Is globalization as great as business leaders want to believe it is?

[liberal_at_heart]

I've heard this before and I know so have business experts, so why is everyone so infatuated with globalization? Anyone who has researched investing in emerging market economies knows the rewards can be enormous, but so can the risks. Have American businesses ignored the risks of investing in emerging economies hoping they would hit the big jackpot just like they ignored the risks of the derivatives in the financial industry? Maybe just maybe American businesses would reap a bigger profit if they invested more in domestic economies such as America?

http://www.msn.com/en-us/money/markets/the-great-unraveling-of-globalization/ar-BBiEoba

[Jesus Malverde]

1. Here's one of the best parts of the report.

"Primarily, its management has worked more closely with governments and local businesses to assure them that Cisco is not in league with the National Security Agency in global eavesdropping schemes"

Good luck with that.

[pampango]

2. Whether it is good or bad, we can thank (or blame) FDR for it.

Coolidge and Hoover and the republican congresses of the 1920's raised tariffs to restrict trade.

FDR lowered tariffs in the 1930's. Then in the 1940's he set up low-tariff international trading system and the multilateral organizations that govern it that led to "globalization". If he had stuck with the policies of Coolidge and Hoover this would not have happened.

[RiverLover]

3. FDR-FDR Had It Right - If the economy is going to come back, we need to buy -- and make -- American.

FDR Had It Right

Our greatest primary task," said Franklin D. Roosevelt in his first Inaugural Address, "is to put people to work." Roosevelt had no doubt that this task took precedence over all others. "Our international trade relations," he continued, "though vastly important, are in point of time and necessity secondary to the establishment of a sound national economy."

Today, with nearly 31 million American workers now effectively unemployed -- including an unprecedented 14.9 million who are unwilling part-timers or who've dropped out of the work force because they can't find employment -- the "primary task" before the Obama administration and this Congress is also to put people to work. The real unemployment rate in the country today isn't the official 10.2 percent but a staggering 19.2 percent.

Even the average full-time worker is now working only 33 hours a week, a record-low that represents a loss of hours and wages of 17 percent. And these dismal figures do not adequately depict the particularly adverse effect of the recession on people of color and recent immigrants.

The global economic crisis that began in 2007 and our own ongoing jobless recovery are each the result of the very wrong-headed globalization of finance and trade that began in the early 1980s and continued over the next two decades, long before Barack Obama became president.

The abuse of the promise of globalization arose out of two mutually reinforcing, flawed models of growth: first, debt-financed overconsumption in America and a few other major developed economies; and second, dramatic over-savings and under-consumption in the major production-oriented export economies of Asia, especially China...

https://prospect.org/article/fdr-had-it-right

[pampango]

5. Indeed he did. Which is why he took the power to negotiate trade agreements away from congress

during his first administration. He came to see increased trade as complimentary to "the establishment of a sound national economy". That's why he lowered tariffs through "secretly negotiated" bilateral trade agreements in the 1930's and set up international institutions that would perpetuate increased trade in the post-war world. FDR would not have promoted such an "un-Herbert Hoover" system of trading if he thought it was bad for American.

He knew, as we all do, that the primary policies that lead to "the establishment of a sound national economy" are protecting labor, providing a safety net, increasing taxes on the rich, regulating banks and corporations, etc. European countries still do this - and it still works. Trade makes the "pie" a little bigger (or why would FDR have promoted it) but dividing it up fairly is a function of these other policies he adopted.

[cali]

9. The problem, or rather one of the problems,

is that as we've discussed before, modern tpas are less about tariffs and tangible goods, than they are about such things as intellectual property rights, corporate rights, etc.

[pampango]

15. I partially agree. Lots of people here are precisely worried about manufactured goods from Vietnam

and Malaysia and that TPP will lower tariffs on and increase imports from them. I think those are tangible goods that are a concern for many.

I agree you that modern fta's (tpa's?) are less about tariffs (though liberalizing trade could be the 'carrot' for complying with other provisions) and more about other things. International protections for labor rights and the regulation of corporations were in FDR's ITO proposal. The enforcement mechanism were so strong that the republican congress rejected the ITO on 'national sovereignty' grounds, along with their distaste for labor rights and business regulation. Environmental standards were not in the ITO but that was not a big concern back then.

To me it is the details of the "other things" that are a part of these agreements rather than whether there are 'other things' in them.

[RiverLover]

4. Globalization must come with social protections for the population, we haven't had that...

Or I should say, we are losing that.

Looking at how the United States exited the Great Depression under Franklin Roosevelt offers a lesson. FDR was a champion of free trade, a fact that both modern Democrats and Republicans choose to ignore. He saw trade as a route to both prosperity and peace, as trading partners are unlikely to wage war against each other.

But advocating for freer global trade was always coupled with social protections for the general population—a minimum wage, unemployment insurance, unions, and more. A bargain was struck with society: Open the country up to the vagaries of the global marketplace and in return, society will receive social protections in case they lose out as a result of global trade.

This lesson shows that markets don't exist in isolation of a broader social system. Just advocating for markets to operate with no protections for those who lose out is certain to further a protectionist backlash. What is necessary is for the country's political leaders to strike a new bargain with society—a new social contract.

http://www.hbs.edu/centennial/businesssummit/business-society/globalization-and-the-social-contract.html

[pampango]

6. Excellent post, RiverLover. Without social protections nothing works to benefit workers.

Restricted trade under republicans before FDR didn't work and led to historical levels of inequality. Expanded trade in modern America has not worked to create income equality either.

What was and is missing are the social protections that exist in progressive countries and ensure that the bigger "pie" created by trade is divided up fairly in a society.

[RiverLover]

8. Thanks pampango. I've learned from reading your posts. :)

These modern trade agreements seem to only protect the enormous profit margins of corps & stockholder gains, while throwing workers, small local businesses, & the environment under the bus. I know this is not what FDR envisioned for US.

We need "fair trade", not this mislabeled "free trade". It ain't free, and is surely isn't fair.

[DCBob]

7. depends on what the metric is.

[randome]

10. Doesn't matter. It's inevitable.

Too much domestic competition (i.e. too many people) means companies will seek out other markets. Globalization can't be stopped, it can only be managed.
[hr][font color="blue"][center]Don't ever underestimate the long-term effects of a good night's sleep.[/center][/font][hr]

[cali]

11. we will see increased trade deficits here, but you're right: corporations will benefit

[randome]

12. Some of those corporations are smaller outfits.

The intellectual property rights portions of the TPP are designed to address the smaller, all-digital corporations. It's not all about Exxon and G.E.

That's not me saying I'm rooting for the TPP, just that I think it will have some positive and some negative consequences.
[hr][font color="blue"][center]Don't ever underestimate the long-term effects of a good night's sleep.[/center][/font][hr]

[cali]

13. sure, but do the positives outweigh the negatives?

I don't see that.

[bemildred]

14. Capitalism requires growth. And "growth" means "profits".

It's dogma, not an empirical theory.

The only place "growth" is possible these days is the under-developed world. So the alternative to globalization is something new, a new feudalism, a new steady state economics. We don't have any idea how to do that these days.

[el_bryanto]

16. From The West Wing

Toby is talking to a DC Cop about Free trade.

TOBY
You want the benefits of free trade? Food is cheaper.

SACHS
Yes.

TOBY
Food is cheaper, clothes are cheaper, steel is cheaper, cars are cheaper, phone service
is cheaper. You feel me building a rhythm here? That’s ‘cause I’m a speechwriter and I
know how to make a point.

SACHS
Toby...

TOBY
It lowers prices, it raises income. You see what I did with ‘lowers’ and ‘raises’ there?

SACHS
Yes.

TOBY
It’s called the science of listener attention. We did repetition, we did floating opposites
and now you end with the one that’s not like the others. Ready? Free trade stops wars. And
that’s it. Free trade stops wars! And we figure out a way to fix the rest! One world, one
peace. I’m sure I’ve seen that on a sign somewhere.

I'm not sure I buy the argument - I'd like to believe it; but I don't know if it works in the real world. Rather it's a bit like reading Bellemy or other Utopian Socialists - I'd like to believe the world could work like that; but it doesn't seem to.

Bryant

[mmonk]

17. For only the muti-nationals. For domestic small business, not at all.