A Challenger to the Church of Free Trade (by William Greider for the Nation, via AlterNet)

A Challenger to the Church of Free Trade

By William Greider, The Nation. Posted April 23, 2007.



An unlikely dissident from the Ivy League's economic establishment has come forward with a proposal to reform globalization.

The church of global free trade, which rules American politics with infallible pretensions, may have finally met its Martin Luther. An unlikely dissenter has come forward with a revised understanding of globalization that argues for thorough reformation. This man knows the global trading system from the inside because he is a respected veteran of multinational business. His ideas contain an explosive message: that what established authorities teach Americans about global trade is simply wrong -- disastrously wrong for the United States.

Martin Luther was a rebellious priest challenging the dictates of a corrupt church hierarchy. Ralph Gomory, on the other hand, is a gentle-spoken technologist, trained as a mathematician and largely apolitical. He does not set out to overthrow the establishment but to correct its deeper fallacies. For many years Gomory was a senior vice president at IBM. He helped manage IBM's expanding global presence as jobs and high-tech production were being dispersed around the world.

The experience still haunts him. He decided, in retirement, that he would dig deeper into the contradictions. Now president of the Alfred P. Sloan Foundation, he knew something was missing in the "pure trade theory" taught by economists. If free trade is a win-win proposition, Gomory asked himself, then why did America keep losing?

The explanations he has developed sound like pure heresy to devout free traders. But oddly enough, Gomory's analysis is a good fit with what many ordinary workers and uncredentialed critics (myself included) have been arguing for some years. An important difference is that Gomory's critique is thoroughly grounded in the orthodox terms and logic of conventional economics. That makes it much harder to dismiss. Given his career at IBM, nobody is going to call Ralph Gomory a "protectionist."

...(snip)...

As this shift of productive assets progresses, the downward pressure on US wages will thus continue and intensify. Free-trade believers insist US workers can defend themselves by getting better educated, but Gomory suggests these believers simply don't understand the economics. "Better education can only help," he explains. "The question is where do you put your technology and knowledge and investment? These other countries understand that. They have understood the following divergence: What countries want and what companies want are different."

The implication is this: If nothing changes in how globalization currently works, Americans will be increasingly exposed to downward pressure on incomes and living standards. "Yes," says Gomory. "There are many ways to look at it, all of which reach the same conclusion."

I ask Gomory what he would say to those who believe this is a just outcome: Americans become less rich, others in the world become less poor. That might be "a reasonable personal choice," he agrees. "But that isn't what the people in this country are being told. No one has said to us: 'You're probably a little too rich and these other folks are a little too poor. Why don't we even it out?' Instead, what we usually hear is: 'It's going to be good for everyone. In the long run we're going to get richer with globalization.'" .....(more)

The complete piece is at: http://www.alternet.org/story/50529/?page=1

are ignoring. The more workers in a labor pool the cheaper the labor. The fewer workers in a labor pool the more expensive the labor. When you "globalize" you labor pool, you are expanding the labor market of developed countries by including: child labor, slave labor, prison labor, indentured servitude and subsistence labor. In a labor market like this, everyone's wages drop to the lowest paid wages and that would be slavery. There is no other way around it, unless you regulate out some of those labor pools.

Everyone who currently has wealth can get wealthier by using this expanded labor pool at very, very, little cost. Everyone who is currently not wealthy has to join this expanded labor pool for very, very low wages.

There is reason why "sweepers" is the most common job for women in the non-agriculture sector in India right now.

Glad to see that Ralph Gomory has seen the logic.

But if you want Democracy and economic upward mobility, you have to regulate it. Capitalism is a form of economics that works in dictatorships, feudalism, monarchies and democracies. It is separate and distinct from forms of governments. Capitalism does nothing to promote Democracy.

or out of the mainstream. Economically dominant nations being surpassed by their "inferior" trading partners has happened so often it should be a cliche. As recently as the 70s, today's consensus was consdiered eccentric.

Now, the economic explosion of China and India should have erased any doubts about the power of free trade. But that seems to have blinded our political leaders to the "downward pressures on income and living standards" in this country. Nobody is minding the store anywhere or making any serious plans to correct the negative effects.

The recommendations in Gomory book seem to be very sensible. I am encouraged to hear that they can be done within the framework of the WTO. It would be a shame to throw the baby out with the bathwater.

I have not read Greider's latest book, but I hope he gets tons of publicity and a voice in the next administraion. To anyone who hasn't, his books on the Federal Reserve and on globalization are wonderful. His archive is worth looking at.