies and the interests of American workers is not.

Comments

[save_the_rustbelt]

Summers should read the Detroit Free Press for a month, perhaps he would be more attuned to reality.

Reducing the "pace of integration" is quite tenable, globalization will continue to occur and how we manage the transition is the issue. We can do better.

[me]

Globalization is a loser for the US as long as American businesses send our jobs to countries where they don't have to pay for health care.

[Real Person from the Real World]

It's nice someone is finally talking about how to limit the damage globalization has done to wages, and certainly cooperation with regards to corporate taxation is a good idea IF you can get cooperation among countries about it. Regulation with regards to financial markets is certainly needed as well. I think SOX requirements have not hurt but helped make our corporations more desirable as investments. But we need to go even farther. Labor wage arbitrage has to be limited. For example, if companies bring in workers from overseas, perhaps we need to insist on some US workers getting experience in countries overseas with the same companies. It need not be on a 1 to 1 basis, but more US IT people need access to the job experience they need to move ahead in their careers. And while we lose unskilled manufacturing jobs to overseas labor, we need to get some part of the work back here, or balance the loss somehow.

[Winslow R.]

Summers wrote: "Second,... prevent harmful regulatory competition. ... Financial regulation is only one example of where the mantra of needing to be “internationally competitive” has been invoked too often as a reason to cut back on regulation. There has not been enough serious consideration of the alternative – global co-operation to raise standards. "

I don't think he has this quite right. He is pushing us towards a one world government. There is no need to go there and in fact it is undesireable from a domestic stability perspective.

Each country has their own lender of last resort (LOLR). Access to the LOLR can go two routes.

1) International interest farmers can compete for access to as many LOLR's as possible making international regulations and enforcement a requirement for stability.

2) Allow only domestic access to the LOLR. Make citizenship the basis for access. Such access would remove the need for international regulation and enforcement.

Have the internationists give up their race to the bottom, tax havens, access to the LOLR etc. before we give them their one world government. Internationalists have no reason to be trusted to look out for anyone's interest but their own.

[lark]

The public policy response of withdrawing from the global economy, or reducing the pace of integration,is ultimately untenable. It would generate resentment abroad on a dangerous scale, hurt the economy as other countries retaliated, and make us less competitive as companies in rival countries continue to integrate ... with developing countries. ...

If we developed under a tariff program, and have operated much more often with one than without one, how harmful could it be?

The notion that substantive policy measures that actually impact trade are equivalent to "withdrawing from the global economy" is a straw dog.

It's really a question of who gets hurt. If we put into place policies to protect jobs and workers, corporations will scream bloody murder. But doing their bidding is what has gotten us into this pickle, so they have really destroyed their own credibility.

[zinc]

As a first step, why doesn't China and Japan abandon their currency peg ?

Why is America's trade deficit not shrinking noticeably, even though the collapse in the value of the dollar has wiped out magnitudes more American wealth than our corrupt "free trade" policies have ever (or will ever) return.

The current trade structure does not qualify as free trade. It is bad policy, forced down the throats of Americans in the dead of night, by a Federal Government whose main purpose has been warped as representative of business interests and contemptuous of the interests of it's own citizens.

Academia continues to back this senseless giveaway, dogmatically spouting unsupported dogmatic drivel. Now we are down to the world government thing to enforce free trade.

[gordon]

When a prominent academic with extensive ties to Government starts to say that jobs might really have been offshored, starts to talk about "inequality and insecurity" and makes noises about tax harmonisation and tax havens, you can bet he has had a real scare. There is nothing in his reported remarks that hasn't been said and said often for twenty years or more, so why the sudden concern?

I would bet my socks it's because there is now a real groundswell of opinion against globalisation and in favour of higher tariffs. It's very clear from posts on this and other blogs that the Establishment fears this sort of public reaction like poison. Only that sort of scare can produce a response like Summers'.

My strategic response would be to buy a T-shirt with "No Globalisation" or "Fair Trade Now" or "Bring Back Tariffs" on it in big red letters, and wear it wherever politicians and well-connected economists gather. Northern Hemisphere summer is coming, which has got to be the T-shirt season! Bumper sticker too, perhaps. When you've got the herd scared enough to run in the right direction, you should ensure they keep moving!

[save_the_rustbelt]

International tax cooperation?

First, is Summers that naive?

Second, does he really imagine in our lifetimes that international tax cooperation or coordination is going to make any difference to displaced US workers?

He is detached from reality.

[gordon]

Actually, all I need to put on my T-shirt is "Made In China".

[Bruce Wilder]

gordon: "When a prominent academic with extensive ties to Government starts to say that jobs might really have been offshored, starts to talk about "inequality and insecurity" and makes noises about tax harmonisation and tax havens, you can bet he has had a real scare. There is nothing in his reported remarks that hasn't been said and said often for twenty years or more, so why the sudden concern?"

I don't think it's a groundswell of opinion, so much as anticipation of a groundswell of opinion. Larry Summers is a fat, egotistical, self-satisfied, normally complacent and conservative, eager servant of the plutocracy, but he's a smart guy, who knows his economics. Really smart.

It does not take a genius to read the implications of the current recession or the next recession: the bottom 90% of the American People are about to experience major cramdown. The dollar has been devalued; the housing stock has been devalued; and, now, employment is going to shift to exports (at greatly reduced real prices). The American standard of living will decline at least 6% in this business cycle, peak-to-peak. 6%, peak-to-peak -- and that's an optimistic estimate. Peak-to-trough, it will be worse. And, we are on track for even worse in the business cycle that follows.

Major declines in the American standard of living, one would expect, will result in major unrest and discontent.

I am beginning to consider that my paranoia about this political cycle -- that the Democrats are being elected to take the fall for losing the War and creating the Depression -- is actually the realist position.

There is plenty of policy space to cram-up -- to make the top 2% and major corporations absorb a lot of the pain. Usury laws. Progressive taxation. Wealth taxation to erase the accumulated Bush deficit. Public investment projects, particularly to redesign transportation and communication to minimize energy requirements. Minimum wage increases. Repeal Taft-Hartley. Increased mandatory vacation. A tax-financed Health Care system.

2008 will see a tsunami (that's a big wave) election, and, while the plutocracy want the lesson to be one of Democratic failure, it is a big gamble on 40 years of Democratic impotence continuing.

So, cue Larry Summers.

[Francois]

Gordon raises an excellent point. The Establishment has a lot of reasons to be fearful. I read at least 4 other econ/financial blogs every day and the comments smell anger, frustration and a growing desire to strike back in any way possible.

This can't come as a surprise to any member of the reality-based crowd, a.k.a. the majority of the people. First, more and more Americans realize they are lied to every month: Case in point, the in-your-face fudging of the go-vermin stats such as CPI and unemployment numbers by the BLS. As per this estimated agency, inflation is contained; construction and finance jobs ROSE last month, during one of the worst downturn ever for real estate and the financial industry. Who you gonna believe Bro? Me, or your lying eyes?

We have also the ever trending shift in taxation to middle-income earners served with a hefty serving of higher expenses for everything necessary (food, energy, healthcare where even the insured feel an increasing amount of financial pain and decreased coverage), the multiple tax loopholes and sweet deals (Halliburton anyone?) provided by the go-vermin to the well-connected and wealthy. Free Lunch and Perfectly Legal by David Cay Johnston make an irrefutable case of this injustice. Quelle surprise! There is rising anger, and frustration.

Said frustration derives in no small part from the valid observation that people feel that their voice does not even matter anymore. One has only to remember the infamous comment by Dana Perino during a press conference:

"But...we listen to the people. They speak every 4 years"

Yeah right! In the meantime, we are supposed to STFU and bend over perhaps?

or the ineffable "So?" by Dick Cheney when told that the polls showed a majority of Americans opposed to the Iraq war.

Give the political opportunists some catalytic event(s), and the masses are likely to react with an irrepressible urge to chop some heads figuratively or otherwise.

The powers that be are right to fear. And no Mr. Summers! Jawboning these feelings by merely acknowledging them won't be enough.

It is time to think different and do sensible things for the common good.

The status quo isn't an option.

[Francois]

"I am beginning to consider that my paranoia about this political cycle -- that the Democrats are being elected to take the fall for losing the War and creating the Depression -- is actually the realist position."

Reps know they've lost this election, despite the media trying to make us believe that McCain is great and Democrats are the only mandatory target of gotcha journalism. Witness Stupidopoulos and Glibson conduct of the Philadelphia debate as a sample.

Is it any wonder that Dumbya insist so heavily to deny the very existence of a recession? How can there be a recession when the job loss is ONLY 20K jobs? When exports are soooo vibrant?

Why did the Fed increased several time the TAF while accepting collateral of less and less quality? They've now accepted to backstop the entire student loans industry as of Friday. Why? Because there is NO recession; only the libruls, the enemies of the GOP are talking about a recession. It's a slowdown stupid! The real recession will miraculously start in January 2009, not a day before. (if it can be avoided...*evil grin*)

The republicrats have already started to "warn" us that Dems "will raise taxes", will wreck havoc on the markets by imposing more regulations. When the next president get elected, just watch how ugly the systematic campaign of destruction, spin, smears and lies will be. It'll continue unabated during 4 long years where ANY president will have to repair 8 years of severe damage to the very fabric of the Republic. The responsibility for said damage will, of course, never be acknowledged by the attackers.

The story line will be: All the real trouble started THE DAY THE DEMS TOOK OFFICE. Their mere presence generates a miasma of bad stuff, a toxic cloud of perversity permeating the whole country...what am I thinking?...the whole Universe!

That the Democrats are being elected to take the fall for losing the War and creating the Depression is the realist position. It segways into the Republican (neocon) modus operandi. Never acknowledge any mistake, always accuse the "others" of what they, themselves are doing, and be unrelenting in your attacks. If there' nothing to attack, smear the opponent until something stick. Oh! and fudge the facts as much as possible to your advantage.

Wash, rinse, dry and repeat.

[BJ Feng]

What's missing in this discussion is the positive impact of globalization for emerging and poor countries. Real wages in China, India, and a host of others have jumped enormously thanks to globalization. When the world becomes a smaller place, wages have to equalize across nations, just like wages in Dallas has to be in the ballpark of wages in New York. Not exactly the same, but at least within 50%.

Globalization has reduced poverty more than any other program in the history of the world. Of course this has been accomplished mostly by the private sector, which is why we don't hear much about the good globalization creates. So when the UN reports that poverty is down drastically all over the world, no reason is given why, only that "more must be done".

What we're experiencing here in the US is not normal or typical. It's because we're so rich and have such high wages that globalization can be considered a negative factor (it's unclear because of the lower cost of products). For most countries though, globalization is clearly a blessing and a huge positive force that is raising their wages and their lifestyles.

People complain about environmental standards and such, but poor people just don't have the money to spend on improving the environment. When you only make enough for food, you're not going to care if cheaper food comes at the cost of massive pollution. Only when people get wealthier do they have enough to consider the environment. It's only thanks to globalization and higher wages that countries like China are now considering environmental impact, before they wanted to industrialize regardless, but now there are protests about opening up a chemical plant right in the middle of a large city, and about endangered species in the rivers and ecosystem.

Globalization increases environmental awareness! Everyone wants cleaner water and air, but only the rich can afford it. As people become richer, they spend more on improving the environment. That spending can be indirect, say restricting logging which will drive up paper prices and eliminate jobs, or not building another dam, which will force everyone to pay more for electricity, but it's all the same.

A lot of people in the United States are very myopic. Europeans have complained for years that the average American has no clue on what occurs elsewhere in the world. It's time for Americans to look farther than the tree in front of them and see the forest of wealth that is globalization. Those who are serious about reducing poverty and helping the poor should be asking how globalization can be accelerated, and how to get oppressive dictators to open up their economies to the world economy.

[save_the_rustbelt]

BJ:

So will you give up your job, health insurance, and house to further the cause of globalization? Others are involuntarily, so will you?

[Real Person from the Real World]

Globalization may be good for the 3rd World, but is it right to help them while hurting others? The help comes at the cost of the US Middle Class. Meanwhile, narry a CEO, or politician for that matter, is suffering. The US used to be a market for high end goods. Now we are covered with $dollar stores, Tuesday morning, Marshall's, TJ Maxx, and Walmart selling low end crap at rising prices. Sales jobs of lying over the phone are abundant, low wages for the starters, higher for the practiced liars who can pull a sale off. We need some sense (regulation) on what we offshore and outsource, and who shares the rewards.

[rdan]

Wages are rising in China. For whom, where, and how many?

[rdan]

Wages are rising in China. For whom, where, and how many?

[paine]

"The domestic component of a strategy to promote healthy globalisation must rely on strengthening efforts to reduce inequality and insecurity"

larry on homeland front :
same old same old

strengthen job lose safety nets
issue more and better job compaction collision mats
produce more hu-cap
by ringing more school bells ...

sum up
zillions of cubic meters of gaseous chatter

the international front ??

"the US should take the lead in promoting global co-operation in the international tax arena"

"prevent harmful regulatory competition"

larry brings forth ....a mixed bag
of common peas and magic beans

the result

more waiting
more jobsters waiting for godot
while being harped on
to eat their skill building spinach

larry u'll have to do better then this
telling the board room
"there's a job class out there in the north hemi
that ain't likely to buy the frayed line
' open borders raises all incomes '
so you trolls better fire up
the second wave of razzle dazzle "

which is ????

"we feel your pain
as much as you see our gain
we agree you're getting pipped
...... something must be done
and it means by all of us
responsible types
living here on earth
so we're meeting
yup reps from all us big timers' venues
meeting
in a quiet hamlet in the alps to .... "

[paine]

winston smith's brother winslow :

"pushing us towards a one world government. ....Internationalists
have no reason to be trusted
to look out for anyone's interest
but their own"

larry ???

would that he would
in fact he only bloweth ...smoke

[paine]

"As a first step, why doesn't China and Japan abandon their currency peg ?"

precisely

why ??

cause
the U.S. patriotic wing of
larry's flock of globe circling
" stateless elites "
are making both our national policy
and their zillions off this
trans pacific profit slurry

[paine]

" it's because there is now a real groundswell of opinion against globalisation and in favour of higher tariffs. It's very clear from posts on this and other blogs that the Establishment fears this sort of public reaction like poison. Only that sort of scare can produce a response like Summers'"

exactly correct

and larry even states it boldly

stateless (careless) elites
each elite
indifferent to the fate
its own nation's job force

and he goes further

the "groundswell " is based on
real jobster compaction
not ignorant urban myths
and a few scattered factual anecdotes

in the rapidly
post industrializing nations of the north hemi
the time has come for bigger ...promises

[me]

"What we're experiencing here in the US is not normal or typical. It's because we're so rich and have such high wages that globalization can be considered a negative factor (it's unclear because of the lower cost of products)."

If I lose my job (I did) and have no money to buy cheaper goods, what is my benefit. The lose of my job and health care costs me far more than any saving on food at WalMart

What people like you don't understand is that it is a zero sum game. IBM fires 75,000 in the US and hires 75,000 in India. Even if they hired 75,000 in India but grew the business and HIRED only 10,000 in the US that would be a plus but you will have a hard time selling a zero sum game.

If you want "free trade" then let's level the playing field. Let's put a health care import tax on imported goods for any country we import from that does provide health care to their employees.

Globalization in not longer a theory of greatness, it, like Iraq, is a failed experiment.

[paine]

employment is going to shift to exports (at greatly reduced real prices)

you lost me on this bruce

talking real terms of trade ???
i agree more or less

but looking at corporate earnings
export sector margins in dollars
oughta rise nicely
in fact
why not raise price as dollar falls ??
gaining market share over seas
may be only so much so fast
and specifically
not as fast as any particular
bilateral dollar drop

even if (dollar based )
relative prices
export to import move as expected
export sectors oughta pass thru real wage increases as well as higher employment levels

but that's the econ con in me...
more to the main point

"There is plenty of policy space to cram-up "

boy oh boy are u right

and i love your list of means ".. to make the top 2% and major corporations absorb a lot of the pain"

well worth repeating

Usury laws
Progressive taxation.
Wealth taxation
Public investment projects
Minimum wage increases
Repeal Taft-Hartley
Increased mandatory vacation
A tax-financed Health Care system

[paine]

"ANY president will have to repair 8 years of severe damage to the very fabric of the Republic"

what in hell
"severe damage to the very fabric of the republic "??

the patriot act

hey till white folks fear their own gub
no way this cuts ice

iraq??

both sides of the aisle will find a way
to the same end game

that one deemed best
for the limited liability
global project
ie
the imperial way

the mounting federal deficits ???

pure black widow spider horse feathers

the downed wires of 50's era
gub over business
control and regulation ??

bi partisan

in sum
that we are on the verge
of a grave choice next fall is
well
yet another "flood " cry
time for pwogs to build another
noah's ark of conventional thinking

i for one am tired of 30 years
of post woodstock
comfortable but full of fellow "feeling" class

their hysterics their indignation
their moral world according to ME

its upshot
a stampede to back
a clinton or a gore or a kerry
or now
a hillbama

any one but an elephant eh ???
listen by the looks of it
either of the identity twins
that prevails
won't
be able to by a cup of dunkin's
on the diff
between them "in action" over the next 4 years
and the next 4 years
under the ole air pirate

peog ponders
you want a new deal type morph ???

sorry
not if the global economy
pulls out of this credit swoon

now if it dosn't ....

even flight deck pappy
will be closing the borders
--with secret corporate trap doors of course ---

[don]

"While labour standards arguments have at times been invoked as a cover for protectionism, and this must be avoided, it is entirely appropriate that US policymakers seek to ensure that greater global integration does not become an excuse for eroding labour rights."

Greater globalization will come at the expense of U.S. wages. What are the other 'labor rights' that we should protect? (An unelated question, since there is a global saving glut, why are returns to capital holding up so well? Why the huge split on the returns to debt and equity?)

"The domestic component of a strategy to promote healthy globalisation must rely on strengthening efforts to reduce inequality and insecurity. The international component must focus on the interests of working people in all countries, in addition to the current emphasis on the priorities of global ­corporations."

What does this mean? Bread and circuses for the masses?

"There has been a race to the bottom in the taxation of corporate income as nations lower their rates to entice business to ... invest in their jurisdictions. Closely related is the problem of tax havens that seek to lure wealthy citizens... It might be inevitable that globalisation leads to some increases in inequality; it is not necessary that it also compromise the possibility of progressive taxation."

Yeah, right. Tax the corporations. But only people pay taxes. You will never get the pie-in-the-sky international cooperation. But you need only tax income of individuals progressively to get the desired result. The only hard part about this is taxing the income on an accrual basis when it is held in a corporation, but there are ways to do this, certainly for any corporations that have a traded stock with quoted prices.

Gordon and Zinc make better points - much of the problem stems from artificially pegged exchange rates. This is the same old scam countries tried to pull during the great depression - devalue your currency and export your unemployment. (B J Feng makes good points - it would be selfish for the U.S. to stop this from happening. However, most of us are selfish.) It surprises me that the U.S. public has tolerated this state of affairs for so long. Part of the reason, I suspect, is that they were mollified by the apparent increase in their wealth that came from these policies.

[Rohan Swee]

me - What people like you don't understand is that it is a zero sum game.

Ah, but that's one of the funnier parts. All these years, listening to the exasperated Wise Ones bemoaning the intractable allegiance of hoi polloi to the misapprehension that free trade (or "free trade", to get technical) was a zero-sum game. Apparently we all misheard all along. They weren't saying that only idiots think it's a zero-sum game, they were saying it's a zero-sum game for (all you) idiots.

BJ: It's because we're so rich and have such high wages that globalization can be considered a negative factor (it's unclear because of the lower cost of products)."

me: If I lose my job (I did) and have no money to buy cheaper goods, what is my benefit. The lose of my job and health care costs me far more than any saving on food at WalMart.

Come the revolution, first up against the wall will be the luckless bastard who earnestly, innocently bleats the last variation of the "but you benefit from all this cheap Chinese crap" defense in the wrong place, at the wrong time, to the wrong ex-paid, ex-insured, ex-fed, ex-worker, at precisely the right pin-point turning point of history and ineluctable fate. Poor devil. Probably won't be the one who deserves it.

[donna]

The problem is we don't ALL benefit from the cheap Chinese crap. Walmart execs benefit, WalMart heirs certainly benefit, WalMart stockholders may benefit. Walmart managers, to some extent. WalMart employees? No. And the taxpayer gets to pay taxes to support WalMart workers with social services while WalMart teaches the workers to fill out the forms for public aid. Meanwhile jobs get shipped overseas, people are paid less and end up having to shop at WalMart. It's a very vicious trend.

And then there's the part I hate -- I can't even get the quality and kind of goods I want, because the manufacturers who make the higher-quality goods I want get forced out of business. I don't shop at WalMart because most everything there IS crap. But there's no where left to go that produces much better. That's where we've lost it -there's no more room for good quality products that are not sold at the cheapest possible prices.

[Casualobserver]

There really is no problem. Even the far left economists have a hard time blaming the plight of modestly skilled hourly worker on globalization.

No more $30 an hour jobs with benefits for screwing two pieces of steel together.

Even the healthcare crisis is drastically overblown. 75% of those uninsured have insurance 12 months later.

Sorry folks, your are longing for and trying to recreate a time in American history that has gone the way of the Pinto and Abe Lincoln's sideburns.

It is a bit like sports fans blaming their team's loss on the officiating.

It can't be stopped. Once you accept the reality, than a new paradigm will arise with modern day solutions that will benefit everybody. Until than, both parties will choke on their own vomit.

The political party that achieves success going forward is the party that first figures out how to function in the new "operating environment." As of now we have one party that wants to go "Back to the Future" and the other party that looks like a "deer in headlights."

I suspect if Obama or HC happens to stumble to victory, you will see much less targeted legislation as the Politiboro hoped for and a substantial decline in the rhetoric concerning healthcare, globalization, income inequality, and other various left leaning hypochondriatic drivel.

For those that continue to decide that high school doesn't matter, it is OK to have children out of wedlock, and that Wal-Mart is a career are going to continue to have very difficult lives. For the rest, the gains in the new economic reality are going to be bountiful. No amount of rule changing is going to have an effect.

No amount of money solves every problem.

The real economic revolution is not going to be from the bottom up but rather from the top down.

Congress has a lower approval rating than the President. If you don't grasp what that means than no amount of foot stomping and temper tantrums on a blog are going to accomplish much.

says...

Donna,

You are clueless.

[kthomas]

Donna is not clueless. Wal-Mart definitley sells loads of crap.

[paine]

" strengthening efforts to reduce inequality and insecurity"
by tax and transfer among ourselves ???

now if the job class can be polarized
and then the better off jobsters taxed to
net support the fallen ....
just
keep it all monoclassic
at least for as long and as far as possible

you know
keep the product and low skill borders open
for competitive cost of living purposes

and of course
as dean baker harps
keep the upper 10%
professional class household s income
border seal protected

yes always remember in the public discourse
try to keep the focus on
the total amount of any households income
not the source of the income

maxim
at all times
let the bottom twenty
the true losers
get proped up by means of taxes largely
on the top twenty
the true winners
while stabilizing the middle sixty

blah blah

key
some how thru all this taxing and transering
pull of a sweden trick

keep expanding
the exotic non big corporate
tax free zoning areas
then we stateless elites
can still
off class our taxes
if we don't off shore our wealth ...

its all about
the big ones
the top 1% ers
in fact even
only the top 1% of the 1% ers
really really matter

the rest of us
are helots
sons of adam
the preteri
with his curse
not children of the angels

says...

Did I say Wal-Mart doesn't sell crap? So does Costco, Target, Shopko and a handful of other smaller retailers.

Have you visited your local "dollar store"? They make Wal-Mart look like Saks.

Donna is clueless because in many cases, crap is all people can afford. How can you be so out of touch with the people you supposedly "feel" for and are trying to help?

You think the lower middle class or working poor are going to buy their kids clothes at fricking Dillards and Nordstroms?

The rest of her comments are rantings of an arrogant, ignorant, elitist.

If you don't like shopping there, don't, nobody gives a rats ass.

Where do you propose the working class poor and lower middle class cloth their kids, buy their food items in bulk, and buy cheapr necessities if cashiers and teenagers opening the video game case make $25 an hour with full benefits?

[BJ Feng]

Free trade is NOT a zero sum game! Thanks to comparative advantages, BOTH nations benefit overall, though some people may be worse off. Yet isn't that the mantra of the left? The needs of the many outweigh the benefit for a few?

Donna, what exactly of high quality do you wish you could buy that is no longer available? Dishes? Clothing? I can't think of anything except maybe a broom or mop, you can buy higher quality toys still, just not the ones from Mattel which made a huge error in trying to save a few cents. They're going to be punished and already are due to lower earnings, but the damage to their brand name can't be calculated.

For most people, a plate is a plate and a fork is a fork unless you have guests over and want to show off. Ikea is good for that kind of stuff. When people are able to save, they have more money to spend elsewhere, and jobs will be CREATED. That's hard to directly measure, the new nails saloon that opens up because people have more money and now can support such a business. All we see are manufacturing jobs that are lost due to trade, but we have difficulty seeing those jobs that are created.

I don't know what specifically you propose to keep companies from globalizing. I don't see how raising taxes is going to do anything, taxes have nothing to do with job security. And good luck getting a global corporate tax rate, countries like Ireland and those in Eastern Europe have prospered way too much by lowering their corporate taxes to ever let someone else talk them into poverty again. The US is lucky that it can afford to have a high corporate tax rate because it is such a wealthy country that any international company MUST do business in the US if they want to be large. As the world's #1 economy and largest market, we have a huge advantage, but we can't allow bad policies to erode away that advantage.

[hari]

So far, this thread is lead by Paine's (gangleader!) who want nothing more than *protectionism* for next 8yrs or so under Dems. Right?

Larry Summers entire argument, if you followed his previous pieces in FT, is the rising tide of protectionism that is likely to sweep thru next Congress.

From an international economic policy perspective, recall right now EU/China/India are in the process of finalising their respective bilateral trade and investment policy framework in light of the (negative) implications of globalization and whatnots.

Larry is aware of what's in the pipeline globally to (may be) restructure WTOs globalization framework and make it more compatible with emerging 21st cent. Isolation is not a choice for US policy given the extend of its private sectors overseas investments (FDI) and its acquisitions.

You simply can't kill the goose that laid the golden egg for US-style free market capitalism a few decades ago.

[Andrew]

hari,

I believe you may enjoy this article by Fareed Zakaria on the 'Post American World'.

[wjd123]

I don't want a world government. I want an international government that not only incorporates democratic values but protects my rights and expands them. That means that China is out.

I don't want to end up desperate by allowing the practices of corporations or their influence over governments seeing that I do.

I don't want to be told by economist that I'm better off than the Chinese worker because capital has invested more in my work place to make me more productive while skipping over the sacrifices others have made to create our political economy.

I don't want to compete with workers making two dollars a day. I can't, and that I have to offends me.

I don't want to be told that free trade improves my life by providing me with cheap goods to make up for my shrinking wages, not when I'm being nickled and dimed to death with the inflated cost of necessities partly due to increased global demand. I don't begrudge other people a higher standard of living but don't lie to me and tell me free trade evens things out, not when you subtract the higher cost of energy and food.

Therefore:

I want to belong to an international government, government X, that protects and expands my rights. I don't want corporations playing off nations with different standards against each other. Think EU.

I want to be able to keep out of the country goods made by denuded labor, in lands that subsidize corporations with tax breaks, easy environmental standards, and use currency pegs as informal tariff. Think real tariffs.

In conclusion:

What I want is for democratic countries with like political economies to band together allowing free trade within their purview. Whoever else it extends trade privileges to will depend on how much the rules of other political economies end up undermining the rules of X's political economy, society, and values. Normal trade relations here at home could do the same but it wouldn't solve the problem of corporations benefiting from playing off countries against each other.

Protecting the writ-large rights of stakeholders in our political economy must start with staunching the damage done here at home by corporate practices and trade agreements. How we trade is a deliberate decision. (New technology is only tangential to it.)

If it is only meant to boost free trade as practiced today, I don't buy the argument that we have to trade or parish. We have to get a hold of trade practices or parish.

For instance, if corporations want to use denuded labor to destroy a sector of X's economy, tariffs should be used to keep them from selling into it. Those nations that allow their stakeholders a fairer shake can appeal to have X's tariffs reduced. This would work as a carrot for countries to put into place rules and regulations that would even the power of all stakeholders in their economies.

When politicians and economist tell Americans that jobs are not coming back I take it as an admission that they are not willing to change the way we do trade. If there is a market here and tariffs make it profitable corporations will build new factories and hire new people to meet the demand. I don't know how much demand there is in countries whose people make $2.00 and hour, but let corporations find out.

If economist start pointing to opportunity cost and wasted resources point back to a political economy we have built up over hundred of years being attacked by politicians captured by the interests of multinational corporations and their money.

Elect politicians that can show you the teeth in their free trade policy. Elect politicians that haven't allowed economist to impair their vision: Economist who believe that we have to destroy the village in order to save it. They are a menace.

Economist know that new economic forces will call for new social needs. However they tend to believe that new social needs will create new answers. Needs don't create answers. Just because there is a need doesn't mean a way will be found to answer it. There is no creative invisible hand.

Because there is no creative invisible hand to build things up again, and because it took a long time to build the particular village in which we live, we should be careful that we don't blindly push for practices that we have no control over.

I'm happy Larry Summers is looking at the consequences of trade as it is practiced today. I'm not happy that his suggestions for fixing its problems have no teeth.

[hari]

@ Andrew -

Thanks for Zakaria historical account...

He's much better in written pieces than in a TV studio. The article in Newsweek is an attempt to come full circle with the geopolitical impact of globalization on US domestic politics and external policy.

[hari]

@ wjd123 -

You know we have a mutual interest - namely, US cannot become isolated from global econoic developments. Need at the present time is to have a *pause* and reconsider impact of globalization...and how to move forward.

Policy consequences are more catastrophic than your random think-piece on trade policy implies....You're NOT an *isolationist* at your tender age!

[wjd123]

Hari,

My age isn't so tender.

I'm no isolationist. In fact I would say that I'm the biggest internationalist on this site. I'm perfectly willing to give up some national sovereignty to have my rights protected from the amoralism of multinational corporations driven by the needs of competition. To do that the power of government is needed. That the WTO can't provide.

International government is possible. The EU proves it. It has laws it can enforce and members who can obey their laws. One World Government would have laws that most members couldn't live up to, or if they could, the rest of its members wouldn't what to live down to.

Why do you think my wants would have consequences that would be catastrophic for trade policy. I want to change trade policies, but I don't want to cause a catastrophy.

BTW, that's "perish" not "parish." Maybe that is what made you think I was an isolationist.

[hari]

STILL YOU ARE REASONABLE AND INDEBTED TO YOUR IMPLICIT INTELLECTUAL INHERITANCE.

[BJ Feng]

"Americans—particularly the American government—have not really understood the rise of the rest. This is one of the most thrilling stories in history. Billions of people are escaping from abject poverty. The world will be enriched and ennobled as they become consumers, producers, inventors, thinkers, dreamers, and doers. This is all happening because of American ideas and actions. For 60 years, the United States has pushed countries to open their markets, free up their politics, and embrace trade and technology. American diplomats, businessmen, and intellectuals have urged people in distant lands to be unafraid of change, to join the advanced world, to learn the secrets of our success. Yet just as they are beginning to do so, we are losing faith in such ideas. We have become suspicious of trade, openness, immigration, and investment because now it's not Americans going abroad but foreigners coming to America. Just as the world is opening up, we are closing down."

I agree with most of the points in the Newsweek article. What Americans don't understand yet is that the rising income of those people in third world countries will benefit us greatly later on. They'll have the money to purchase American products, like I-Pods, Microsoft Windows, and a latte from Starbucks. No the I-Pod isn't made in the US, but the profits go to an American company.

Wjd123, what you want is the government to protect you from competitors who are better in an industry. There's no need to play that game, why not expand an industry where we are better? Creative design, brand name placement, and marketing are where we can dominate, not manufacturing. We design and market a Nike shoe or I-pod. The manufacturers get $1-2 profit per unit, the American companies get the rest, for shoes it's over $50, that's a good deal.

Your demands will only shield us for a short period of time, the key to the future doesn't lie with keeping old jobs, but with creating new ones in new industries. We have a vibrant tech industry and we still manufacture products that no one else can, like Boeing airplanes, and our oil services drillers are the best in the world.

What you want isn't the best for America's future. Making Americans pay $15 for a T-shirt to keep an uncompetitive industry alive isn't going to keep us ahead of the competition. We have to embrace competition, not hide from it.

And instead of being a "stakeholder", a meaningless term, why don't you become a shareholder instead? The multinational companies are owned by Americans, and there's nothing wrong with them trying to offer the best product for the lowest price.

I believe the perfect type of Communism, or the only real way to achieve it, is for all companies to issue shares in equal amounts to every person so that everyone owns a Coke or Intel and gets a share of the profits. Of course problems arise immediately, like the selling or buying of shares, no doubt some would squander that wealth and others build it. If you don't allow selling or buying, then how would stock prices be established and what motive would companies have to increase profits? No matter how you look at it, competition can't be avoided forever.

[Real Person from the Real World]

BJF - you have to make enough money to invest. Many people are just staying afloat. Essentially, American wages are being violently pulled down to 3rd world levels, and that's what is causing the fuss. While it is great that the 3rd world is rising out of poverty, it is not fair to do the raising by yanking the living standard of the US middle class. Meanwhile all and any elite anywhere, whatever his business, lives the good life and couldn't care less about countries.

[Icarus]

Actually, it is fair to destroy the livelihood of the American Middle class in the name of rising 3rd world living standards. I think 6.4 out of 6.5 billion around the globe would sign up for that deal.

The issue really is that a crust of American elites will benefit from this overall arbitrage. Globalization is essentially the redistribution of the spoils of 20th centurly capitalism. As in any redistribution, there are significant losses. Luckily, in this case, the victims are nothing close to innocent. They are relatively ignorant, essentially patriotic and illiterate, obese, war mongering, gun toting, canned food eating, non-passport having, walmart shopping, saddam-hating, good old folk.

What's the big deal if this subpopulation is slowly obliterated by good old free trade? I'm quite serious.

[wjd123]

And instead of being a "stakeholder", a meaningless term, why don't you become a shareholder instead?--B.J. Feng

B.J. Feng

Here in New York stakeholders are written into the law. When companies make business decisions New York state law allows them to take into consideration the interest of stakeholders--labor, suppliers, communities--and not just what is best for the shareholders. Don't other people also have a vested interest of a company? Are their interests to be ignored when decisions are made? Do shareholder interests override everything else?

New York State realizes that when companies give consideration to all their stakeholders it's good for the State. Let's say that because of expanding business a company has to build a new incinerator to get rid of its hazardous material. The business chooses the most cost effective site. However, the community complains, the site is on the south side of town and the prevailing winds are northerly. They fear that smoke and ash blowing over their town will be a health risk for their children, lower real estate value, and make the town a less attractive place to live. The company says that it did soil samplings on the northern site and they would have to do an environmental cleanup there that would be too costly.

Labor and suppliers want the incinerator built because it means jobs, but they are also have families in the community. There is a site in the next county but the not-in-my-back-yard opposition is too great for politicians there to allow the incinerator to be built. The company points out that the farther away the incinerator is located the higher their transportation cost, truck emissions, and wear and tear on county roads.

After wrestling with the problem the community agrees to drop its opposition to the northern site if the company will install special scrubbers that are very expensive, but not as expensive for the company as building on the northern site. New York State government approves of the compromise. It likes the idea of super scrubbers. Not only are they good for the health of its citizens but less health problems down the road is good for the State's budget.

Nevertheless the company is still unhappy about the extra cost of the scrubbers. They will cut into its profit margin. Management is hearing from stockholders about receiving lower dividends. On Wall Street their stock is dropping.

The company starts looking around for a way to increase it's profit margin. China offers them a subsidized site close to a port. The accountants start to crunch the numbers. If they move to China they can unload union contracts here for denuded labor there. The Chinese government promised that they can build their incinerator right next to their plant without those special scrubbers. Executives are offered houses in the suburbs and subsidized office space in a new high rise building in the city. The accountants discover that transportation cost aren't that much of a factor and besides cheaper suppliers are readily available there. A move to China with its denuded labor and lax environmental standards, not to mention all the subsidies the government offers will substantially increase the companies profit margin.

Stockholders are happy about their higher dividends and the chief executives about the increased value of their stock options.

So its your contention that the stockholder's interest come before all the stakeholder's interests in New York and that port city in China. That protecting our political economy with all its compromises should be undermined by a political economy who stakeholders have no say in the process.

Oh, that's right, pollution has gotten so bad in China's big cities that people are protesting in the streets and embarrassing the government. You can't keep stakeholders down forever. Do you still think "stakeholders" is such a meaningless term? Should all decisions be made simply for the benefit of the stockholders? Seems to me that making decisions just for the benefit of stockholders can cause a lot of damage.