We Can Now See the True Cost of Globalization
The worldwide public realizes there is something deeply wrong with today's world economic system
When Karl Marx called for the workers of the world to unite, it seems unlikely he had in mind an iPhone boycott. But suggestions for just such a campaign in the US have thrown the spotlight on possible abuses at firms producing goods for hi-tech giant Apple, urging the public to think again about what happens at the other end of the production pipeline that leads to its swish, minimalist stores. Stung by the criticisms, Apple boss Tim Cook told his staff last week: "We care about every worker in our worldwide supply chain," and the company is now inspecting scores of factories, providing the latest evidence that the public is no longer willing to ignore the dark underbelly of world capitalism.
Before the Great Crash, critics of globalization were isolated on the loony fringe: tear-gassed in Seattle and whacked with truncheons in Prague, as the west's leaders gathered to congratulate themselves on reaping the benefits of unfettered world trade.
When the Asian financial crises of the 1990s toppled governments and forced one desperate country after another into mass impoverishment and emergency bailouts by the International Monetary Fund, the west's leaders – even many on the left – explained it away as a result of shoddy governance or poor economic management, instead of a devastating side-effect of globalization.
And even after the financial shock waves rippled out from the American housing market in 2007 and caused catastrophic collateral damage in countries across the globe, and the deepest world recession since the 1930s, many felt that a few tweaks to bank capital rules, and sharper teeth for financial regulators, would fix the system.
Yet two things have derailed world leaders' attempts to get back to business as usual. The first is that in many countries, more than four years on from the start of the credit crisis, millions of people still wait for economic recovery to take hold. Growth is sickly or non-existent; unemployment is rising; the only people who seem to escape are a tiny, super-rich elite.
And the second reason it is still not business as usual is that there has been a growing chorus of discontent from far beyond the corridors of power. From the Indignados in Spain, who have espoused the cause of the 50% of young Spaniards now out of a job, to the Occupy movements that have sprung up in New York, London and scores of other cities around the world, to the villagers in Guangdong, China, protesting against government land-grabs, many thousands of discontented citizens are making their anger felt about the way the system has failed them.
The demands of these inchoate groups may not be fully formed; but they have noisily identified the fact that there is something deeply wrong with today's world economic system, which puts unfathomable riches in the hands of an unaccountable elite, while millions are trapped in unemployment and poverty.
The focus on youth unemployment and inequality at the annual talkfest in Davos last week was a clear indication that the power-brokers in the global economy are finally realizing that something has gone badly awry.
The truth is that the neo-liberal consensus, with its promise of economic "freedom", has failed to deliver. The opening-up of China and India over the past 20 years has lifted millions of people out of poverty. But inequality here and in other developing countries remains shameful, and shouldn't be left unchallenged.
At the same time, average workers in most of the major rich economies, including the UK, have seen the real value of their wages shrivel away, as they have found themselves in competition not just with their neighbors, but with workers many thousands of miles away.
Yet if the system fails the average worker in the west, it fails even in its own terms, because it undermines consumer demand, and chokes off economic growth. The rich elite who have been the big winners over the last 50 years may be big-spenders, but they still park much of their wealth in Switzerland.
A growing body of research suggests that yawning inequality isn't just a moral and political question – it's an economic one. The credit bubble of the past two decades helped consumers in the US and Europe to prop up their quality of life in the face of the relentless decline in real wages; but that conjuring trick only works for a while, and the resulting legacy of debt will now take many years to work off.
So as the plight of workers in faraway places reveals the true cost of cut-price consumer gadgets, it's also clear that workers everywhere have been losing out. It would be wrong to think that the answer is to retreat inwards, and return – even if we could – to a closed-border economy. But it must no longer be a taboo to question whether raw globalization brings the benefits that were promised.
Domestically, a host of tax and benefit changes could help redress the balance for those who have lost out in the race towards an outsourced, privatized, winner-takes-all world economy. The OECD suggested heavier taxes on properties, pension contributions and mortgage interest payments for the rich as ways of reducing inequality while boosting growth by persuading the rich to invest their money wisely instead of parking it in Park Lane penthouses, for example. Warren Buffett, the billionaire investor and unlikely radical, has suggested that forcing rich investors like him to pay the same tax rate as his secretary might also help.
On an international scale, it should no longer be taboo to propose limits to foreign takeovers, or to the nonstop, unquestioned flow of capital around the world.
We should welcome the fact that China's workers themselves are becoming increasingly restive about their plight. Higher wages and better conditions for them might push up the price of an iPod in London or New York, but they would also help the Chinese economy towards Beijing's aim of a rising middle class and stronger consumer demand at home, instead of economic growth that depends too heavily on cheap exports.
Strong, sustainable Chinese growth, and rising labor standards, would be good for the west too: they should help to narrow Beijing's yawning trade surplus by opening up vast new markets. Apple's critics would once have been written off as naive idealists; but as we sift through the wreckage of the Great Recession, perhaps it's finally time to heed Marx's words, and stand up for workers everywhere.
© 2012 The Guardian/UK