Thursday, April 26, 2007

"Rethinking" Globalization

. Thursday, April 26, 2007

William Greider muses on "exciting new thinking" about how globalization affects American incomes in the current issue of The Nation.

"The church of global free trade, which rules American politics with infallible pretensions, may have finally met its Martin Luther. An unlikely dissenter has come forward with a revised understanding of globalization that argues for thorough reformation...His ideas contain an explosive message: that what established authorities teach Americans about global trade is simply wrong--disastrously wrong for the United States."

I find the article utterly unconvincing and deeply confusing, but Greider apparently does not understand enough economics to present the argument upon which this supposed reformation is based. He writes, "The Gomory-Baumol book explains the dynamics with charts and equations for economists to study. For the rest of us, it is easier to follow Gomory's personal explanation of changing fortunes among trading nations." Right, why bother with math (math is hard) or even logic (math without math is just as hard) when simplistic anecdotes and insipid metaphors provided by a retired IBM executive are so much easier.

The key metaphor is the following: "What made America much wealthier than the Asian nations in the first place?" Gomory (i.e., the new Luther) asks. "We invested alongside our workers. Our workers dug ditches with backhoes. The workers in underdeveloped countries dug ditches with shovels. We had great big plants with a few people in them, which is the same thing. We knew how, through technology and investment, to make our workers highly productive. "The situation today is that the companies have discovered that using modern technology they can do all that overseas and pay less for labor and then import product and services back into the United States. So what we're doing now is competing shovel to shovel." (Competition is apparently a bad thing).

Pardon my language, but what the ...? The US becomes poorer because workers in developing countries acquired backhoes, or are Americans now using shovels to dig ditches? If this is right, then the key to continued American prosperity is continued poverty in the developing world? Sounds suspiciously like middle-age mercantilism (a contemporary of the real Luther, in fact) rather than "new thinking." Moreover, the underlying assumption that the world's income is a fixed pie and "countries" fight over shares of this pie is so just so, well, stupid.

Since I am willing to assume that a modern Luther can't be this stupid, I must assume that Greider fails to convey the argument. Hence, I need to read the book. Check back later for my critique.

The more worrying thing is that the central message holds appeal for certain members of Congress as well as certain candidates in the 08 election.

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"Rethinking" Globalization
 
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