19 June 2007

Man Bites Dog - Economic Inequality is Bad for Globalization

My friend Peter Loewen from up in Montreal brought my attention to this paper in Foreign Affairs on how increasing political-economic inequality informs the growing protectionist atmosphere in the U.S. ...

"Advocates of engagement with the world economy are now warning of a protectionist drift in public policy. This drift is commonly blamed on narrow industry concerns or a failure to explain globalization's benefits or the war on terrorism. These explanations miss a more basic point: U.S. policy is becoming more protectionist because the American public is becoming more protectionist, and this shift in attitudes is a result of stagnant or falling incomes. Public support for engagement with the world economy is strongly linked to labor-market performance, and for most workers labor-market performance has been poor. ...

The fundamental explanation ... : policy is becoming more protectionist because the public is becoming more protectionist, and the public is becoming more protectionist because incomes are stagnating or falling. The integration of the world economy has boosted productivity and wealth creation in the United States and much of the rest of the world. But within many countries, and certainly within the United States, the benefits of this integration have been unevenly distributed -- and this fact is increasingly being recognized. Individuals are asking themselves, "Is globalization good for me?" and, in a growing number of cases, arriving at the conclusion that it is not."

The punch-line? Here it is:

"The best way to avert the rise in protectionism is by instituting a New Deal for globalization -- one that links engagement with the world economy to a substantial redistribution of income. In the United States, that would mean adopting a fundamentally more progressive federal tax system. The notion of more aggressively redistributing income may sound radical, but ensuring that most American workers are benefiting is the best way of saving globalization from a protectionist backlash."

I guess that market fundamentalists need to realize that aggregate gains mean little unless they have some distributive recommendation. We should not be surprised that the benefits of globalization are mal-distributed. They are. We should not be surprised either, if that pisses off people who are being left behind or left out altogether.

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Anonymous Anonymous said...

It's 'bout time these academics woke up!! I'll be perfectly honest, I hope things get worse before they get better. Perhaps then some fat Americans can pry themselves away from the tube and hit the streets in earnest. This country is rotten at the core, just wait until you watch SICKO.

20 June, 2007 01:28  

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