The U.S. midterm election was noteworthy for what analysts called voter "populism," which is to say, its element of economic protest. It is increasingly clear to voters in the United States - and in Europe - that the promise concerning globalization made to the public by economists, business leaders and politicians has not been kept.
Workers in the rich countries were promised that they would ultimately benefit from globalization. Under the new corporate norms of the globalization era, wealth and rewards were to "naturally" trickle down to everyone in a company.
Instead, workers find that their countries grow richer, as do corporations and executives, but ordinary working people grow poorer.
The promise was that workers whose jobs were outsourced abroad might undergo transitional difficulties but eventually would have better and more sophisticated jobs. This was unconvincing.
In the past year, it has become generally acknowledged in practice and in the economic literature that workers in North America and Western Europe have paid the price for the gains made by corporations through outsourcing production. Recognition of this affected the U.S. election and is a major factor in recent popular hostility to EU expansion and further extension of the EU's single market (as in services, to take the current controversy).
The Nobel laureate Joseph Stiglitz and other economists critical of these trends are still inclined to treat what has happened to people in the labor force as an unanticipated flaw in the new system: "Economic globalization has outpaced the globalization of politics and mind-sets," Stiglitz says. "Greater interdependence increases the need for coordinated action, but we still lack the institutional frameworks to do this effectively and democratically."
I am not sure what that means, since what we are talking about is taking skilled employment from people in advanced countries, accustomed to high wages, and awarding it to people in poor societies where high-labor competition exists at much lower wages for the same skilled work (wages that in the economic circumstances of these countries may nonetheless be adequate or even generous).
The low-wage worker and his society benefit in most cases, but have also entered into what is a one-way movement, and a permanent one. The logic of the process dictates that the outsourced work steadily seeks even lower-wage societies. There are few if any manufacturing or professional skills in the advanced countries that cannot eventually be supplied elsewhere at much lower cost.
It also has not until now been fully appreciated that the corporation itself and its management are eventually subject to this logic. Why should the Indian or Indonesian manufacturer of products sold in more sophisticated markets by American, European or Japanese corporate clients not eliminate that costly overhead, and himself take over the functions of corporate headquarters now in Chicago, London or Frankfurt?
The formerly anonymous Chinese manufacturers of IBM products bought IBM, seeing IBM's existing American managers as a profit drain on their company. If you think in this way, globalization still has a long way to go. It may not prove a pretty process.
The new and very recent Anglo- American business orthodoxy dictates the pursuit of profit without regard for social cost or obligation. But as recently as the 1950s in the United States, the "stakeholder" corporate model was generally accepted in business schools and in practice. It holds that while the corporation exists to make profits, it is also responsible for providing secure jobs and just remuneration for its employees, and for advancing the economic interests of the nation and "the good of society."
It clearly is not an outmoded or demonstrably inefficient model, since it is currently widely accepted in Japan. It is, for example, the corporate model followed by the Toyota corporation, the most successful automobile manufacturer in the world. At this moment, the once globally dominant American automobile industry is nearing collapse (and attempting to jettison the last vestige of its own past acceptance of social responsibility, its contractual health- care obligations).
The point is that current international and national assumptions and ideologies concerning the economy are recent, arbitrary, open to challenge, and undoubtedly as transient as those of all their predecessors since Adam Smith (a humanist).
Monetarism will not pass away with Milton Friedman, who died Thursday. But it will become a footnote to economic history. The ideas of John Meynard Keynes, which are attracting attention again, will have the more lasting influence. Why? Because of Keynes's fundamental humanism.
Copyright © 2006 The International Herald Tribune