May 1997 · VOLUME 18 · NUMBER 5

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B O O K    N O T E S

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ONE WORLD, READY OR NOT is the single best effort to come to grips with the phenomenon of economic globalization. Its reporting is impressively broad -- with dispatches from Beijing to Bangkok, from Warsaw to Washington, D.C. and from Jakarta to Frankfurt -- and its analysis is unusually deep. Author William Greider describes in lucid terms the global race to the bottom in wages, with companies migrating to ever-lower wage countries, and low-wage countries making ever-more attractive proposals to lure multinational corporations.

Within the higher wage, industrialized countries, the effects are familiar: job loss and downward pressure on the wages of those who maintain employment.

While the pull-down effect has been felt in the United States for two decades, it is only now beginning to exert itself in continental Europe and Japan, though it faces substantial resistance from unions in Europe and cultural egalitarianism in Europe and Japan.

Greider lays bare the harsh cruelty of the manic logic of global capitalism in a conversation with a German bond trader. "When I look out on the trading floor, I see no need to get the wages of the traders down," Thomas Mayer, chief economist for Goldman Sachs in Frankfurt, told Greider in one of several extremely revealing conversations with business executives and representatives that Greider reports. "That's beside the point. But the need is to get the cleaning workers' wages down and to widen the spread between them."

The United States is a model, Mayer said. "Compare the situation of German janitors and U.S. janitors," he said. "Why is there such a vast difference? How often does a U.S. janitor go for vacation abroad? Not very often, I think. Here, everybody goes abroad. That would be nice if the productivity of the German workers were highest, but it isn't."

The global race to the bottom equally takes its toll on Third World workers, many of whom are forced to toil in ultrahazardous conditions -- as brutalized child laborers, or in unsafe fire-trap factories, for example. The manic logic of global capitalism undermines poor countries' ability to raise wages and labor standards once they attract foreign investment. "Until a floor is built beneath the market's social behavior, there is no way that a small developing country like Thailand can hope to overcome the downward pull of competition from other, poorer nations," Greider writes. "It must debase its citizens to hold on to what it has achieved."

The downward pull on wages and labor standards exerted by companies making real investments and countries looking to host them is complimented by a powerful push from the forces of the financial world. "The Robespierre of this revolution is finance capital," writes Greider, who knows how to turn a phrase. "Its principles are transparent and pure: maximizing return on capital without regard to national identity or political and social consequences. Global finance collectively acts as the disinterested enforcer of these imperatives, like a Committee of Public Safety presiding over the Terror."

If any country or corporation tries to fight against the logic of wage reductions and the global race to the bottom, they are punished by financial traders, who drive down the value of their currency or stock. This happens not through conspiracy, but because each trader makes the same rational calculation of the costs to a firm not to flee to a low-wage country or to a country of choosing not to seek investment by lowering standards. These are rational individual choices, even though the consequences of their collective action is a suicidal drag on living standards.

While One World, Ready or Not is infused with a moral sensibility and outrage over the avoidable human suffering caused by globalization's downward pull on living standards, its more ominous warning concerns the economic consequences of the persistent diminution of wages and living standards. Broaching the issue from a classical Keynesian perspective, Greider suggests that the system is driving itself to destruction. The problem is surplus production: the developing countries are producing more goods in their race to develop, and consumer demand is too low, due to declining wages in the industrialized world and the supercheap labor in the developing countries.

From this perspective, Greider is astutely concerned not about the U.S. budget deficit, but the U.S. trade deficit. The U.S. trade deficit reflects U.S. consumers' role in soaking up the world's excess production. But the United States cannot be the buyer of last resort forever, he warns. Eventually, the resultant decline in the value of the dollar will undermine U.S. buying power.

In the absence of the implementation of precautionary protective measures, Greider fears the end of the U.S. absorption of the global surplus will spark a global depression. And depression, he worries, may be accompanied by resurgent fascism.

This threat of economic implosion calls for an immediate program of bold action. Greider offers a compelling set of initiatives, including:

• Regulating finance capital, with transaction taxes on foreign exchange, limits on the use of hedging and derivative devices, lowered interest rates, elimination of offshore financial centers (by countries prohibiting their banking systems from honoring transfers of offshore capital);

• Taxing capital rather than labor, to encourage job growth;

• Imposing temporary trade barriers in the trade deficit countries (like the United States) to ensure more balanced flows of commerce;

• Increasing wages in the poor countries by requiring trading nations to honor labor rights;

• Forgiving the developing countries' debts, which require them to run trade surpluses to pay interest and principal on their debts;

• Reforming central banks so that they encourage rather than suppress economic growth; and

• Shifting government priorities -- embedded in programs of support, subsidies, research initiatives and tax policy -- to emphasize work and wages rather than trade or multinational corporate competitiveness.

This is an absolutely critical insight, because it should remind citizens the world over of the potential power they can wield through government, and to encourage them to imagine bold alternatives to the current economic system. However, as an aside, it should be noted that Greider may underestimate the institutional obstacles to moving in the direction he suggests. Greider gives short shrift to the World Trade Organization (WTO), which he views as little more than one element among many of industrialized country trade tools. That view reflects in significant part his failure to assess the enhanced powers of the WTO as against the old GATT, and his focus on a few special, highly protected industries (notably aerospace) that effectively function partially outside of WTO rules. With respect to Greider's proposals, the effect of the WTO may be to impede many incremental measures, and require that a country intending to pursue the path he suggests do so wholeheartedly, in a complete break from the existing set of world economic rules.

For all the intensity of his critique of globalization, Greider also sees a liberatory potential in the globalization phenomenon. Those in non-capitalist peasant societies often suffer under the yolk of vicious patriarchal and hierarchical clique, clan or ethnic group rule. The sweeping in of capitalism creates opportunities for young girls who may have been fated to a hard life of farm labor under the dictatorial rule of a husband to work in towns and gain exposure to more cosmopolitan influences, and it offers similar hopeful possibilities for others at the bottom of various rural and ethnic hierarchies. Nike may be freedom, Greider argues. This is not an argument to be dismissed, and it serves as a useful rebuke to those -- including Multinational Monitor -- that may on occasion fall prey to glorifying or romanticizing rural and indigenous life.

For Greider, globalization is a revolutionary process that contains divergent possible futures: new forms of authoritarianism on the one hand, and new opportunities for all people in the world to live with dignity and have equal chances to quench their thirst for self-realization. While his reform proposals should be equally appealing to those who believe globalization to be an unredeemable process, they come from a critic who hopes to reorient, not reverse, globalization.

However, evidence within the book and left out of the book suggests a more skeptical perspective is warranted. First, ruling out a global minimum wage as unworkable at the present time, Greider rests his hope on raising Third World wages on initiatives by industrialized countries to condition trade on countries maintaining local minimum wage laws and protecting workers' organizing rights. But given the systemic nature of Greider's critique, as well as the enormous number of unemployed and rural people still largely outside of the global economic system, it seems unlikely that these conditions will meaningfully affect the wage structure in developing countries -- and certainly not enough to cease being a drag on wages in the rich countries.

Second, Greider fails to grapple seriously with the ecological consequences of globalization, emphasizing engineering innovation and green taxes in a concluding chapter as environmental solutions. This is a plainly inadequate approach, a sharp divergence from his political economy approach to "economic" questions. Just as the global race to the bottom drives down labor standards, it reduces environmental standards to the lowest common denominator as well. It similarly encourages poor countries to overexploit their natural resources. And international trade creates unique environmental problems, such as the energy expended in shipping, and the pesticides and preservatives needed to keep agricultural exports fresh during long transport periods. While it is often unfair to criticize a book for what it does not attempt to address, Greider in the end celebrates the possibility of a reformed process of globalization; it is irresponsible to do so without thinking through the consequences for an issue as monumental as ecological sustainability.

These two criticisms meld into a broader point: Greider's failure to consider a genuine alternative to globalization, "localism" for lack of a better name. Localism emphasizes local control of capital; local production of goods for local consumption, to the extent possible; and diversity of cultures.

Localism provides a potential answer to the wage issue unaddressed by Greider. From the industrialized country perspective, it may favor more straightforwardly protectionist measures to defend U.S. or Japanese higher wages. It offers an escape from the cruel logic of globalization to the developing countries as well. It suggests a strategy not based on cheap labor, but one of building up productive capacity to meet local and regional needs, directly addressing domestic inequality and preserving a viable rural society strengthened by land reform and producing primarily for local consumption.

Localism also offers the opportunity to escape globalization's destructive ecological dynamic. It encourages community control over resources, by far the best way to manage them sustainably; it accepts trade-discriminating measures designed to forestall competition on the basis of lower environmental standards; and it deals directly with transport-related environmental problems.

"The political task," Greider writes in his conclusion, "is tricky: to re-create a national government that asserts its power to regulate players in the global market and yet, at the same time, recognizes the necessity of embracing the internationalist perspective." Greider has done a magnificent job of making the case for undertaking this effort. Those who take his analysis seriously should now enter into a respectful debate about whether re-energized national government should work in pursuit of a reformed globalism or a measured localism.