Global Capitalism

Dear Clive Crook,

       I see I’ve jarred your cyber-sensibility with my talk of “organized movements” and “capital” and “labor.” I hadn’t realized that the advent of the Apricot and Sinclair computers had rendered these terms obsolete, but I’ll keep that in mind the next time I’m conducting an international dialogue. As I thought I made clear in my initial letter, I don’t think the world’s nations currently face a choice between autarky and global integration. My concern isn’t whether integration will occur, but on what terms and to the benefit of whom. The world’s nations also don’t currently face a choice between a regulated and a laissez-faire integration, or even between managed and free trade. Most of what passes for “free-trade” agreements–for instance, NAFTA–consist of extraordinarily elaborate rules governing economic integration. The question, again, is who benefits by these rules?
       What about the effects of “globalization”–a term that originates, I think, with Kenichi Ohmae and carries a certain ideological baggage of its own. Does it leave “each participating country better off in the aggregate”? This is much too ambitious a claim. I would qualify it in a number of ways. First, let’s talk about globalization under the current trade, investment, and monetary rules. Second, as you acknowledge, the current globalization has led to greater internal inequality. Third, among the nations subject to this global regime, some have not fared as well as others. Mexico, Venezuela, and most of the countries of the Caribbean and Africa, for instance, have not done as well as the tigers of the East. Fourth, countries within this global regime are still subject to business cycles, and the possibility looms of synchronous downturns that could be dire. We don’t know. The question is what rules and terms will create optimal conditions for equitable and sustainable growth.
       What about overcapacity? It does not mean that supply no longer equals demand. Supply and demand achieve equilibrium, but at a lower level than could be achieved if labor, plant, and equipment were fully utilized. Since the early ‘70s, there has been chronic excess capacity in such industries as steel, shipbuilding, textiles, automobiles, and chemicals. Overcapacity is fueled by technological innovation and by various cultural considerations–for instance, the desire of newly industrialized nations to have their own steel industry. Talk of overcapacity may sound foreign to your ears, but you’ll find an abundance of references to it in industry trade publications such as Automotive News, American Metal Market, Business Week, the Electronic Buyer’s News, and your own Jane’s Defence Weekly. This overcapacity has manifested itself in slower growth rates on the average than occurred in previous decades and in the presence of actual unemployment or of various forms of what Joan Robinson called “disguised unemployment”–employment at low-productivity, low-wage occupations that would disappear during a genuine boom. The British economist John Eatwell has written several penetrating articles about this kind of unemployment, but I’m not sure whether his views are congenial to those of the Economist.
       Finally, let me say something about such anachronistic terms as “organized movements.” Of course, the phenomena denoted by this term created a sufficient ruckus in Eastern Europe to overthrow a few communist governments, but these movements have recently been less visible and vocal in the United States and Western Europe. That’s happened before–in the 1920s and 1950s in the United States, for instance. These periods of relative quiescence also provoked a smug dismissal of “organized movements” by well-heeled editors. These editors were proven wrong, and I hope you will be, too. But this is a matter that cannot be settled by argument alone.

John B. Judis