Globalization crowd pulled a fast one on the world

Tuesday, June 10, 2008

In the preoccupation with the presidential primary and the euphoria over Barack Obama's victory, something serious is being overlooked: the implosion of that brave new, overhyped and oversold world of globalization.

If you held the Dr. Pangloss view of economics, then globalization -- the unrestrained, unregulated and largely uncharted world of free trade -- would mean more of everything for everybody, everywhere for ever and ever and ever. What's the old saying -- "If it sounds too good to be true ...?"

We all bought into the hype, didn't we? Swallowed it whole, like a bunch of rubes. Republicans loved it from the start. No surprise there; cowboy capitalism (not that stuff they peddle from the pulpit) is the true faith for real Republicans. But Democrats bought the con, too. Bill Clinton, you'll recall, pushed free trade through Congress after the first President Bush failed.

Somebody should have sounded a note of caution -- something like, "Let's go slow here. We don't really know where this global getting and spending will lead and how soon." Or something like, "Is it really possible everybody everywhere can have everything without a head-on supply-demand crash and a destructive speculation surge as futures traders try to beat the market?"

Who might have warned us? The financial press, you say. But the financial press serves primarily as cheerleaders for the stock market and corporate America. It missed the savings-and-loan collapse in the early'80s, the 1987 stock market crash and even the recent bursting of the housing bubble.

Hell, the Wall Street Journal and Forbes magazine, those self-style avatars of economic wisdom, missed the 1929 market collapse. You could look it up.

I'd be inclined to tout professional economists as a source of help in such circumstances; they all went to expensive schools to absorb the wisdom of classic free-market economists like Adam Smith and David Ricardo. But most of them also drank the globalization Kool-Aid. In the process, they forgot this warning from Ricardo: "There is no way of keeping profits up but by keeping wages down."

Actually, that's what the multinational giants (mostly American) that gave us globalization wanted from the start: not merely new, open markets but markets with cheaper, non-union labor. They wanted a rigged market; they got it. American labor has paid the price.

But now we're seeing something else -- a massive supply squeeze on resources that should have been viewed as an inevitable byproduct of a globalization process that produced a world economy on steroids and promised too much too fast.

We all know about gasoline prices. They've risen so fast that even drive-by shootings have fallen off. It's all about supply and demand, we're told. What a crock! Sure, supply-demand pressure is part of it. But the $11-a-barrel oil price jump in one day had less to do with supply and demand than with rank, unregulated speculation by the futures traders.

Now we find that experts believe a similar crisis is at hand on food for a hungry world. And down the road, we may face similar pressure on fresh water supplies.

Take food. A report last month from the United Nations and the Organization for Economic Cooperation and Development concluded that the era of cheap food -- meaning plentiful food -- may be over. If so, it's a crisis that makes the gasoline crunch a proverbial day at the beach.

Then there's water. At a recent conference in London convened by Goldman Sachs, a panel listed a coming squeeze on fresh water supplies as one of the top five global risks and potentially a greater threat than any oil or food shortage. According to the Times of London, the Goldman Sachs report noted that fresh water use is doubling every 20 years and labeled it "the petroleum of the next century." It's already a source of squabbling among states in the American West and a sore point between Israelis and Palestinians.

Ordinary citizens across the globe -- and even a few of their more alert leaders -- have caught on to globalization's false promise. Protectionist demands are rising everywhere, including in Washington. But there's no turning back, at least not entirely. Why? Because governments everywhere have lost control of world trade.

The multinational giants, with their ability to buy and sell political leaders in much of the world, have become a new and unprecedented power in world affairs, exerting force not just in individual countries but across borders. They're not going to give up their edge. But even they must see that they've seriously overstimulated the world economy in a way that has taxed finite resources (the price of every precious metal has skyrocketed) and caused turmoil in the world's currency markets.

They seem at the beginning to have missed the fact that national economies would need time to adjust to their new world -- to petroleum and food shortages, labor displacement here and abroad, reduced living standards in some developed countries, surging wealth and increased demand in developing countries, like China and India.

Odds are we'll adjust in time. Globalization just happened too quickly.

John Farmer may be reached at jfarmer@starledger.com. To comment on his column, go to NJVoices.com.