One World (Greider)

Here are some excerpts from the 1997 book
One World Ready or Not: The Manic Logic of Global Capitalism
by William Greider.
The emphasis is added.

Chapter 7
“Scratching Their Itch”

In a world of glutted markets, the leverage naturally shifts from producers to buyers, so even the most successful global corporations find themselves cast as humble supplicants before prospective customers.
To gain access to promising markets, multinational firms are engaged, quite literally, in trading away domestic jobs for sales.
Struggling to unload overabundant goods, companies are compelled to bargain with nations for entry into their markets, especially those fast-growing economies where demand is rising rapidly.
In these transactions, the manufacturers will typically agree to consign a portion of their home-based production system—and technological prowess—to the buyers, the foreign country and its fledgling industrial enterprises.

The fulcrum for these negotiations is not the traditional economic question of comparative advantage — where will things be produced most efficiently? — but the particular ambitions of both companies and nations.
Multinational corporations, faced with continuing surpluses, desperately need entry into the burgeoning markets.
National governments, meanwhile, aim to secure a foothold in the advanced-technology sectors—aircraft, electronics, automobiles, telecommunications and others—that provide the core of modern, high-wage economies.
These motivations converge in a familiar, blunt demand from the customers: if we buy your airplanes (or cars or telephone systems), you have to give us a share of the production, jobs and also industrial expertise.

This bargaining is always done discreetly and seldom discussed very openly by either governments or multinational corporations because it directly violates the reigning spirit of free trade.
The deals regularly flout or circumvent the numerous global trade agreements negotiated among nations, ostensibly to prohibit such political interferences with the free marketplace.
Despite the supposed rules, these government-corporate trade-offs are commonplace around the world, regularly demanded in different forms by rich and poor nations alike.

The contest for market entry constitutes another fundamental imperative shaping the behavior of enterprises in the global system.
In the case of the most advanced technologies, it is probably a more powerful incentive driving the globalization of industry than the search for lower labor costs (though frequently the two objectives merge).
In poorer countries, as we have seen, companies have the leverage to set the terms for their investments and to extract special benefits.
But the bargaining power shifts to the governments if they control access to a “hot market” like China or India or even smaller nations like Indonesia where the economic growth is robust.

Market leverage—using a sheltered home market as a base to gain advantage in global commerce—provokes moral indignation among free-trade advocates, especially in the United States, but there are no innocent parties in this story.
Employing a country’s market leverage to promote its domestic welfare is an ancient practice of trading nations.
Across the centuries it has been regularly used by both mature and developing economies, including the United States whenever the strategy seemed to serve American economic interests.

Moral objections, in any case, do not dissuade either nations or companies from pursuing self-interest in this manner, and neither have the much-heralded trade agreements known as GATT.
The political management of trade and foreign industrial investment is not gradually receding, as many suppose, but actually expanding and refining its dimensions.
Overall, the global system is more accurately described as a market-access regime, despite the familiar rhetoric about free trade and open markets.
This reality helps explain further why firms are driven to globalize and why the migration of industrial jobs will continue.

As multinationals parcel out elements of production and share their skills with other firms, they inevitably invite a large risk: the possibility that they are helping to create their future competitors.
From the standpoint of developing nations, that, of course, is the idea.
Their goal is to become world-class producers themselves—to get out from under the domination of a handful of industrial states.
In the broader sweep of human history, redistributing the world’s industrial structure among many new nations may eventually be understood as a great act of economic justice—sharing not only jobs and incomes, but also capitalism’s power of wealth creation.
But, in the here and now, this process adds stress to the accumulating social and economic contradictions.

Corporations hedge against the risk of future rivals by globalizing—forming partnerships with their potential competitors, the new producers in emerging markets.
The major multinationals hope to guide their evolution and, if it comes to that, to share the future markets with them in transnational consortia of producers.
Even if this corporate strategy should succeed, it still leaves out one group: the industrial workers back home whose jobs were traded away.

Chapter 10
The Buyer of Last Resort


“The trade deficits will provoke a moment when you have to say stop,”
[Clyde] Prestowitz predicted.
“Nobody knows when that moment is, but the longer you postpone it, the more indebted we become.
Sooner or later, we are going to have to stop importing.
But the other countries are still effusing to import more.
That’s the point of breakdown.
Sometimes in the next five or ten years, we are looking at some kind of crisis.”
[Note: This was published in 1997.
The trade and borrowing debacle he foresaw has not yet arrived, but still seems (to me at least) to be inevitable under current policies.]

To prevent this eventuality, the United States would have to do something “rash,” both to save itself and the system.
The U.S. government was not as defenseless as it appeared, but in order to act, the political order would have to acknowledge the nation’s dilemma frankly and resign from the role of apostle and guarantor for the global system.
In fact, American statesmen would have to invoke a forbidden word in American politics—tariffs—and be prepared to use them in the national interest.

An emergency tariff of 10 or 15 percent, designed to reduce the trade deficits over several years, would bring the abnormalities to an immediate confrontation with other trading nations and, of course, greatly upset them.
But, as Professor [Wynne] Godley noted, import-control measures intended to correct a country’s grave financial imbalances were not prohibited by GATT’s international rules.
Other nations have employed them.
Further, if the exporting countries tried to retaliate, it was the deficit nation that would have the high ground in such a fight, as the others understood.

Only in America, and especially among the proud American establishment, the obvious remedy was regarded as unthinkable.

Bill Clinton [42]’s essential trade strategy was a hearty brand of patriotic mercantilism,
dedicated to advancing the particular fortunes of America’s multinational corporations
by winning new markets for them.
He dispatched cabinet officers to China, India, Indonesia, Malaysia and elsewhere,
often accompanied by corporate CEOs, to help sell their goods.
The President personally celebrated when they came home with new contracts.
His trade negotiators provoked a series of dramatic showdowns with other governments,
demanding that the Japanese, Chinese or others open the door
to various American products.

American presidents have been doing much the same for years,
albeit with less fanfare and self-congratulations.
Despite its free-market ideology Ronald Reagan [40]’s administration was actually more aggressive (and successful) in defense of U.S. industrial sectors,
fashioning temporary market agreements to help steel, textiles, autos, semiconductors and some others.
Republicans and Democrats alike, the government took its cues in this from the major multinationals.
“In our system,”
Commerce Undersecretary Jeffrey E. Garten confided,
“the fact is, trade policy is driven by private interests.”

But a provocative question was never asked:
Did all this globe-trotting activity in behalf of private interests
actually benefit the broader national interest?

The government’s salesmanship would surely be good for the companies, but was America’s openhanded approach to the global system actually good for the nation and most of its citizens?
In broad terms, the accumulated evidence appeared to be negative: the general stagnation of incomes and loss of high-wage jobs, the slower U.S. economic growth, the widening extremes of wealth and poverty, the nation’s staggering foreign indebtedness, the general sense of insecurity and social stress.
From these facts alone, it would be most difficult to demonstrate that over the last two decades [1977–97, when the book was published] globalization improved economic well-being for most Americans.

At a minimum, the facts demanded that the fundamental question be asked and the reigning assumptions reconsidered.
Having launched a great industrial revolution, the United States did not have the option of withdrawing from it.
These freewheeling economic forces existed independent of the progenitor, creating and destroying in wondrous ways around the world.
The real question was how the United States could best cope with what it has wrought, confronting these forces in behalf of its own citizens.

The old order assumed that the fortunes of multinational firms were roughly synonymous with the nation’s self-interest.
Since the New Deal’s liberal activism, a universal premise was implanted in American politics, shared by most conservatives, too, that government’s active support for business would be an undiluted good thing for all.
If enterprise prospered, the benefits flowed widely, if not uniformly, throughout the society.
Clinton reiterated this premise every time he celebrated a new trade deal: exports meant more jobs for Americans, new markets meant more exports.
Company by company, that was usually true, though not true when the company intended to do its production elsewhere.

The narrow logic of export promotion, however, left out the vast collateral consequences of the global system and the other offsetting losses absorbed at large, given America’s passive acceptance of the imperatives to globalize.
For instance,
Clinton’s frequent job claims were based on a crude rule of thumb about how many new jobs were created for every $1G ($1 billion) in exports.
But the government’s own estimate kept shrinking as U.S. firms globalized their production.
The Commerce Department used to claim that $1G of exports produced 20K jobs, but it had to adjust that downward as the actual American labor content in “American exports” was displaced.
In Clinton’s first year [1993], Commerce officials put the number at 19K jobs.
By 1996, it was only 14.2K jobs.
If that was correct (and it probably wasn’t), then one must conclude that global trade was costing Americans a net loss of 2M to 3M (two million to three million) jobs a year.
As the frustrated President conceded, the global economy seemed to be destroying good jobs faster than he [sic] could create them.

But the economic loss was more fundamental than that.
Many of the very export deals that Clinton celebrated actually required the transfer of American jobs to foreign economies—elements of the production base that were permanently ceded to other nations in order to win their sales.
The government did not object to this or inquire into the long-term implications.
It good-naturedly accepted the industrial migration as a positive aspect of the globalization.

Alongside the perennial trade deficits, this represented the other great force steadily weakening the American economic hegemony.
The United States was not only buyer of last resort, but also the most flexible industrial economy in terms of its willingness to shut down or offload its manufacturing production.
The American attitude was unique.
Other nations, rich and poor, targeted manufacturing sectors and did whatever they thought necessary to develop them or hold on to them.
The U.S. perspective was more global, as though it did not matter where basic industries were located so long as the corporations were competitive and prospering and exports were expanding.

In this way,
America provided another crucial form of support for the global system.
As other nations built new industries and overcapacity inevitably developed in those sectors, the United States took the adjustments.
Not right away, of course, but over time,
U.S. firms either closed out production in the face of foreign imports or began to share their production base with foreign customers and competitors.
The trend was so diffuse it was difficult to see, but its importance to the system would become obvious if the United States were ever to decide it would not longer tolerate the erosion.

Notwithstanding the usual reassurances,
American manufacturing was shrinking as the vital core of the U.S. economy.
In 1977, its output was 20.2 percent of Gross Domestic Product; by 1993, it was 18.7 percent.
If that shrinkage seemed statistically trivial, it represented millions of high-wage jobs, and of course, manufacturing’s share of output continued to fall as the U.S. defense industry was downsized.
More important, as Godley pointed out, it did not reflect what America’s manufacturing output might have been if the country were still relying mainly on domestically produced goods.
In those terms, the United States had ceded about one third of its domestic market to foreign manufacturers over the last twenty-five years [1970–95].

American firms often resisted the domestic erosion, of course, but they had the latitude for adjustment that other nations did not permit their national firms.
U.S. organized labor was much weaker, as were the labor laws that, in other countries, put a high price on discarding workers by requiring companies to pay significant redundancy benefits and other social costs.
Aside from the defense industry and assorted high-tech subsidies, the U.S. government was mostly indifferent to the question of industrial structure.
Its occasional efforts to negotiate so-called voluntary agreements curbing imports helped to defend U.S. producers, but usually only temporarily, giving the U.S. firms time to downsize or relocate production elsewhere.

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