is globalization headed for the rocks? a view from the radical center thomas i. palley economics for...
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Is Globalization Headed for the Rocks? A View from the Radical Center
Thomas I. Palley
Economics for Democratic & Open Societies
www.thomaspalley.com
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Framing the Debate
(1) Right v. Center v. Radical Center.- Going to the “root”- Dealing with “causes” v. “symptoms”(2) Globalization vs. Neo-liberal (Corporate)
Globalization Globalization likely to continue. Question = is neo-liberal globalization
headed for the rocks?
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The Debate Over Neo-liberal Globalization
Neo-liberal Globalization
Structure Sound
RIGHT = No changes needed
CENTER = minor“compassionate”changes needed
Structure Problematic
RADICAL CENTER =change neo-liberal globalization
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The View from the Right
• The Right = “Sunny Flat World”
(1) globalization delivering large economic gains via trade/out-sourcing/re-arrangement of global production patterns.
(2) All benefit – within countries & across countries.
(3) Good for North & South.
(4) Policy implication = full steam ahead More of the same.
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The View from the Center(The Mass. Avenue Consensus)
• The Center = “Flat World with a cloud or two.”(1) Large gains for all.(2)North suffers some temporary dislocation costs
need adjustment assistance (e.g. wage insurance).(3) South also gains A) Middle-income south
needs governance reform. B) Low-income south also has governance problems & may have poverty trap needing “aid.”
(4) Governance reforms to be done by “market opening” compete corruption away.
(5) Mandatory international financial standards & property rights; all other standards voluntary.
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The View from the Radical Center - 1
• Neo-liberal globalization more than just an economic project.
• Also a political project, with dramatic implications for democracy and distribution of power.
• Both economic and political dimensions are troubling.
• Globalization = integral part of “neo-liberalism” needs to be assessed in that context.
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The View from the Radical Center - 2
• Average annual global economic growth slower post-1980.
• Widening income inequality within countries & across countries.
• True for U.S & Europe.
• Especially true for Latin America adopted neo-liberal creed most explicitly in form of “Washington Consensus.”
• Africa has special political & governance difficulties but shows that openness & global integration do not reduce corruption may increase corruption by increasing stakes (resource curse).
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The View from the Radical Center - 3
• Flat World metaphor suggests level playing field on which compete on equal terms.
• Neo-liberal globalization anything but.• Playing field designed by corporate elites,
not an invisible hand.• Alternative metaphor = “The Box”
workers boxed in.
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The Box
WORKERSGlobalization
Less than full employment
Small Government
Labor Market Flexibility
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80
100
120
140
160
180
1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003
Inde
x (1
973=
100)
Productivity
Compensation -average
Compensation -median female
Compensation-median
Compensation-median male
Source: Source: State of Working America, 2004-05, Economic Policy Institute, Washington, DC.
The Great Decoupling US Productivity & Compensation Growth, 1973 – 2003.
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The View from the Radical Center - 4
• Globalization today differs from past part of neo-liberal policy frame.
• 19th century trade = manufactures for raw materials application of absolute advantage (which coincided with comparative advantage).
• Mid-20th century = manufactures for manufactures trade as competition policy.
• 21st century = global labor arbitrage capital & technology mobile
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The View from the Radical Center - 5
• Structure of today’s global economy: Changed competition (Global sourcing)+ Changed technological conditions (capital
mobility)+ Neo-liberal trade policy (market opening) + 2 billion new workers (end of dam of socialism) = downward wage & workplace pressures.• When join two swimming pools, water levels
will equalize.
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The View from the Radical Center - 6
• Workers cannot outrun the box.• Both private & public sector workers boxed
in.• Both Northern & Southern workers boxed
in. Changing Economic Policy therefore
critical Social Policy is NO substitute
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The View from the Radical Center - 7
• Government also boxed-in:
(1) Mobility of investment & production +
(2) Fear of employment losses +
(3) Vulnerability to financial disruption
Shrinks space & political will for policy such as fair taxation, unionization.
Creates economic & political “lock-in”.
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The View from the Radical Center - 8
• Exposure to globalization can be a source of social & political discontent.
• Economists focus on “poverty” and ‘absolute income”
• Globalization produces “marginalization” = sense of disempowerment & irrelevance
additional source of resentment reinforces economic resentments caused by “box”
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A Radical Center Agenda
• Accumulating resentment sets stage for change.• Big change probably requires a serious downturn.• Agenda = re-pack the box. Take workers out, put
CEOs & corporations in (1) Globalization with standards, (2) Full employment policy, (3) Progressive government, (4) Restore worker bargaining power, (5) Corporate agenda that re-aligns corporate behavior with national interest and social purpose.
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Dangers
• Danger = nationalist/nativist reactions fuelled by- economic anxiety & resentment, - illegal immigration, - war on terror rhetoric, - wrongly identifying trade deficit with the box.• “It can happen here”• That is why we need to make “economic policy”
(the box) the focus of political debate.