Globalization: the Dichotomy and the Pendulum

This guest article was written by William Laraque who is the Managing Director of US-International Trade Services.

US eyes were focused on Cleveland last week as the US Republican Convention rolls out.

Writing in non-Marxist terms, Cleveland is a dichotomy. The shiny new downtown area in which $50 billion has been spent contrasts with East Cleveland where some 6,000 houses have been demolished in an effort to reduce blight, to maintain what remains of property values, in order to discourage squatting, drug abuse and all other ills associated with economic failure. East Cleveland is a failed economic state. The largely black community has lost its industry-based jobs.

High Tech Thinking and Low Tech Living

The US dichotomy continues in all areas. In a Silicon Valley where housing is increasingly unaffordable, artificial intelligence, self-driving cars and technological innovation are proposed and advanced as the dire need for reinvestment in the US infrastructure is all too clear everywhere else.

Enhancing both the dichotomy and the pendulum's swing, the convention on its first day featured a speech by Melania Trump, a speech which plagiarized that which Michele Obama gave at the Democratic National Convention in 2008. In thinking about Slovenia, the country from which Melania Trump hails, I noted a few other dichotomies.

Slovenia is a crossroads of empires which has experimented with various economic regimes from Titoism to its unique form of a market economy which is export-driven. I was quite naturally struck by the juxtaposition of ideas implied thereby; the immigrant from an export-driven economy and country which joined NATO and the EU, who marries a man who promotes Brexit and divisiveness among the inhabitants of the US; a man whose anti-globalization and protectionist, anti-free trade policies could launch a new version of the Great Depression or if we're lucky, the Great Recession.

The Abdication and Pendulum of the Left

From "The Popular Revolt Against Globalization and The Abdication of the Left" by Dani Rodrik (from Social Europe):

"But the experience in Latin America and southern Europe reveals perhaps a greater weakness of the left: the absence of a clear program to refashion capitalism and globalization for the twenty-first century. From Greece’s Syriza to Brazil’s Workers’ Party, the left has failed to come up with ideas that are economically sound and politically popular, beyond ameliorative policies such as income transfers."

"Economists and technocrats on the left bear a large part of the blame. Instead of contributing to such a program, they abdicated too easily to market fundamentalism and bought in to its central tenets. Worse still, they led the hyper-globalization movement at crucial junctures."

"The good news is that the intellectual vacuum on the left is being filled, and there is no longer any reason to believe in the tyranny of “no alternatives.” Politicians on the left have less and less reason not to draw on “respectable” academic firepower in economics."

"Consider just a few examples: Anat Admati and Simon Johnson have advocated radical banking reforms; Thomas Piketty and Tony Atkinson have proposed a rich menu of policies to deal with inequality at the national level; Mariana Mazzucato and Ha-Joon Chang have written insightfully on how to deploy the public sector to foster inclusive innovation; Joseph Stiglitz and José Antonio Ocampo have proposed global reforms; Brad DeLong, Jeffrey Sachs, and Lawrence Summers (the very same!) have argued for long-term public investment in infrastructure and the green economy. There are enough elements here for building a programmatic economic response from the left."

"A crucial difference between the right and the left is that the right thrives on deepening divisions in society – “us” versus “them” – while the left, when successful, overcomes these cleavages through reforms that Bridge them. Hence the paradox that earlier waves of reforms from the left – Keynesianism, social democracy, the welfare state – both saved capitalism from itself and effectively rendered themselves superfluous. Absent such a response again, the field will be left wide open for populists and far-right groups, who will lead the world – as they always have – to deeper division and more frequent conflict."

This guest article was written by William Laraque who is the Managing Director of US-International Trade Services.

US eyes were focused on Cleveland last week as the US Republican Convention rolls out.