We Will Not Be Crucified Upon This Cross of Trade by mattsteinglass
April 2, 2007, 2:22 pm
Filed under: China, Trade, United States, Vietnam

Harvard political economy professor Dani Rodrik has a piece in today’s Financial Times arguing that the true enemies of globalization today are its uncritical cheerleaders, who threaten to provoke a populist protectionist backlash.

Closed markets may have been a fundamental problem during the 1950s and 1960s; it is hard to believe they still are. The greatest risk to globalisation is elsewhere. It lies in the prospect that national governments’ room for manoeuvre will shrink to such levels that they will be unable to deliver the policies that their electorates want and need in order to buy into the global economy.

This is an amusingly inverted version of the argument behind the “Third Way” neoliberalism of the ’90s. Neoliberals argued that progressive social goals could only be accomplished if one first reassured Big Capital that one didn’t intend to tax it or seize its assets; otherwise the money men would take their business elsewhere, destroying the economic growth on which social progress depends. The new version runs the other way around: the healthy profits of Big Capital can only be guaranteed if one first reassures Big Labor (or Big Consumer, or Big Citizen) that one will pursue progressive social goals. Otherwise the inflamed masses will vote populists into power who will jack up taxes and erect protectionist boundaries around their markets. This is basically just a return to the older version of the industrial social compact which held from the advent of the New Deal until the ’80s.

I’m curious about Rodrik’s idea that countries should stop arguing for open markets tout court (you open yours and I’ll open mine), and instead strike bargains over which areas of their own economic policy they should be allowed to pursue in violations of WTO norms. First of all: is it really possible at this point without breaking the WTO? Secondly: what exactly is Rodrik talking about? Does he mean the US should start bargaining with China to protect the US software industry in exchange for dropping tariffs against China’s allegedly subsidized paper industry? Or what?

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