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Foreign Policy
Fall 1998
Globaphobia: Confronting Fears about Open Trade
by Gary Burtless, Robert Z. Lawrence, Robert E.
Litan, & Robert J. Shapiro
Reviewed by Erik Izraelewicz *
The fear of globalization is, in itself, a global phenomenon—one that simultaneously afflicts an engineer in South Korea, a civil servant in France, or a blue-collar worker in the United States. Confronted with this widespread anxiety, national élites—most notably political leaders—in every country must cope with a tremendous responsibility. They must face the difficult task of managing their countries’ transitions to a world where the ups and downs of the marketplace are driven by technology rather than by the decisions of government. And, as if that were not bad enough, political leaders have another unenviable task: They must convince voters that while their fears are understandable, they are not totally justified. If political élites fail in that job, they will open the door to a popular backlash that could lead to protectionism and isolationism.Few political leaders are shouldering this burden. Worst of all, policymakers throughout the world (though especially in the United States) are using bad economic arguments to sell good economic policies, such as free trade and open markets. Apparently finding this situation intolerable, four American experts—Gary Burtless, senior fellow at the Brookings Institution’s Economic Studies program and former economist in the U.S. departments of labor and health, education, and welfare; Robert Lawrence, professor of international trade and investment at Harvard University’s John F. Kennedy School of Government; Robert Litan, director of the Economic Studies program at the Brookings Institution; and Robert Shapiro, an economic adviser to the Clinton administration—argue in their very stimulating book, Globaphobia, that the best way to make the case for free trade and open markets is to rely on economic realities rather than economic platitudes.
Drawing on case studies and careful statistical analyses, the four authors seek to dispel misconceptions that are common throughout much of the industrialized world: namely, that globalization threatens jobs, depresses wages, promotes inequality, and erodes national sovereignty. Forsaking the feel-good clichés that dominate the political discourse regarding the global marketplace, they argue that the statement “globalization kills jobs” is just as false as the statement “globalization creates more jobs.” Or, one can even argue, that both of these statements are true. As Burtless, Lawrence, Litan, and Shapiro correctly remind us, capitalism is a permanent process of “creative destruction,” a reference to the famous Austrian-born economist Joseph Schumpeter. Ever since the earliest days of the free marketplace, economic growth has always been the outcome of a simultaneous process of destruction and creation; the destruction of activities, products, and jobs exists side-by-side with the creation of activities, products, and jobs.In other words, even in an era of globalization there will continue to be winners and losers. The total number of jobs in an economy does not depend on the economy’s degree of openness. But imports can affect jobs in specific industries, shifting the work force toward manufacturing products in which a nation has a competitive advantage.
The authors of Globaphobia distinguish themselves from their peers in that, while they are ardently in favor of free trade, they do not attempt to gloss over capitalism’s destructive impulses. In fact, they offer constructive advice to U.S. policymakers on how to minimize the dislocating effects of the global marketplace. For instance, the four analysts argue that current programs offering cash benefits and employment retraining to workers who lose their jobs to trade are flawed in their design and only end up prolonging the period of adjustment. Instead, the authors suggest reforming the program by offering earnings supplements that would not be payable until a worker finds a new job and that would cease within a specific time period after displacement occurred.
In the most original and important part of the book, the authors argue that as globalization changes the way that the economy functions, it changes the ways in which government can and must intervene in the economy. The traditional tools of the state—industrial policy, social policy—are not always efficient in today’s world. “Globalization may complicate the ability of governments to redistribute income, either directly or through regulation,” the authors observe. And trade agreements that specify labor standards and human-rights practices run the risk of imposing the values of one culture on another. As the authors vividly explain, “One nation’s sacred cow may be the next country’s favorite meal.”
If, with globalization, deregulation has been the name of the game, then “reregulation” must be the other part of the same game, on both the national and international levels. The time has come to ask the winners to help the losers in new ways and, maybe, to change the whole economic and social organization that has been built up during the last 50 years. Politicians must learn to rethink the role of the state. This message is not only for America’s leadership but for Europe’s political élites as well.
Endnotes
*: Erik Izraelewicz is editor in chief of Le Monde and author of The World That Awaits Us: French Fears and the Economy (Paris: Bernard Grasset, 1997). Back.