Knight-Ridder/Tribune Media Services, September 6, 2000
Globalization is once again at the top of the agenda, as the biggest gathering of world leaders in history takes place in New York for the United Nations' millenium summit. But most of the discussion and thinking is taking place inside a very small box, and one that is steeped in popular mythology.
The phenomenon itself is vastly misunderstood. Globalization-- defined as an increase in international trade and investment-- is seen as an inevitable, technologically driven process. It is billed as a natural phenomenon, like the weather, to which we all must adapt if we are to survive and prosper.
But this has never been true. The globalization we have seen in recent decades has been driven by a laborious process of rule-making. It is the establishment and enforcement of these rules that allows Timberland shoes, for example, to make their product in China at wages of 22 cents an hour, and then sell it at the local suburban mall. Advances in transportation and communications did not determine this result.
Our leaders have carefully rewritten the rules of the game in a way that has driven down wages for the vast majority of American employees. One may agree or disagree with this policy, but it should be understood as a conscious political choice.
The same thing could have been done to the salaries of doctors, for example. With much less effort and expense than it has taken to negotiate investment and trade agreements like NAFTA and the WTO, we could license and regulate the training of doctors in foreign medical schools. By allowing these doctors to practice medicine in the United States, we could lower the salaries of doctors and greatly reduce health care costs, without any loss of quality.
Interestingly, the savings to consumers from reducing American doctors' salaries to even those of Europe-- where they are not badly paid-- would be enormous: about $70 billion a year. This is at least a hundred times more than the efficiency gains from our most comprehensive trade liberalization agreements, such as the one that established the WTO five years ago. But it is unlikely to happen, because doctors-- unlike the majority of the US labor force-- have enough political clout to protect themselves.
As much as globalization has hurt American workers, the results have been far worse for most of the poorer countries of the world. Over the last 20 years, their economic growth has been sharply reduced as they have opened their economies and submitted to Washington's dictates. In Latin America, for example, income per person grew ten times as fast from 1960 to 1980, as compared to the past two decades. In many countries, inequality has also increased.
A lot of great promises have been made at the summit, such as halving the number of the world's poor, or halting and reversing the spread of AIDS, over the next 15 years.
But there is no reason to take these promises seriously under present arrangements. The real power over the poorer countries resides with IMF and World Bank, who head up a creditor's cartel that is still strong enough to determine what policies most of them will have to follow. And the IMF/World Bank nexus, or "the Wall Street-Treasury complex" as one prominent economist has named it, represents a much more narrow constituency than the General Assembly of the United Nations.
That constituency is considerably more interested in preserving the status quo, which is why we have seen so little progress on the crucial issue of debt relief. After four years of talk, only one of the 41 countries promised debt relief by the IMF and World Bank has actually seen even partial debt cancellation. The impoverished and AIDS-stricken countries of sub-Saharan Africa lose $15 billion a year to debt service, and no proposed foreign help will come close to making up for that.
Even worse, the big pharmaceutical companies, often with Washington's help, have successfully prevented the spread of cheap generic substitutes for patented anti-AIDS drugs that tens of millions of AIDS victims will never be able to afford.
Twenty-five years ago the United Nations called for a New International Economic Order to promote economic development. The poorer countries began to organize, as labor unions do within an industry or country, to demand a better deal. That effort was soon crushed, but recently there have been signs of revival in organizations such as the Group of Fifteen (less developed countries). Now that's the kind of "globalization" that could actually make the world a better place.