BUILDING A GLOBAL VILLAGE
JUNE 28, 1996
After meeting in France today, the leaders of the world's seven richest democracies gave a generally upbeat accessment of the global economy. But some economists are painting a different picture. Paul Solman looks at problems facing the G-7 participants, and leads a debate on the economic ups and downs of the "global village".
The G-7 conference is facing a full plate of global economic problems
Paul Solman looks at world trade agreements and their impact
PAUL SOLMAN: We're joined by historian Manning Marable, who heads the African-American Studies program at Columbia University; Amy Kaslow, economics and employment fellow at the Council on Competitiveness in Washington; in Boston, Harvard economic historian David Landes, who's completing a book called The Wealth and Poverty of Nations; and John Cavanagh, who works on economic and trade issues at the Institute for Policy Studies here in Washington. Thank you all for joining us. Now, Mr. Cavanagh, the world leaders in Lyon issued a statement today that says, they're "convinced that the process of globalization," i.e., freer markets, open trade, "is a source of hope for the future." What do you think?
JOHN CAVANAGH, Institute for Policy Studies: Well, I think it's a source of great hope for the future of some people. The world economy and the speed up of the world economy is creating, though, a kind of--instead of the global village that they say it's creating, it's creating a kind of global economic apartheid. There are clear winners, and there are clear losers. And all of this has to do with the fact that more and more of what we wear, what we drink, what we eat, what we buy are made from global products. More and more workers are part of a global labor pool, so your Nike sneakers were made in New Hampshire and Maine 20 years ago, workers demanded more money, Nike moved the production to Korea and Taiwan, workers got organized. It now has gone to the countries where organizing isn't allowed, Indonesia, China, and so on. Still, Michael Jordan--and I don't want to say anything bad about Michael Jordan--is making $20 million a year. He did in 1992 from Nike.
PAUL SOLMAN: He's getting a raise, I think.
MR. CAVANAGH: He's getting a raise, more than the 30,000 women who make the shoes in Indonesia. So it's, it's a world economy where there are clear winners and losers, and unfortunately, the governments of the G-7 are mainly talking about the winners.
PAUL SOLMAN: But Prof. Landes, you've studied and taught economic history for decades. What does history suggest about this process, where we are and where we're headed?
DAVID LANDES, Harvard University: (Boston) Well, the history of the last several hundred years has been one of growth, increased income, and the diffusion of these new technologies around the world so that countries that once could not do this are now doing it. And there are employment problems, and there are income problems, and the world does seem to be polarizing between rich and poor. The rich are getting rich more or less along the same path. And the poor are having trouble keeping up. In the meantime, most economists would say that the development of jobs and employment in countries like East Asian countries, China now, we spoke of Indonesia, we spoke of the other low-wage countries of this area, many people would say as low as their wages are that it's better than what they would have had without this. On the other hand, there are lots of people in rich countries who see this kind of competition as hurting their wages, hurting their employment, and economists I think on the whole don't pay enough attention--
PAUL SOLMAN: Professor--
PROF. LANDES: --to this kind of thing.
PAUL SOLMAN: I'm sorry. Professor Marable, I've seen the headline: "Sweat Shop is Better Than No Shop," and that's what Prof. Landes is talking about. Aren't people better off than they've been?
MANNING MARABLE, Columbia University: I'm afraid I don't agree. Two things that are most striking about globalization in my perspective are how issues of minorities and immigration are increasingly part of the mix around issues of economics. In the United States, over a quarter of the labor force in the United States is Latino, black, and Asian-American, and that percentage is growing. So issues like affirmative action, issues like Proposition 187 in California--
PAUL SOLMAN: That's the anti-immigration--
PROF. MARABLE: That's right.
PAUL SOLMAN: --provision.
PROF. MARABLE: Find echoes in Europe with the debate about what they call there positive discrimination, issues of how the labor force, itself, is being transformed around race and gender. So increasingly, we have to take an international perspective about racial and economic inequality.
PAUL SOLMAN: Well, are people not better off than they used to be?
PROF. MARABLE: I think that there's a growing trend throughout the Western world of economic insecurity, especially for young families with children, and increasingly white collar professionals who find themselves subject to downsizing, whether it's in the United States or in Europe.
PAUL SOLMAN: So, okay, Amy Kaslow, why don't you get in here. Are people better off? Aren't they better off?
AMY KASLOW, Council on Competitiveness: Well, the low-wage economies from China to El Salvador, certainly with their very low-skilled labor, lack of regulations, all the things that inhibit a lot of economic development in the industrialized world, are, you don't hear a giant sucking sound, to quote a former Presidential candidate, but you certainly hear a sound, and that is, um, the low-skilled jobs are going off-shore.
PAUL SOLMAN: Uh-huh.
MS. KASLOW: 25 percent of corporate production now, or U.S. corporations produce 25 percent of their goods off-shore now.
PAUL SOLMAN: And this is true, of course, of the European countries--
MS. KASLOW: True of--
PAUL SOLMAN: --really all the G-7, right?
MS. KASLOW: Absolutely, absolutely. And we're here and we see lots of exposees of abuses of child labor, women who are forced into slave labor, prison labor, et cetera. But we also see a lot of things coming to the industrialized countries. For example, Germany, the wage rates are so incredibly high there, the, the businesses feel so strapped by all sorts of regulations that they are fleeing Germany. There's capital flight that's going to Eastern Europe, that's going to the Carolinas of the United States. In fact, if you look at, at many of the Japanese, the Korean, the European car manufacturers, you'll find them in the southern portion of the United States, which is what I'm calling now the new Detroit. And this is job generation, so it's not--it's not black and white. We're not--we're not seeing, you know, a complete robbing of the industrialized world, umm, and we're not seeing also a complete robbing of, of the poor in the third world or the so-called developing world.
PAUL SOLMAN: Well, the question, though, is, is competition maybe going too fast?
MR. CAVANAGH: I think absolutely this is the question. The world leaders who are meeting right now in France have been the main forces behind the speed up of globalization. They pushed NAFTA through here and North America, this new global round of trade talks through the World Trade Organization.
PAUL SOLMAN: And so the freer the trade, the more you move you move towards freer markets and a more competitive system.
MR. CAVANAGH: Right. And freer trade really we should know what it means. These accords give greater mobility to big corporations to move factories, to move jobs, to move goods to other countries. They give more rights to global corporations but no new responsibilities vis-a-vis workers and the environment. So the dynamic--and Bill Clinton is standing there in France saying, we've created 10 million new jobs since I came into power--the new dynamic of the global economy is that more and more of these new jobs are bad jobs because the balance of power between large corporations who are global and workers who are predominantly local has shifted. And so Ford can say to its workers in Detroit, you take a cut in pay, you take a cut in benefits, or we'll go to Mexico. The key thing is not whether they go to Mexico. It's the increased threat, which is bargaining down wages and working conditions here and across the industrial world.
PAUL SOLMAN: Professor Landes, is this right, and what do economists say about this? We've heard this complaint on and off over the centuries, even, haven't we?
PROF. LANDES: Yes, but of course, economists tend to see things in the aggregate, and they point out that people in other countries also need jobs, also need wages, et cetera. This is little consolation to people who have enjoyed good salaries and good working conditions in the richer countries of the world. And when they lose the jobs even though as some economists can show, the implication or the impact on the larger economy is small, these people, nevertheless, feel that it's very big where they're concerned. And one has to take this sort of thing into account. It's not easy to reconcile the demands of the people directly affected in the rich countries and the growth of the economy in poor countries. I, I want to say, of course, that it is easy to point out that there are abuses all around the world, and this is the sort of thing that one can reasonably work toward correcting, and I think from that point of view, we have made gains and will make gains. But there is a problem between those countries and the third world so called who are really not getting very far at all. And here the whole African continent is a disaster area. Here the Middle East is going nowhere in spite of oil, and these are things that are going to create political problems, that economic and the political are married in this respect, and this is the sort of thing we have to start worrying about.
PAUL SOLMAN: And I gather this is the kind of thing you do worry about, Prof. Marable.
PROF. MARABLE: Absolutely. We see a growing gap between the rich and the poor internationally, globally, the North and South. Dialogue has largely broken down with Africa, Latin America, and many countries in Asia experiencing a decline in standards of living, but the other part of this that's important that we haven't talked about is not just the globalization of the corporate economy, global economy, but also the retreat from the state. Over the last 15 years, because of Thatcherism and President Reagan's administration, we've seen a--
PAUL SOLMAN: And voters in all these countries, many of whom have supported--
PROF. MARABLE: That's true.
PAUL SOLMAN: --cutting back government spending.
PROF. MARABLE: Cutting back social spending, unemployment compensation, all over the western world has led to a growing income inequality and a worsening of living standards for average working women and men.
PAUL SOLMAN: I wanted to ask you, Ms. Kaslow, do you think that there are going to be more cuts, that this retrenchment, this--
MS. KASLOW: Absolutely.
PAUL SOLMAN: --austerity--you do?
MS. KASLOW: It's inevitable. And you see that cutback, it may, it may be really detrimental to workers in the short-term, but in the long-term, not only is it inevitable, but it's going to help workers. Why? Governments are absolutely strapped. You see this not only in Egypt, which is paying for I don't know how many millions of ghost workers who are on the payrolls and don't show up for work, but you see this in France, in Germany, throughout--Europe is incredibly slow to recognize this. It's finally recognized it, but now it has to reconcile the need to pull back government spending with a very, very tough popular reaction. And just if I may finish the point, in the United States, you see government much more restrained primarily because we don't have the money, and we're always claiming, you know, fiscally strapped in the United States--you see a stimulus happening in Japan off and on--you know--pushing government money in, into the private sector to stimulate jobs. But, inevitably, these costs are so high--and the example I gave about Germany earlier--the fact that government makes such demands on the private sector, inevitably these, these corporations are going to leave. They're going to chase cheaper labor and where their capital goes further. They are looking for productivity gains, and they are looking for the bottom line.
PAUL SOLMAN: I wanted to ask you, Mr. Cavanagh, because I read today at the AP wire this morning about Germany, he says, bucking a wave of street protests, parliament today--that's just today--approved a landmark overhaul of post war Germany's welfare state. Union leaders warned the protests may escalate if the austerity plan goes ahead. So my question is: More cutting, or is the backlash about to begin?
MR. CAVANAGH: Oh, the backlash has begun, definitely. Don't buy into the inevitability argument. I think--
PAUL SOLMAN: We've been saying that the backlash has begun for a while.
MR. CAVANAGH: In the backlash, we've seen it. We saw it in the NAFTA fight, enormous coalitions coming out against the speeding up of free trade. You just saw it with Pat Buchanan in the Republican nomination. You've seen--
PAUL SOLMAN: Well, he didn't go anywhere at least.
MR. CAVANAGH: Oh, he won my home state of New Hampshire, and there was a great groundswell behind somebody saying slow down. I think he was rejected because of his reactionary ideas on other things, but the point is this: We're at a stage now in the world economy where we were in the U.S. in the 30's. In the 30's, big corporations were playing rich union states off against poor, non-union states. There was a big struggle, and we came up with some new rules--minimum wage, maximum hours of work. We're now at that stage globally, where firms are playing the richer unionized countries off against the poor, non-union ones, without rules and a tremendous backlash is coming out. Half a million farmers in India on the streets--workers in France--a vast citizens coalition in Canada that are saying enough is enough. And don't say there isn't enough money. We spend $250 billion here still in the U.S. on military to fight threats that no longer exist. There's plenty of money if the will is there to shift it to.
PAUL SOLMAN: Prof. Landes, is the analogy of the 30's apt?
PROF. LANDES: No, I don't think so. I think from the point of view of the health of industrial technology and so on, we are moving in a way that they weren't moving in the 30's. And, in fact, the problem is that as someone said, we're moving very fast. And it's not easy to deal with this and still take care of the people who are used to so much better and now see themselves threatened. The European thing is particularly striking because they have set their own goals on deficit, budget deficits, and so on so high that unless they find some way to save on social welfare and so on, they're not going to meet the deadline they set in order to have a unified currency group. No one satisfies the requirements now--not the French who pushed hardest for it, not the Germans who seem the richest. I think perhaps Luxembourg and one or two small players can, can satisfy the requirements, so they're looking for places to save money. Now it's all well and good to speak of defense spending, which is certainly a waste in many ways, but defense spending also pays wages and salaries.
PAUL SOLMAN: Well, I think we have to end it there. It looks like you all think there's a rich-poor problem, and that globalization is going to continue or maybe at least one of thinks otherwise. Leave it there.