Davos Man, by all accounts, is
worried. The severity of the global economic recession has alarmed many of the
architects of the global economy. Fears of resurgent economic nationalism are
rampant. At the same time, some world leaders – most prominently, French
President Nikolas Sarkozy, as well as German Chancellor Angela Merkel – argue
for instituting a new regime of regulation for the financial sector that will
be global rather than merely national in scale.
Such a regime is long overdue.
The mobility of capital has enfeebled the power of national regulations to
limit risk and chicanery in the financial system. The economic crisis, of
course, can’t be solved simply by globalizing, and strengthening, financial
regulation. Neither fiscal nor regulatory policy, even when enacted on a global
scale, can address the widening economic inequality that has resulted from the
neo-liberal policies of recent decades. In the United States, neither new fiscal
nor regulatory policies will undo the popular revolt against globalization that
manifested itself in last year’s election campaigns. They cannot undo the fact
that household incomes have stagnated even while the economy was growing, and
that the exposure of American labor to global competition was a factor in that
stagnation.
In its Global Wage Report, 2008-2009, the International Labor Organization
noted that in 28 of the 38 nations on which it could obtain reliable data,
wages as a share of Gross Domestic Product (GDP) declined in 2001-2007 from the
1995-2000 period, and that the United States was one of the 28 nations that
experienced such wage-share decline. Globalization, the ILO reported, was a
factor in this decline: “We found that over the past decade the countries in
which trade was growing as a percentage of GDP were also the countries with the
fastest decline in wage share….” Indeed, wages declined as a share of GDP at
both ends of the bilateral relationship that is the centerpiece of world trade
– in China (where wages went
from constituting 52 percent of GDP in the late 1990s to 40 percent today) and
the United States.
The regression analyses merely
validate Americans’ view of globalization as something that enriches the
nation’s elites while putting downward pressure on their own incomes. After
all, the managed-trade treaties that go under the misnomer of “free trade”
provide protections for intellectual property and foreign investors, but no
protections for workers – no mandates for labor standards or the right to form
unions. That is why globalization as it has been practiced over the past
quarter-century has failed to win popular support within more and more sectors
of the population.
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