|
|
|
|
Foreign Affairs
Globalization's Missing Middle
By Geoffrey Garrett
Geoffrey Garrett is Vice Provost of the International Institute and Director of the Ronald W. Burkle Center for International Relations at the University of California, Los Angeles.
Squeezed
The polarized debate over the effects of free trade and international capital flows has become a fixture of world politics. Boosters of globalization assert that it is a win-win proposition for the rich and the poor, developed and developing countries alike. President George W. Bush has said that "a world that trades in freedom ... grows in prosperity," reiterating a theme Bill Clinton championed in the 1990s. But critics see a small global elite lining its pockets at the expense of everyone else. John Kerry's decrying of outsourcing by "Benedict Arnold CEOs" is this year's version of Ross Perot's 1992 forecast that the North American Free Trade Agreement (NAFTA) would make a "giant sucking sound" by drawing jobs out of the United States.
All this good-versus-evil rhetoric obscures one key fact: while globalization has benefited many, it has squeezed the middle class, both within societies and in the international system. In today's global markets, there are only two ways to get ahead. People and countries must be competitive in either the knowledge economy, which rewards skills and institutions that promote cutting-edge technological innovation, or the low-wage economy, which uses widely available technology to do routine tasks at the lowest possible cost. Those who cannot compete in either include not only the erstwhile industrial middle class in wealthy nations, but also most countries in the middle of the worldwide distribution of income, notably in Latin America and eastern and central Europe.
This tripartite account of globalization's results does not fit neatly into either of the paradigms that dominate the current debate. On the one hand, globalization's supporters-who maintain that all countries should gain from opening their economies-try to explain the poor performance of the middle-income countries by invoking factors other than globalization, such as the trauma of eastern Europe's rupture with its socialist past or endemic corruption and inefficiency in Latin America. On the other hand, critics of globalization, who refuse to accept that it has benefited anyone in the developing world save a tiny Westernized elite, fixate on various injustices (using terms such as "sweatshop labor") and discount its positive effects as the product of other processes, such as the modernization of agriculture in China. But simple evidence demonstrates that both views are inexact. In fact, middle-income countries have not done nearly as well under globalized markets as either richer or poorer countries, and the ones that have globalized the most have fared the worst.
The question is, how can they be helped? Displaced American manufacturing workers would probably rather get jobs at Microsoft or Genentech than at McDonald's or Wal-Mart. But for most of them this just is not a realistic option. On the global stage, countries such as Mexico and Poland would similarly like to compete with Japan and Germany in the U.S. market for high-value-added goods and services. But their work forces are not skilled enough and their economic institutions not sufficiently supportive of investment or innovation to take advantage of the knowledge workers they do have. As a result, . . .