Globalization and the left (broadly speaking)

Paul Krugman - maybe I should be saying "even-the-Hillary-supporter Paul Krugman" - has been walking a line between his fondness for free trade and the failure of the great benefits advocates of "trade" treaties always promise to actually appear. He writes in Trade, Labor, and Politics New York Times 03/28/2016:

Serious economic analysis has never supported the Panglossian view of trade as win-win for everyone that is popular in elite circles: growing trade can indeed hurt many people, and for the past few decades globalization has probably been, on net, a depressing force for the majority of U.S. workers.

But protectionism isn’t the only way to fight that downward pressure. In fact, many of the bad things we associate with globalization in America were political choices, not necessary consequences — and they didn’t happen in other advanced countries, even though those countries faced the same global forces we did.

Consider, for example, the case of Denmark, which Bernie Sanders famously held up as a role model. As a member of the European Union, Denmark is subject to the same global trade agreements as we are — and while it doesn’t have a free-trade agreement with Mexico, there are plenty of low-wage workers in eastern and southern Europe. Yet Denmark has much lower inequality than we do. Why?

Part of the answer is that workers in Denmark, two-thirds of whom are unionized, still have a lot of bargaining power. If U.S. corporations were able to use the threat of imports to smash unions, it was only because our political environment supported union-busting. Even Canada, right next door, has seen nothing like the union collapse that took place here.

Krugman is an expert on international trade. But it seems to me he's trying to hold on to the pretense, or at least the hope, that the neoliberal "trade" treaties aren't primarily about trade but about corporate deregulation and overriding national sovereign for the benefit of corporate predators.

Bill Mitchell wrote last year about how too many left economists, including some who were working with an explicitly socialist or Marxist perspective, got caught up in the illusions of globalism, The origins of the ‘leftist’ failure to oppose austerity Bill Mitchell – billy blog 07/22/2015:

The situation [in the 1970s] became worse when the ‘left’ started incorporating the increasing global nature of finance and production-supply chains into their analysis. They wrongly assumed that these trends further undermined the capacity of states to spend and maintain full employment.

The ‘fiscal crisis of the state’ and ‘globalisation’ were held out as the two major impediments to state sovereignty. Nothing could have been further from the truth. But the ‘left’ bought it and in the 1970s, the neo-liberal resurgence as Monetarism, then privatisation and austerity, became virtually unchallenged and the ‘left’ disappeared up its own post-modern whatever. ...

In the European context, the unchallenged domination of the Monetarists was an important reason why France and Germany were able to come together and advance the move towards monetary union. ...

I think the literature that emerged from the Marxist scholars like James O’Connor in the early 1970s was not only substantially wrong it is presentation of macroeconomic theory (particularly in terms of its characterisation of the fiscal opportunities available to the fiat currency issuing governments) but was so influential among the practical ‘left’ – trade unions and other activists – that it provoked the downhill path of progressive opposition.

Neo-liberalism in its macroeconomic manifestation faced little opposition. Sure enough progressives attacked the retrenchment of welfare states, the privatisation schemes, the outsourcing and all the rest of it.

Globalization issues

Stanley Weintraub of the Center for Strategic and International Studies has some thought-provoking comments on The U.S. Midterm Elections and Globalization 11/15/06. He writes:

There are losers in this process, such as the workers who are dismissed from their jobs in the United States, and there are winners, such as those who get good-paying jobs in export industries. The workers in countries who get the jobs also benefit. Creating winners and losers from economic change is nothing new; technology changes create winners and losers, and the “progress” inherent in this comes from creating more winners than losers and generating higher productivity-permitting wage increases for the winners. This was true when the cotton harvester replaced manual harvesting, when automobiles took over from horse-and-buggy transportation, and when personal computers became ubiquitous.

The main shortcoming of this process is that many countries, including the United States, do little to compensate the losers. Low-wage and low-skilled workers in the United States were the first to suffer from the combination of job loss and little to no compensation.

This is also a chronic problem whose eventual solution is uncertain:

The United States has accepted the role of debtor to the world—as the ultimate destination of goods and services that has led to the large U.S. deficits on the current account. Many countries, predominantly in Asia, seek to have trade surpluses by keeping their exchange rates undervalued, certainly with respect to the U.S. dollar. The United States has bilateral trade deficits with many countries, but the two largest deficits in 2005 were with China ($201 billion) and Japan ($82 billion).

A trading system under which different countries play by different rules on such a crucial issue as exchange-rate practices does not merit the word “system.” There must be a limit to how much longer the United States can maintain such high trade and current account deficits and how much more foreign debt the United States can tolerate. There could be a soft landing, under which gradual realignment of exchange rates could lead to a large reduction of the U.S. balance-of-payments deficit, but there is no evidence that this is happening. It is unlikely that any one country, China for example, will allow a major appreciation of its exchange rate as long as other countries with perennially undervalued rates do not act simultaneously. What is needed, in my view, is a collective negotiation on exchange rates. Failing this, the United States may suffer a hard landing and this would affect welfare throughout the world.

Tags: globalization, stanley weintraub