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Global Is as Global Does? | The Nation

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Global Is as Global Does?

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One of the shortcomings of the Bretton Woods system was the failure to give labor a voice in determining the policies of the international institutions. Kapstein describes how the participants at Bretton Woods had sought to establish an International Trade Organization alongside the World Bank and IMF. The ITO was to be concerned with the relationship between trade and labor. In 1946, according to Kapstein, "the United States and its allies were pursuing a 'two-track' trade policy at this time. On a separate track, negotiators were working on the General Agreement on Tariffs and Trade, whose simple purpose was to achieve multilateral agreement on trade-barrier reductions. This was meant to be a temporary instrument, and upon its establishment, the ITO would subsume the GATT's functions, as well as tackle the broader issue of trade and employment."

About the Author

Mark Levinson
Mark Levinson is the chief economist at the Union of Needletrades, Industrial and Textile Employees (UNITE) and the...

But the ITO was not to be. By the late forties the cold war was in full gear. Economic policy was increasingly couched in terms of the capitalist/communist struggle. The business community in the United States was able to use this to stop the ITO. For example, the National Foreign Trade Council, a business lobbying group, asserted that the ITO "would operate inexorably to transform the free enterprise system of this country into a system of planned economy, with consequent initiative-destroying regimentation, reduction in productive output and standards of living, and threat to the free institutions and liberties of the American people."

By 1950, realizing that the ITO would not pass, the Truman Administration withdrew the charter from Congressional consideration. According to Kapstein, "The failure to create the ITO thus meant that issues of trade and employment would not be formally joined at the level of international institutions. Instead, labor would have to rely upon the International Labor Organization to advance its objectives in multilateral discussions. Given the relative inefficacy of that organization, the practical result was that labor's voice was effectively stilled in discussion and debate over international economic policy."

In response to the collapse of the Bretton Woods system in the early seventies and the resulting bouts of inflation, governments everywhere retreated from full employment. Corporations searched the globe for the lowest wages, taxes and environmental standards. Countries sought to "compete" by keeping production costs as low as possible. Low wages, the abandonment of regulations and a scaling back of redistributive taxes and expenditures are now seen as the keys to national prosperity. Poor countries that refuse to follow these policies lose their access to international sources of capital; rich ones suffer capital flight.

Unemployment rates increased in the United States and Europe, growth in real wages slowed and in the United States real wages never returned to the peak levels reached in the early seventies. Markets grew more slowly; workers and plants were idled. The competition among the world's manufacturers for the remaining market niches intensified. The result is growing economic disparity both between and within nations. Between nations, grotesque inequalities between rich and poor countries worsen. Within nations the fates of rich and poor diverge. In the United States, Kapstein worries about the danger of "an apartheid economy."

This world order is not a stable one, as demonstrated by the Latin American debt crisis in the eighties, Mexico's in the mid-nineties and East Asia's in the late nineties. The world economy suffers from chronic problems of oversupply and weak demand, speculative bubbles and collapses on its volatile financial exchanges.

So what is to be done? Kapstein offers a catalogue of proposals. A few of them--urging companies to adopt codes of conduct and individuals to buy from socially responsible firms--are lame. Others--rejecting protectionism, investing in education and training--are conventional. But some--creating public-sector jobs, linking trade with worker rights, increasing supervision of multinational enterprises and insuring that the IMF and World Bank are sensitive to equity considerations--are truly meaningful. This last set of proposals not only differentiates Kapstein from the mainstream consensus that trade policy should simply focus on opening up markets and assume that all will then be well, but it also points the way to a different global economy, one that would benefit workers and not undercut labor, environmental and other social protections.

While Kapstein argues for economic policies that are sensitive to the concerns of working people, he is aware that the United States has other priorities:

Washington has delinked trade from human rights issues in China; blindly supported the interests of multinational corporations in the World Trade Organization while doing little to promote core labor standards; and continued to support bankrupt regimes from Russia to Indonesia. It has reduced foreign-aid spending to a pittance, and the vast bulk of those funds go to support military-equipment transfers. This country has done everything to protect mobile capital, little to support immobile labor.

The WTO meeting in Seattle will demonstrate that the rule-makers for the global economy are not pursuing pro-worker policies. In fact, they are moving in the opposite direction. But ultimately they must address the question posed by Kapstein: "If our economic policies do not help working people enjoy a decent way of life, and instill hope for a better future, what is the point?"

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