Global Capitalism

Dear Clive Crook,

       From your letter, I suspect that the English have lost their sense of irony. Here I find myself accused of mistreating India and other “poor countries” by a child of the British empire. Really! In addition, I find my views thrown into some anti-capitalist stew that also holds the opinions of Ross Perot and Pat Buchanan. Instead of trying to respond to your caricature, I’ll try to indicate what my views are.
       I don’t pretend to be a world traveler or to understand the current Indian economy, but I would venture a generalization about those countries that are working their way up the hierarchy of nations toward the position occupied by the United States, Canada, Western Europe, and Japan. The ones that have fared best have generally adopted the “East Asian” model of mixed capitalism championed by Japan rather than the laissez-faire model championed by the United States and Great Britain. That involves their keeping in the beginning a tight hold on their currency, their industry, and their trade.
       Within the centuries of world capitalism, countries have sometimes enjoyed mutually reinforcing growth, while in other cases, one country or group of countries has prospered at the expense of others. Britain, for instance, set back India’s industrialization, but in the late 19th century facilitated that of the United States. After World War II, as you note, the United States played a constructive role in rebuilding Europe and Japan, to the mutual benefit of all concerned, but we did not bestow similar benefits on Guatemala or the Dominican Republic. The conditions for mutual growth were complicated. They included international cooperation and regulation (Bretton Woods, the IMF, and the European Economic Community), which was made possible in part by the Cold War, and by strong governments–sustained by educated, organized working classes–that could prevent the kind of skewed development that characterizes many of the world’s economies.
       The world system has changed significantly from the years after World War II. Currencies now float in value, economies are much more financially integrated than before, and capital itself is much more mobile. As you note, this “new world economic order” has created opportunities for rapid growth in Asia, but it has also strengthened trends toward income inequality not only in the former socialist countries, but in countries like the United States. The question I would ask is whether it is possible to enjoy the benefits of the new world economy without also suffering its ills. It is the same question that Americans faced internally in the late 19th century when we began to enjoy the benefits but also suffer the evils of rapid industrialization. In the late 1930s, the United States finally found the answer in a mixed economy with a strong trade-union movement. Today, we might find an analogous answer in adapting to the new world economy.
       I hope we will eventually create a kind of mixed system that includes international regulation–not simply in order to facilitate the movement of multinationals, but to protect the rights of workers and to safeguard the environment. To understand the choices we face, you can look at the fate of NAFTA–the North American Free Trade Agreement. I favored President Clinton’s initial plan of a treaty with powerful labor and environmental commissions that could ensure that the pact was not simply used by corporations to drive down wages and escape environmental regulations. But under pressure from business lobbies, Clinton acceded to a treaty that was a blank check for multinationals. Although not definitive, the results so far have not been pretty. American workers have lost about 250,000 jobs, and Mexican wages have plummeted by a third.
       I see the same kind of choice looming for the World Trade Organization–whether it will simply be a vehicle by which the world’s multinationals will extend their prerogatives or whether it will also seek to protect workers. I don’t see the choice currently as one between an anarchic laissez-faire system and an autarchic system where each nation fends for itself. I see the choice, rather, as being between two systems of regulation: one that favors capital, and another that attempts to reach a middle ground between the needs of capital and those of labor. The former system, which I oppose, is much more likely to create the kind of zero-sum asymmetrical growth that you believe I favor. The post-World War II history of Europe and the United States shows that the latter kind of system is possible, but it will take decades to develop, and will require organized movements throughout the world to achieve.

John B. Judis