Mobilization for Globalization
For the past 30 years, American capitalism has been on a roller-coaster ride.
Remember, in the early 1980s, the U.S. economy was written off as unproductive, unimaginative and self-indulgent, doomed to fall behind Japan and Germany with their superior business cultures and economic models?
As it turned out, America's obituary as an economic superpower was premature. By the turn of the millennium, the Anglo-American economic model was back on top. Communism was dead and buried, an American-led tech boom was in full swing and the rest of the world was looking to the United States as the indispensable source of global growth.
It was a glorious comeback, to be sure. But just as we were about to settle into a new period of smug triumphalism, things started to unravel again. Productivity slowed, along with the pace of innovation. And the bursting of two monster-size investment bubbles has raised serious questions about the ability of unregulated financial markets to allocate capital.
Most significantly, the stagnation in wages and income for the vast majority of households -- as top executives and industry superstars are walking off with the lion's share of gains from economic growth -- has created a backlash against trade and immigration and badly eroded political support for further globalization. Rather than Germany and Japan, it is China and India that are viewed as the imminent threats to U.S. prosperity and economic hegemony.
I have no doubt that Americans overstate the degree to which globalization is responsible for this economic malaise, just as I have no doubt that economists and business executives understate it. We could probably spend the next decade figuring out whether it is free trade or changing technology or the decline of unions or simply the herd instincts of corporate executives that are most to blame for decisions to move production to Mexico or outsource to Lithuania.
But as Matthew Slaughter, a Dartmouth economist and one-time Bush economic adviser has written recently, it doesn't much matter how the responsibility is apportioned. As long as trade and globalization are factors, which they clearly are, then whether they account for 25 percent of the problem of 65 percent, the public will be against them.
Given that political reality, it's disappointing there hasn't been a more serious debate by the presidential candidates about globalization.
In the Democratic camp, the big fight now between Hillary Clinton and Barack Obama is over which one is more against NAFTA. Both are peddling the silly idea that by renegotiating the treaty, they would somehow magically make plants in Ohio and across the Rust Belt suddenly competitive again. And both unfailingly parrot the empty union mantra about "enforceable labor and environmental standards" anytime trade crops up at a candidate forum.
Things are no better on the Republican side, where the party line seems to be that importing workers from Mexico depresses wages and increases unemployment for U.S. workers, but importing goods made by low-wage workers in China does not. So much for economic literacy. To his credit, John McCain has been more consistent in his support of open borders of all sorts but offers little to those who are the losers from trade other than platitudes about education and unshakeable confidence in the ability of Americans to adapt to change.
What none of the candidates has offered is what Americans most desire: a grand bargain that would restore confidence in the competitiveness of the U.S. economy and make it possible politically for the country again to embrace globalization. If we could get beyond stale ideology, it's not hard to imagine what such a grand bargain would look like -- a bit of Sweden combined with a strong dose of Silicon Valley, spiced with a pinch of Putin's Russia.
Sweden has been successful in retooling its once-socialist economic model by embracing the notion that the government should protect workers rather than jobs. In the U.S. context, that would mean reforming the health-care system so that losing your job didn't mean losing your health insurance. It would mean putting serious money into an expanded unemployment insurance program that would cover all workers and include education and training grants, and wage insurance. And it would include an explicit goal of offsetting the alarming increase in income inequality by using the progressive income tax to redistribute income from the highest-income households to everyone else.
What Silicon Valley can contribute to a new American economic model is not just its fantastic technology, but its entrepreneurial spirit. Silicon Valley is about a culture of risk-taking, not just by companies and investors, but workers as well. It's about companies where everyone understands that the way to get rich is to make great products that change the world. And it's about management that eschews bureaucracy, that values talent above all else, that includes fun in the compensation system and expects ideas and inspiration to flow from the bottom up rather than the top down.
I realize that it's pretty hard for a blue-collar worker in Toledo to understand what any of that has to do with his factory closing, but in fact it has everything to do with it. The U.S. economy wouldn't be in the funk it's in if it took more cues from Silicon Valley and fewer from Wall Street.
Finally, we might learn a thing or two from Putin's Russia about playing hardball on the global stage. Rather than spending a decade begging China to stop manipulating its currency for mercantilist advantage, we should slap a 30 percent tariff on all Chinese imports and let them spend a few months negotiating with us on when and how we're going to reduce it. In the same spirit, why not announce that the United States welcomes investment from the sovereign wealth funds of any nation except those that are members of OPEC and other price-fixing cartels?
Americans have nothing to fear from globalization except their own unwillingness to do something about it. A presidential campaign ought to offer the perfect opportunity for figuring out what that might be.
Steven Pearlstein can be reached firstname.lastname@example.org.