Home > Uncategorized > The elite globalization consensus

The elite globalization consensus

from Robert Wade

In this context globalization refers to the opening of domestic markets and the integration of global production via multinational corporations (MNCs). More broadly, it refers to  movement in the world economy towards “one country”, or “deep (not shallow) integration”, where nation states have no more influence over flows of goods, services, capital, finance, ideas and people across borders than South Dakota or the other US states have across theirs. Ever since the 1980s leaders of western states – including shareholders and top executives of MNCs – have agreed that states, on their own and cooperating (in free trade agreements, and in inter-state organizations like the World Bank, IMF, World Trade Organization, European Union), should push for ever more globalization, more “market access” for their corporations, and less state “intervention” or “regulation” in markets.

Here is Martin Wolf of the Financial Times, one of the world’s most influential economic commentators:

“It cannot make sense to fragment the world economy more than it already is but rather to make the world economy work as if it were the United States, or at least the European Union… The failure of our world is not that there is too much globalization, but that there is too little. The potential for greater economic integration is barely tapped… Social democrats, classical liberals and democratic conservatives should unite to preserve and improve the liberal global economy against the enemies mustering both outside and inside the gates” (emphasis added).[1]

Here is Renarto Ruggiero, former head of the WTO: 

“trade integration is not just a recipe for growth but also security and peace, as history has shown” (emphasis added).

Here is the WTO saying on its website: global integration under WTO and predecessor GATT supervision 

“has been one of the greatest contributors to economic growth and the relief of poverty in mankind’s history” (emphasis added).

Here is the World Bank summarizing others’ research findings, with which it agrees:

openness to international trade, based on largely neutral incentives, was the critical factor in East Asia’s rapid growth” (emphasis added).[2]

The World Bank’s Structural Adjustment Loans over the 1980s carried more trade liberalization conditions than those in any other policy domain. The Bank treated trade liberalization as the queen of policies, not just one among many, saying that free trade policy will limit the amount of damage from other government interventions in the market.[3]

The Financial Times peppers its editorials about trade protection with negatives like “mercantilist” and “populist”, and stresses that any one country benefits from adopting free trade policy even if others do not – because protection amounts to throwing rocks in your own harbor. Apparently the collective interest of any country and of the world at large always favors free trade, because free trade maximizes the size of the pie. Only self-seeking “vested interests” want protection in order to get more of the pie for themselves, at inevitable cost to society.

A big business voice comes from Percy Barnevik, when CEO of the Swedish-Swiss multinational Asea Brown Boveri (ABB):

“I would define globalization as the freedom of my group to invest where and as long as it wishes, to produce what it wishes, by buying and selling wherever it wishes… while putting up with as little labor laws and social convention constraints as possible.” [4]

Finally, Bernard Arnault, in 2000, CEO of French luxury group LVMH and 10th richest person on Earth:

“Businesses, especially international ones, have ever greater resources, and in Europe they have acquired the ability to compete with states… Politicians’ real impact on the economic life of a country is more and more limited. Fortunately.”[5]

These statements illustrate the tendency for globalization champions to attribute “all good things” to trade and investment integration, including (1) global poverty reduction on an unprecedented scale, (2) East Asia’s remarkable economic rise, and (3) global peace and security.

Though they assert causality, the statements are not intended to pass a test of evidence.  Their job is to affirm identity: that the speaker or organization is a member of the global elite team which wants capital, goods and services to be able to move freely worldwide between locations and sectors, as the defining feature of desirable globalization, assuming that what is good for the team is good for humanity and the biosphere.

Implicitly or explicitly the claims downplay the value of “policy space” and the value of the solidarity obligations embedded in the idea of “nation”, ignoring the employment point made by Keynes in the epigraph. The claims should be understood in the light of Daniel Kahneman’s observation, “Declarations of high confidence mainly tell you that an individual has constructed a coherent story in his mind, not necessarily that the story is true”.     read more

[1] M. Wolf, 2004, Why Globalization Works, Yale University Press, p.4.

[2] World Bank, 1993, The East Asian Miracle: Economic Growth and Public Policy, p. 292.

[3] World Bank, 1989, “Strengthening trade policy reform”, Washington DC, November 13.

[4] Quoted in J. Gelinas, 2003, Juggernaut Politics: Understanding Predatory Capitalism, Zed Books,
p. 21

[5] B. Arnault, quoted in Serge Halimi, 2013, “Tyranny of the one per cent”, Le Monde Diplomatique (English), May 1.

  1. April 6, 2017 at 3:37 pm

    Corporatists are afflicted with insatiable want. They are suffering from a mental illness refuses to see the possibility of human extinction sooner than later. Such people see global environmental collapse as just another bump in the road to infinite growth on a finite planet. They are very close to renouncing their souls.

  2. rjw
    April 6, 2017 at 7:12 pm

    Fascinating essay, with some great food for thought, and some references that I will certainly explore. The points made on the importance of domestic institutions in driving the growth process are as interesting as the discussion of trade and trade policy. Thankyou.

  3. April 8, 2017 at 10:01 am

    Per Pangloss, this world is “the best of all possible worlds.” Pangloss’ own experiences show this is untrue. But he holds on to the belief and passes it along to Candide. Whether this is “the best of all possible worlds” depends on who is speaking. For the elites in business, government, the military, and of course in economics the statement is obviously true. They have everything they want and are continually rewarded (physically and psychically) by the world. On international trade, for example, no matter who or what is harmed, they always win. But as Candide discovered in his travels and experiences Pangloss’ belief is wrong. Most are harmed or killed in this “best of all possible worlds.” Only a few are benefited. Since those who are hurt vastly outnumber those who are benefited, why do the harmed accept this situation? Two reasons. First, the philosophy that Pangloss teaches – this is the best of all possible worlds; any other would be worse. Second, those who control this world are smart. So smart that opposing their wishes is foolish. The world Candide encounters is a world based on these two forms of fear. These same fears are used to maintain international trade today. As well as most capitalist economies in the world. The question before us: how can these fears be overcome? Is that even possible?

    • robert locke
      April 8, 2017 at 5:00 pm

      Find a way to replace anti-social behavior and doctrine with cooperative behavior and spirit. Begin in the firm.

  4. patrick newman
    April 20, 2017 at 12:29 pm

    Surely they are not claiming that what has happened in China as a success of globalisation? Or is it a success if we ignore the damage done to ecology and environment and the widespread destruction of rural communities.

  5. robert locke
    April 21, 2017 at 12:59 pm

    Some years ago I briefly discussed how Clausewitzian thinking enriches economic analysis It seems to me that Clausewitz formulated views that frame the discussion about foreign trade in terms that better clarify the subject than we get when the discussion is contained in a classical frameworlk that few believed at the time or now, except blinkered economists.

    “Foreign trade

    The classical formulation of international trade David Ricardo gave in his theory of comparative advantages, which was an elaboration on Adam Smith’s comments on the subject in The Wealth of Nations and which is today taught to undergraduates in economics courses all over the world. Comparative advantage appears when a country has a margin of superiority in the production of goods and service. It exports those and imports from countries that have a comparative advantage in other goods and services that it does not have. The theory has had its supporters and detractors but what is striking about the interchange between them is how the discussion takes place in the terms formulated first in the great London emporium where the debate began. Ricardo’s argument assumed that two countries and two commodities (wine and cloth) were involved, that there was perfect competition, labor was the only factor in play, labor was perfectly mobile within each country but not between the two, that there was free trade and no technological movement or transportation costs. The critics talk about the shortcoming of assuming that value is determined by labor, or assuming that there is full employment, or that demand is ignored, no evolution of the factors of production are permitted, that Ricardo assumes that there is no free trade and there is complete specialization, etc. – This language is fit for the London emporium but not Clausewitz’s continental Europe, not the world of great power politics where the preoccupation of those left behind in the race is how to catch up with and even surpass their competitors, how to prepare the material strength of the state to see it through. This was the preoccupation of Japanese leaders after the war and of imaginative Chinese Communist Party bureaucrats after Mao’s death. So the axioms of neoclassical economics do not have much to do with geo-political economic ambitions.

    For Clausewitzians the discussion about the theory of comparative advantage is clearly limited. Ian Fletcher wrote about the limitations in his article “Dubious assumptions of the theory of comparative advantage” (Fletcher, 2010). Ricardo’s is a “static theory” about how best to use existing factors. It tells economists the “best move today, given our productivity and opportunity costs. It does not tell us the best way to raise productivity. “That, however, is the essence of economic growth [and industrialization], and in the long run much more important than squeezing every last drop of advantage from the productivities we have today” (Fletcher, 103). Comparative advantage, he also notes, is “narrow theory,” It is only about the best uses to which nations can put their factors of production. “We have certain cards in hand, the others players have certain cards and the theory tells us the best way to play the hand we have been dealt. Or more precisely it tells us to let the free market play our hand, so market forces can drive all our factors to their best uses in our economy.” It does not, however, tell us how to reshuffle the productivity cards; it is not dynamic.
    real-world economics review, issue no. 61

    The theory of comparative advantages is, therefore, not very helpful to people involved in strategic thinking about great power rivalry. And today, governing elites in America need help, inasmuch as very little about US international trade policies, if they can be called that, results from strategic thinking. In the US an ideology of egoist self-interest prevails in orthodox economics, and trade policies are set by lobbyists to the advantage of special interests. The result: capitalists like the high profits and consumers the low prices when imports replace domestic produced goods, but the workers lose their jobs as low tech jobs move overseas, high tech jobs do as well, the trade imbalance with China increases and the Chinese amass huge amounts of US treasury bills with which to finance their overseas expansion, while the tax base erodes in the US as special interests avoid taxes; the American people accumulate a huge private and public debt, and the strategic interest of America and its allies suffers through this demoralizing cascade of events.

    To recover US politicians and civil servants need not just to ward off the special interests when setting trade, fiscal and monetary policy, but to obtain better input from economic theory. That science cannot be exclusively the positivism of orthodox economics. A move away from Ricardo to Clausewitz permits the observer first to focus on the state and not the individual and second, because his theory engages in contingency planning that minimizes the effects of the unknown and unexpected, allows the observer to deal better than the neoclassical economic theorist with the complexities of purpose, goals, and means in the accidental world of great power struggle. This thinking process opens the door to nonpositivist arguments about economic outcomes; it turns to the situational roles of the thinkers and policy makers themselves, to their moral education, their esprit de corps, their sense of the nation’s purpose, in order to usher in an economics that better copes with change in a trade world continually in flux. It allows economics more to serve commonwealth than specialprivate interests.”

    • April 23, 2017 at 5:32 am

      Well said, Robert. Only downside I see is this. Following Ricardo, or any other mainstream, positivist economic theory is easy. Like following the instructions on the back of a pancake mix box. They’re not made-from-scratch pancakes but if you follow the instructions they will be edible, kind of. But making pancakes from scratch is not at all easy. Requires a lot of work and research, and some practice with real-world events. And some real-world mistakes. Some large and embarrassing. So it is when the economic decision makers deviate from the standard and accepted economic truths. Making those decisions becomes more difficult. Requires more work, more research and testing. And more failures. Not something most decision makers nor many mainstream economists can accept.

      • robert locke
        April 23, 2017 at 9:58 am

        Good point and there are lots of historical events that can be cited to buttress them. Clausewitz’s ideas about contingency planning, for example, might minimize risk, but it cannot end it, as the German General Staff found out to its dismay in 1914. But your reference to instructions on the back of a pancake box is apt. Contingency planning requires faith in creative imagination that goes beyond the recipe box; I know risks are involved, but so are great rewards to be expected when gifted and smart people get it right. I want to believe that the visible hand of management can give us much more than the invisible hand of markets. That is what being human is all about, provided of course, that the visible hand serves the commonwealth.

      • April 24, 2017 at 6:55 am

        Robert, those who believe in markets, and I emphasize the word believe, see no purpose for planning of any sort. The world is simple. Just follow whatever path markets lay out. For those who pretend to believe in markets, the story is much the same. Planning is unnecessary since winners win and losers lose. These are micro-worlds. The individual follows markets or destroys (or is destroyed by) the competitors, or sometimes both. There is no sense of history, or even time (except moving from one thrill to the next). Supporters of both assert they are helping society, and all its members, the commonwealth. How do we judge this claim? It is contrary to the history and anthropology of humans (homo Sapiens). Planning and forward living, even imaginary living are how humans function. Denying them is absurd and dangerous. Such denial threatens human survival. As things stand now it may take more time to fix this than our species has left.

      • robert locke
        April 24, 2017 at 12:43 pm

        Ken, I think you think that most people believe in markets, and it makes, because belief triumps over the evidence of the real-world, those who criticize market based economics labor in vain. But all I hear in the press, in the government, is a discussion about the competition among nation states, about the rise of Japan, of China’s challenge to US hegemony, about German hegemony in the EU, nothing much about markets here. Why do we talk endlessly about the competition between nations and frame economic discussions in terms of individuals acting in markets?

      • April 25, 2017 at 6:41 am

        Robert, my experience is most Americans and Europeans believe in markets. Not the markets from today’s economics. But exchanges of all forms by which individuals and nations obtain many of the resources they need and require. Those involved in these markets generally do not oppose regulation or oversight of them and those who participate in them. And those involved are not so stupid as to believe the markets are always free, open, and fair. They depend on governments to deal with resolving such problems. Such markets sometimes use competition, sometimes cooperation, and sometimes a mixture to make them work. Getting to this balance is again the job of governments. So long as governments can keep markets useful and reasonably fair and open, they ought to continue. I for one am uncertain today as to how many markets are useful, fair, or open. One of the factors that makes me uncertain is economists’ almost complete ignorance about actual markets, along with their continuing insistence on being involved in designing them.

      • robert locke
        April 25, 2017 at 9:31 am

        We’ve probably milked this subject of most insights, but one last comment. People like Friedrich List and Clausewitz, in the age of classical economics, but also the age of the French Revolution stressed community, esprit de corps, and the importance of education in the creation of prosperous communities that could thrive in the world of competitive states, and we still do that, as for example, in the constant discussion of the importance of training and education to a country’s ability to compete in the world. List stressed community and the importance of fostering it through special efforts. He died in 1846. The people who wrote the GI bill legislation understood, or came to understand, the significance of public polices that fostered the creation of a nation’s mental capital, too. Since about 1980 the US abandoned this course, but other countries did not, and we have plenty of studies to show how important the presence or absence of training and educational systems are to furthering general welfare. I’ve written comparative studies on the subject over the past few decades, and can put out a pretty good argument that explains the comparative economic performance of the French and Germany economies in terms of training and educational mentalities. The problem is not comparative advantages as Ricardo would have, but inherited and persistent educational cultures that effect managerial performance.

      • April 26, 2017 at 7:26 am

        Robert, you had me with esprit de corps. I was a Marine. But, seriously, you and I are on the same page. It took a great deal of work to create the USA as a nation, rather than just a lot of land and detached cities and towns. That work has been reversed and even threatened several times in the US history. First, during the rage of land speculation and lusting after gold and silver that followed shortly after the nation’s founding. Next, during the age of corruption and greed leading up to and during what’s called the “Gilded Age.” Then, during the run to neoliberalism that began during the 1960s and is peaking right now. Railroad and mining magnates, then Robber Barons, and then multinational corporations were held up as replacements for old-fashioned community and nationalism. They all failed. I prefer to accept the Star Trek view of the future. That all the things we associate with nationalism and community that are positive will one day grow to encompass not just multiple nations on earth but multiple planets across space. This will be hard to accomplish but is always preferable to the picture of misers and sociopaths grubbing in the dirt and killing one another (physically and psychologically) to accumulate more, always more. So, from where I sit Ricardo is not just wrong, he’s useless and threatening.

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