Global Capitalism

       I have argued that growing economic interdependence is on balance an enormously good thing. You say things are much more complicated. The balance of costs and benefits could go either way. “The question is what rules and terms will create optimal conditions for equitable and sustainable growth.”
       In the 1960s and 1970s most developing-country governments chose economic separation for reasons similar to the ones that you advance for being cautious today. They called for a new world order, so that they could trade with the West on equal terms. (Just what changes were needed was always unclear. Judging by your pronouncements, it still is.) In the meantime, they embarked on development in isolation. The new order never came—-and guess what. They stayed poor. You say, and I commend your powers of observation, that Africa has gained less from globalization than East Asia. Indeed it has. Africa has gained nothing from globalization because its governments decided not to join in. They shared your anxieties. They spent 30 years waiting for better “rules and terms.”
       It’s worth noting that our many disagreements are of two distinct kinds. First, we differ over the effects of integration. Here you are consistently more pessimistic than I am. You think that globalization will cost more jobs in the West than I do, that the downward pressure on wages of the unskilled will be greater than I do, that the risks of global depression will be higher than I do, and so forth. I concede that on some of these points–notably on wages of the unskilled–you are right about the direction of the short-term effect, if not about its scale and persistence. Moreover, as you say, these are empirical matters: Time will tell who is right. But our other kind of disagreement is more basic, and more immediate. It concerns how governments should respond right now, given that, even on an optimistic view like mine, globalization is a mixed blessing.
       To answer that question, I drew a parallel in my previous letter between integration and growth. You did not respond, but I want to press the point, because I think it is crucial. Greater openness to trade and capital is very like an advance in technology: It widens a nation’s economic opportunities and makes its resources go further. Nobody would say that technological progress was an unmixed blessing: Jobs may be lost, particular industries may have to shrink, wages of the unskilled may fall, and so on. So far as I am aware, however, you do not propose to raise the tax on research and development, throw a little sand in the wheels of America’s high-tech industries, or put a quota on the number of software engineers graduating each year. Yet these and similar policies are what you propose as the remedy for global integration: higher tariffs, sand in the wheels of international finance, tighter regulation of labor markets, and so on.
       The right attitude to technological progress, despite its drawbacks, is to want more, and then discuss ways of helping the minority of losers to share in the broader gains. That is exactly the right attitude to globalization. I fail to see why global integration should be any more threatening than technological progress. Globalization is just better technology–and you are a Luddite for our times.

Clive Crook