Ethicist Thomas Pogge talks on global poverty. (Flickr/Pontificia Universidad)
For three decades, the Institute for International Economics in Washington has been enormously influential as an intellectual home base for globalization. The think tank is nonpartisan, but closely aligned with business and finance multinationals that provide generous funding. A few years ago, its name was changed to the Peterson Institute, honoring its founding chairman and leading benefactor, billionaire Pete Peterson, who is better known for his long-running crusade against Social Security and Medicare.
Whenever you read about the thousands of jobs promised by a new trade agreement, supporting evidence was very likely generated by economists at the Peterson Institute. The fact that these “studies” regularly turned out to be wildly exaggerated or flat wrong has not deterred experts from churning out more dubious assertions.
The debate over NAFTA in 1992 was perhaps the most notorious example. Ross Perot, the independent presidential candidate, was ridiculed and effectively discredited for calling “free trade” globalization a “giant sucking sound” that would wipe out millions of American jobs. Perot, it turns out, was right. So were American working people who complained bitterly that so-called “free trade” was hollowing out the middle class and driving down industrial wages.
The Peterson Institute, so far as I know, never confessed error—but its new leadership is implicitly acknowledging the damage and inviting critics it has long ignored into the high-brow policy discussions. It was something of a shock to attend an all-day conference at the Institute, on January 7, where twenty academic economists and policy thinkers delivered papers. The subject was “ethics and globalization.” Ethics? What’s ethics got to do with it? Quite a lot, the Institute belatedly asserted.
Indeed, some of the speakers offered policy reforms that could have been drawn from The Nation magazine. Other speakers described the global system in deep trouble and warned of popular rebellion here and abroad if things are not changed. Having lost confidence in the trading system’s promises, many are turning to national governments to save them from global capitalism.
Howard Rosen, a visiting fellow at Peterson and ex-staff director of Congress’s Joint Economic Commmittee, enumerated the negative consequences of the last generation and concluded: “To my mind, this amounts to international trickle-down economics.”
Rosen recommended a list of reforms that includes a global minimum wage, industrial wage increases linked to productivity gains, unemployment insurance, adoption of international labor standards that encourage unionization and commitments by the World Bank and other international financial institutions to require nations to accept these reforms as a condition for getting loans.
Thomas Pogge, professor of law and international affairs at Yale, added to the indictment. “Who are the beneficiaries of the last 25 years?” he asked. “Not the global poor but the global rich.” The system has generated “a tremendous concentration of wealth,” he said, created by the rich nations in league with global organizations like the World Trade Organization.
As Pogge explained, tax abuse and intra-company pricing—which allows multinationals to book income in countries with the lowest tax rates—ensure that both rich and poor countries will be robbed of wealth and resources. The subsidies paid to commodity producers like advanced agriculture in the United States ensure that they will wipe out the small-scale farmers in developing poor nations. The stringent patent rights that trade rules grant to drugs and other products create the monopolies that crush infant competitors elsewhere in the world.
Economist David Branchflower of Dartmouth spoke ominously about the “scarred workers,” both young and old, who will never recover from the lack of jobs. The working class in Europe is “smoldering,” with potential rebellion, he warned, and he said something similar may occur in the United States.
Kimberly Ann Elliot of the Center for Global Development argued for suspending all tariffs on garments imported from very poor nations as the best way to improve the horrendous working conditions at the bottom. In Pakistan, a garment factory fire in September killed 289 workers, the worst industrial fire in the history of capitalism. Walmart purchased the factory’s output and sold it to Americans, but claimed not to know it was imposing life-threatening risks on the workers [1].
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Elliot sees little hope that multinational companies like Walmart will change these deadly practices on their own. “I don’t think the multinationals really are taking responsibility,” she said. “They are trying to protect their reputation—but fundamentally they aren’t changing their buying behavior.”
For many years, these accusations have been made against the global system—but they are still largely ignored by the multinational establishment and by the politicians who have approved the numerous trade agreements. From NAFTA to the WTO, these agreements are thick with protections for capital investors who build production in foreign countries, while the rules meant to protect workers and citizens from abusive corporations are either meaningless or nonexistent.
The Peterson Institute’s conference may signal a promising change in direction, though skeptics are entitled to doubt it. At least the debate is beginning to acknowledge inhumanities that the global establishment long ignored or explained away. Better late than never, one hopes. An old political friend told me after the conference, “This is a significant signal that will make a difference.” The message he got was that global industries must accept the obligation to pay attention to equity. By giving a platform to reform voices like Rosen and Pogge alongside the standard defenders of globalization, the Peterson Institute was inviting realism into the debate.
Peterson Institute’s new president—former Fed economist Adam Posen—may be responsible for this. He chose “ethics” as the focus for the first Institute conference since he became president. “It is a substantive intent on my part to broaden the perspectives and add to our already existing focus on distributional issues,” Posen said. “I took a strong hand in setting up the conference agenda and speakers.”
Posen knows the political foundations of globalization are in trouble. “One of the alarming effects of the global financial crisis has been the widespread erosion of confidence in capitalism itself,” Posen wrote recently. Government can change policy, he said, but only business can restore the faith by changing its own behavior.
Posten’s course correction at least offers an opening for critics. They should seize the opportunity and renew the worldwide campaign for reform principles they have been articulating for many years. People will be able to see soon enough whether the establishment’s change is real or simply an adjustment in public relations. Meanwhile, the global establishment is wobbly and vulnerable. Business is unlikely to get well politically unless it really does change.
For more on the global neoliberal consensus, read Amy Wilentz’s dispatch [3] from Haiti in the most recent issue of The Nation.