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March 28, 2007
The critics of globalization are usually seen as headed even though globalization has a diversity of meanings. Jagdish N. Bhagwati, is very very much pro-free trade, but is much more chary about free capital flows (especially of short-term capital). He argues in his In Defense of Globalization that the benefits of globalization clearly outweigh the costs. He says that fair trade and social justice are used to critique what I call the corporate form of globalization and that free trade is the way to go.
Bhagwati usefully distinguishes between two different meanings of fair trade:
In the US, it is a protectionist’s handmaiden to argue that we cannot have free trade with partner countries whose competition we fear because it would be tantamount to “unfair trade”: their democracy is defective (just think of ours, perhaps of Chicago for us Democrats and Florida for the Republicans), their labour standards are low (Human Rights Watch with which I work on the Advisory Committee on Asia, has a salutary pamphlet on the question of our own appalling respect for labour rights), their environmental policies are inadequate (this coming from a country which has not signed on to Kyoto, which I admit is ill-designed as I have argued last month in a major center page op ed in The Financial Times which has received much attention from environmentalists and others), and so on. In the US, it is a protectionist’s handmaiden to argue that we cannot have free trade with partner countries whose competition we fear because it would be tantamount to “unfair trade”: their democracy is defective (just think of ours, perhaps of Chicago for us Democrats and Florida for the Republicans), their labour standards are low (Human Rights Watch with which I work on the Advisory Committee on Asia, has a salutary pamphlet on the question of our own appalling respect for labour rights), their environmental policies are inadequate (this coming from a country which has not signed on to Kyoto, which I admit is ill-designed as I have argued last month in a major center page op ed in The Financial Times which has received much attention from environmentalists and others), and so on.
In the US, where fairness (equality of access) is more important in public policy debates than social justice (equality of success), resort to the language of “unfair trade” goes a long way for protectionists who are motivated by self-interest (i.e. by fear, of competition). Bhagwati says the other meaning of fair trade is the altruistic sense (the content varying in a confusing way), as an argument following from empathy.
Bhagwati realizes that the main criticism of corporate globalization comes from social justice---the social implications of economic globalization: the impact on women’s rights and welfare; on the environment, on democracy, on indigenous culture...or mainstream culture, child labour in the poor countries, and the effect on poverty amelioration.
Bhagwati is willing to acknowledge that there are certain sectors where, under the cover of the ideal of free trade, policies that aren't necessarily desirable or positive for poorer countries have been pushed on them -- intellectual property property and copyright protection , eg., the strength of, specifically, pharmaceutical multi-nationals has threatened to impose untenable conditions on poorer nations. Current intellectual property and copyright protection is most vulnerable to the argument that it is bad for all nations, not just poor nations, but as we have seen with Australia, those with vested interests have proven very capable at parrying all reasonable efforts to impose a more sensible protection regime.
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I think it would be useful to regard the latest phase of "globalization" of capitalism, (which, of course, has accompanied the development of capitalism on and off since its inception), as less a matter of "free trade" than of an intensified financialization of global capitalism, starting probably with the demise of Bretton Woods in 1972, but especially in the last 15 years or so with the emergent marriage of IT and telcommunications. In 2005 global real output was ~$43 trillion, yet global financial assets were ~$200+ trillion and the notional value of derivatives ~280+ trillion. Needless to say such ever-expanding ratios of the financial to the real economy are unprecedented. (In the era of expansive "free trade" from, say Marx' death to WWI, the financial economy expanded to 40%-50% of real output). Since capitalism always needs an external environment on which to expand, evidently it is less the globally interconnected world onto which it is expanding, that the future itself, which it is colonizing.
I think that IT has increased both the productivity and the flexibility of real capital goods, while decreasing their costs, and, at the same time, increasing both the flexibility and range of business organization, thus greatly enhancing the power of capital over both labor and popular government. The result has been a re-emergence of those famous contradictions of capitalism in high-tech form, as the capacities of MNC for global labor arbitrage and various forms of rent extractions have strengthened in the face of production over-capacity and weakened global demand. Hence the attempt to mint profits financially out of profits, global asset inflation, and increasingly debt-financed consumption together with rising inequalities. Not exactly a very sustainable prospect, eh? In fact, this minting of financial profits out of profits and inflating of assets looks like a gathering capital realization crisis, a symptom of the "law" of the falling rate of profits. Compared to the financialization of global capitalism the effects of classic comparative advantage, which Paul Krugman, international trade economist, estimated at a 2%-3% one time fillip to GDP, is relatively minor.
From a meta-Marxist left social democratic point-of-view, this is where the paradox of state-power raises its head up most of all, as at once a necessary means of counteracting, regulating, and redistributively correcting the dysfunctions of unchecked global capitalism, and an oppressive agency subject to capture by those same forces of capital. And, further, only a coordinated, multilateral alliance of states could any longer be adequate to stand up to globalized capital. But if the value of labor is to be protected/restored against excessive (and deflationary) extractions of profit, which is necessary for the maintenance of adequate aggregate demand, and which also implies the protection/redevelopment of valued-added industries, as underpinning the wage-structure, then the struggle to re-capture effective state-power in the popular interest is necessary. And needless to say, the growing environmental/ecological crisis and the need to redirect technological development from without its control by private capital point in the same direction. The "withering away of the state" runs directly counter to the need for its popular expansion.