Wayne O'Leary

True Price of Globalization

The cat is finally out of the bag. For two decades, the refrain from the nation's power structure has been that globalization would not hurt the American middle class; if anything, a growing world economy, spurred on by free trade, would expand and strengthen it, stamping out poverty and inequality in the process. A few manufacturing jobs might go, but those would be expendable blue-collar jobs, nothing to trouble the average middle-class American. Now, even the acolytes of market supremacy are expressing, if not fundamental doubt, then at least a concern for appearances as the true cost of 20 years of criminally wrong-headed economic policy becomes abundantly clear.

Two of the leading establishment publications that have long beaten the drums for globalization have recently begun to issue what amount to contrite mea culpas tempered by calls for those damaged by market madness to adjust and accept reality. Last June, the centrist Washington Post supported the then-pending Central American Free Trade Agreement (CAFTA), the latest globalization initiative, despite conceding that the pact would not necessarily cure regional poverty and might dislocate some American workers; its bottom-line argument, trotted out almost reflexively, was to claim the economic advantages would outweigh the disadvantages.

Nine months later, commenting on the now unavoidably obvious diminishment of equality and social mobility in the US, the Post reached this startling conclusion: 'We recognize that trends in the global economy may make some rise in inequality inevitable." Nevertheless, the paper's editors remained wedded to globalized "growth" and worried aloud about redistributive antipoverty policies prone to weaken it. The implication for those in the shrinking middle class who were negatively affected by the global marketplace was that they would just have to reduce their expectations.

The Post's ideological alter ego when it comes to globalization, the conservative British journal The Economist (which actually sells more issues in North America than in the UK), recently echoed the American publication's sheepish acknowledgment of the limits of open markets. Observing the increased financial detachment of multinational companies from their home economies, the magazine ruefully concluded, "The old relationship between corporate and national prosperity has broken down," so that "the success of companies no longer guarantees the prosperity of domestic economies or, more particularly, of domestic workers."

This was a stunning admission coming from The Economist, with its almost religious adherence to laissez-faire and free trade, but the facts were incontrovertible. On average, it reported, the world's 40 biggest multinationals now employ 55% of their workforces in foreign countries and earn 59% of their revenues abroad. Overall earnings per share for large companies (up more than a third over the past two years for US-based firms) are far outstripping the performances of their individual national economies; these corporate entities are, in short, part of a global economic network that bears little connection to the countries where their home offices are located. Despite record profits in recent years, companies everywhere have only very reluctantly increased domestic hiring or wages.

Globalization, with the unlimited access to cheap Third World workers it provides, has quite simply shifted the economic balance of power in the international labor market to favor corporate managements; the mere threat of offshoring holds down wage rates in all home markets. A good example, cited by the New York Times, is Caterpillar Inc., the globally active Peoria, Illinois, tractor maker with nearly $3 billion in annual profits. Caterpillar now offers new stateside hires half what it pays more senior workers. Company President Douglas Oberhelman revealingly told the Times, "There is a balance that must be struck between being competitive and being middle class."

Oberhelman deserves credit for his candor in writing off the American Dream; few, if any, executives have been willing to say it so plainly. Like the editors at the Washington Post and The Economist, the Caterpillar head admits the real direction of America's globalized economy, and, like them, he views it as inevitable. In a sense, the establishment's lame response to globalization (it's domestically harmful, but there's nothing to be done) is strikingly similar to its response to the Iraq imbroglio (we shouldn't have gone in, but we can't leave now). These are the pronouncements of an intellectually and morally bankrupt ruling elite that's lost its capacity to act imaginatively in the face of adverse or altered circumstances. It can neither reverse course nor make decisions that might run counter to received wisdom.

In fact, there are any number of viable approaches to the globalization menace threatening America's middle-class way of life. They're hard, but doable. The Economist itself mentions several: higher taxes on profits, restrictions on overseas investment, selective import barriers, legislated limits on worker layoffs. But in the next breath, its editors dismiss these as "suicidal" in the current economic environment; they offer instead only the bromides of improved education, voluntary profit sharing and procompetitive government policies designed to "ensure that consumers [i.e. workers] benefit from lower prices as a result of the shifting of production to low-cost countries" -- in other words, the Wal-Mart solution: cheap imports will compensate for lost jobs or reduced wages and benefits.

Above all, The Economist stresses, companies must not be penalized, a futile and counterproductive exercise. But others disagree. Harold Meyerson, writing in The American Prospect, calls for a revival of industrial policy in the US to "cajole and compel" American corporations to make strategic investments in their home country, rather than constantly outsourcing. He also recommends "constraining business leaders" by changing corporate governance to guarantee employee and public representation on investor-oriented boards of directors. These and similar proposals fall under the rubric of economic nationalism, the philosophical counterpoint to economic globalization. Publications like The Economist and the Washington Post call this approach anti-competitive or protectionist; commonsensical might be closer to the mark.

Of course, there's always the choice of holding fast to the globalization agenda. A glimpse of this strategy can be seen in the conservative French government's initial refusal to rescind unpopular labor-flexibility legislation enacted as a sop to its corporate sector, which moved France's economic debate into the streets of Paris this spring. As John F. Kennedy once said in another context, "Those who make peaceful revolution impossible will make violent revolution inevitable."

Wayne O'Leary is a writer in Orono, Maine.

From The Progressive Populist, May 15, 2006

Home Page

Copyright © 2006 The Progressive Populist