The Death of the Globalization Consensus & comments

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Will Barack Obama Commit Industrial Policy?
Robert Kuttner, Co-Founder and Co-Editor of The American Prospect
Barack Obama may soon find that he is committing a big sin against one of the major premises of the reigning ideology. As part of his plan to restructure the auto industry, rebuild infrastructure, and create new green industries and jobs, he will be committing industrial policy. And this will create a head-on collision with one of the cherished dogmas of market fundamentalism — “free trade.”
This clash is long overdue. For several decades, American elites of both parties have been preaching the same gospel of free trade. Supposedly, if we just leave markets alone, different countries will produce and export what they naturally do best, and import products at which their partners excel. In the tidy and oversimplified textbook world, there is no room for questions about pollution, labor standards, product safety, financial engineering, or industrial policy.
August 3
Shipping Costs Start to Crimp Globalization
(NYT) Cheap oil, the lubricant of quick, inexpensive transportation links across the world, may not return anytime soon, upsetting the logic of diffuse global supply chains that treat geography as a footnote in the pursuit of lower wages. Rising concern about global warming, the reaction against lost jobs in rich countries, worries about food safety and security, and the collapse of world trade talks in Geneva last week also signal that political and environmental concerns may make the calculus of globalization far more complex.
Many economists argue that globalization will not shift into reverse even if oil prices continue their rising trend. But many see evidence that companies looking to keep prices low will have to move some production closer to consumers. Globe-spanning supply chains — Brazilian iron ore turned into Chinese steel used to make washing machines shipped to Long Beach, Calif., and then trucked to appliance stores in Chicago — make less sense today than they did a few years ago.
July 2008
The Death of the Globalization Consensus
By Dani Rodrik
(Project Syndicate) CAMBRIDGE – The world economy has seen globalization collapse once already. The gold standard era – with its free capital mobility and open trade – came to an abrupt end in 1914 and could not be resuscitated after World War I. Are we about to witness a similar global economic breakdown?
The question is not fanciful. Although economic globalization has enabled unprecedented levels of prosperity in advanced countries and has been a boon to hundreds of millions of poor workers in China and elsewhere in Asia, it rests on shaky pillars. Unlike national markets, which tend to be supported by domestic regulatory and political institutions, global markets are only “weakly embedded.” There is no global anti-trust authority, no global lender of last resort, no global regulator, no global safety nets, and, of course, no global democracy. In other words, global markets suffer from weak governance, and therefore from weak popular legitimacy.
Recent events have heightened the urgency with which these issues are discussed. The presidential electoral campaign in the United States has highlighted the frailty of the support for open trade in the world’s most powerful nation. The sub-prime mortgage crisis has shown how lack of international coordination and regulation can exacerbate the inherent fragility of financial markets. The rise in food prices has exposed the downside of economic interdependence without global transfer and compensation schemes.
Meanwhile, rising oil prices have increased transport costs, leading analysts to wonder whether the outsourcing era is coming to an end. And there is always the looming disaster of climate change, which may well be the most serious threat the world has ever faced.
May 6, 2007
Free Trade’s Great, but Offshoring Rattles Me
By Alan S. Blinder
(Wasington Post) I’m a free trader down to my toes. Always have been. Yet lately, I’m being treated as a heretic by many of my fellow economists. Why? Because I have stuck my neck out and predicted that the offshoring of service jobs from rich countries such as the United States to poor countries such as India may pose major problems for tens of millions of American workers over the coming decades. In fact, I think offshoring may be the biggest political issue in economics for a generation.
… But I would argue that there’s something new about the coming transition to service offshoring. Those two powerful forces mentioned earlier — technological advancement and the rise of China and India — suggest that this particular transition will be large, lengthy and painful.
It’s going to be lengthy because the technology for moving information across the world will continue to improve for decades, if not forever. So, for those who earn their living performing tasks that are (or will become) deliverable electronically, this is no fleeting problem.
It’s also going to be large. How large? In some recent research, I estimated that 30 million to 40 million U.S. jobs are potentially offshorable. These include scientists, mathematicians and editors on the high end and telephone operators, clerks and typists on the low end. Obviously, not all of these jobs are going to India, China or elsewhere. But many will.
Alan S. Blinder is a professor of economics at Princeton University, vice chairman of Promontory Interfinancial Network and vice chairman of the G7 Group.
September 8 2006
We have become rich countries of poor people
By Joseph Stiglitz
(FT) There were once hopes that globalisation would benefit all, both in advanced industrial countries and the developing world. Today, the downside of globalisation is increasingly apparent. Not only do good things go more easily across borders, so do bad – including terrorism. We see an unfair global trade regime that impedes development and an unstable global financial system in which poor countries repeatedly find themselves with unmanageable debt burdens. Money should flow from the rich to the poor countries, but increasingly, it goes in the opposite direction.
What is remarkable about globalisation is the disparity between the promise and the reality. Globalisation seems to have unified so much of the world against it, perhaps because there appear to be so many losers and so few winners. The Panglossian view of globalisation, that it would automatically benefit all, has impeded the ability to address its failures.
…Unfettered globalisation actually has the potential to make many people in advanced industrial countries worse off, even if economic growth increases.
While economic theory predicted there would be losers from globalisation, it also said that the winners could compensate the losers. Well-managed globalisation can make everyone, or at least most, better off. This has not happened. Instead, conservatives have argued that globalisation requires countries to become more competitive by cutting taxes and rolling back the welfare state. In the US, tax policies have become less progressive; the bulk of recent tax cuts went to the winners, those who had already benefited both from globalisation and changes in technology. Increasingly, we are becoming rich countries with poor people.