The Race to the Bottom (Tonelson)

Here are some excerpts from the 2000 book
The Race To The Bottom:
Why A Worldwide Worker Surplus And Uncontrolled Free Trade
Are Sinking American Living Standards

by Alan Tonelson.
The emphasis is added.

Chapter 7
False Hopes

Probably the most important tenet
of the Hippocratic Oath that all medical doctors take
is the first.
Do no harm.
This refreshing nod to modesty
is one that should be heeded by more economic policymakers,
especially since they undoubtedly know less about
the domestic and world economies
than physicians know about the human body.

Nothing, then, is more depressing than recognizing that
globalization enthusiasts inside and outside government
seem unaware of this cardinal rule.
Not only do they have no clue how to head off
the crack-ups looming ahead for
American society, the U.S. economy, and the global economy
thanks to their policies,
but they also seem determined to bring them on sooner.
Slightly less depressing is that
many of the most perceptive critics of current globalization policies—
including those who have insightfully decried the race to the bottom—
have lined up behind a series of policy alternatives
that could bring the same kinds of results.

The crack-ups will not be averted unless Americans understand
what lies behind the world economy’s dangerous imbalances.
The race to the bottom is only the worst and most important symptom,
not the cause of the global economy’s problems.
The race is being run in the first place
it is rewarded so lavishly by the way the world economy is set up.
The main interlocking mechanisms for generating these rewards are

  1. the many and varied policies pursued by
    governments in the industrialized countries
    and by international organizations
    (and lobbied for enthusiastically by multinational corporations)
    to channel investment into
    the low-income countries of the third world; and

  2. wide-open access for these countries’ exports
    to the markets of the industrialized countries,
    chiefly the United States.

The investment has different effects in different types of third world countries,
and sometimes within the same country.
In the export superpowers located mainly in East Asia,
it builds the factories and supplies the infrastructure systems
that make possible the manufacture of almost endless floods of products—
most eventually headed fro final markets in Europe and the United States.
Because of the mercantilist policies practiced by these countries
and IMF financial constraints on many of them and numerous others,
the investment flows do not finance enough of the consumption
that would enable these countries to buy their share of these products themselves,
much less to consume their share of other countries’ goods.

In the less successful low-income countries located mainly in Latin America
(but now including Russia),
investments provided by the world economy
finance much export-oriented production.
However, much of this investment is simply stole or wasted by governments.
Some of it, to be sure, also finances consumption,
but even that modes level of consumption is more consumption
than the populations of these countries can sustain responsibly.
These populations cannot sustain much consumption because
most earn next to nothing,
which causes them to live either at the edge of debt or deeply in it.
In effect, these countries can import and consume
an appropriate share of their own and world output
only if they dramatically reduce their output,
or if they live far beyond their means.
Borrowers that splurge, however,
have the rug yanked out from under them all too regularly.
Further, because the world sends so much capital their way,
when rugs are yanked, financial crises result.

However, one more major imbalance bears responsibility
for the world’s dangerous financial instability today—
the outsized share of the world’s imports
(and especially the developing world’s imports)
taken by the United States.
It is true that,
given the sputtered-out national engines of domestic growth
in much of the world nowadays,
and given so many countries’ insistence on keeping their markets closed,
U.S. importing is almost single-handedly
keeping the rest of the planet afloat economically.
It is equally true, however,
that current levels of net importing
are driving down living standards in the United States,
that they are consequently driving down the real purchasing power
that makes significant, responsible levels of importing
sustainable to begin with,
and that this growing gap between U.S. purchasing power and U.S. imports
is bound to make the nation’s creditors
increasingly reluctant to continue financing these purchases.

Without a sustainable balance between production and consumption,
any economic system will sooner or later fall apart.
The race to the bottom is inexorably destroying this balance.
It is encouraging ever more production by countries and populations
that either will not consume or cannot consume for very long.
Unfortunately, the race is dependent on ever more consumption
by a population whose ability to support consumption with production
it is steadily sapping.

Section 7.A
Growing the Deficits

For decades, most U.S. leaders and economists responded to
concerns about U.S. trade deficits and international payments balances
with energetic ridicule....

some academic economists and think-tank types still pooh-pooh the deficits....

Section 7.B
If at First ...

Section 7.C
The New Welfare Lobby

Section 7.D
Trade Agreements with a Difference

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