Let's talk about "globalization," whatever the fuck it means (totally different things to, say, Thomas Friedman and Noam Chomsky)

1. We Are Globalized, But Have No Real Intimacy with the Rest of the World
Increased contact with other countries has led many to believe that the western model should be applied everywhere
by Martin Jacques

I have just read Ruth Benedict's The Chrysanthemum and the Sword. It is a classic. Published in 1947, it analyses the nature of Japanese culture. Almost 60 years and many books later, it remains a seminal work. Like all great works of scholarship, the book manages to transcend the time and era in which it was written, aging in certain obvious respects, but retaining much of its insight and relevance. If you want to make sense of Japan, Benedict's book is as good a place to start as any. Here, though, I am interested in the origins and purpose of the book.

In June 1944, as the American offensive against Japan began to bear fruit, Benedict, a cultural anthropologist, was assigned by the US office of war administration to work on a project to try and understand Japan as the US began to contemplate the challenge that would be posed by its defeat, occupation and subsequent administration. Her book is written with a complete absence of judgmental attitude or sense of superiority, which one might expect; she treats Japan's culture as of equal merit, virtue and logic to that of the US. In other words, its tone and approach could not be more different from the present US attitude towards Iraq or that country's arrogant and condescending manner towards the rest of the world.

This prompts a deeper question: has the world, since then, gone backwards? Has the effect of globalization been to promote a less respectful and more intolerant attitude in the west, and certainly on the part of the US, towards other cultures, religions and societies? This contradicts the widely held view that globalization has made the world smaller and everyone more knowing. The answer, at least in some respects, is in the affirmative - with untold consequences lying in wait for us. But more of that later; first, why and how has globalization had this effect?

Of course, it can rightly be argued that European colonialism embodied a fundamental intolerance, a belief that the role of European nations was to bring "civilized values" to the natives, wherever they might be. It made no pretense, however, at seeking to make their countries like ours: their enlightenment, as the colonial attitude would have it, depended on our physical presence. In no instance, for example, were they regarded as suitable for democracy, except where there was racial affinity, with white settler majorities, as in Australia and Canada. In contrast, the underlying assumption with globalization is that the whole world is moving in the same direction, towards the same destination: it is becoming, and should become, more and more like the west. Where once democracy was not suitable for anyone else, now everyone is required to adopt it, with all its western-style accoutrements.

In short, globalization has brought with it a new kind of western hubris - present in Europe in a relatively benign form, manifest in the US in the belligerent manner befitting a superpower: that western values and arrangements should be those of the world; that they are of universal application and merit. At the heart of globalization is a new kind of intolerance in the west towards other cultures, traditions and values, less brutal than in the era of colonialism, but more comprehensive and totalitarian.

The idea that each culture is possessed of its own specific wisdom and characteristics, its own novelty and uniqueness, born of its own individual struggle over thousands of years to cope with nature and circumstance, has been drowned out by the hue and cry that the world is now one, that the western model - neoliberal markets, democracy and the rest - is the template for all.

The new attitude is driven by many factors. The emergence of an increasingly globalized market has engendered a belief that we are all consumers now, all of a basically similar identity, with our Big Macs, mobile phones and jeans. In this kind of reductionist thinking, the distance between buying habits and cultural/political mores is close to zero: the latter simply follows from the former. Nor is this kind of thinking confined to the business world, even if it remains the heartland. This is also now an integral part of popular common sense, and more resonant and potent as an international language because consumption has become the mass ideology of western societies. The fact that television and tourism have made the whole world accessible has created the illusion that we enjoy intimate knowledge of other places, when we barely scratch their surface. For the vast majority, the knowledge of Thailand or Sri Lanka acquired through tourism consists of little more than the whereabouts of the beach.

Then there is the phenomenon of Davos Man, the creation of an overwhelmingly western-weighted global elite, which thinks it knows all about these things because it describes itself as global and rubs shoulders on such occasions with a small number of hand-picked outsiders. Nor should we neglect its media concomitant, the commentariat - columnists who wax lyrical on these things even if their knowledge of the world is firmly bounded by the borders of the west. A couple of days at a conference in Egypt, India or Malaysia makes instant experts of them. So is much of modern western opinion made.

The net effect of all this is a lack of knowledge of and respect for difference. Globalization has obliterated distance, not just physically but also, most dangerously, mentally. It creates the illusion of intimacy when, in fact, the mental distances have changed little. It has concertinaed the world without engendering the necessary respect, recognition and tolerance that must accompany it. Globalization is itself an exemplar of the problem. Goods and capital may move far more freely than ever before, but the movement of labor has barely changed. Jeans may be inanimate, but migrants are the personification of difference. Everywhere, migration is a charged political issue. In the modern era of globalization, everything is allowed to move except people.

After three decades of headlong globalization, the world finds itself in dangerous and uncharted waters. Globalization has fostered the illusion of intimacy while intolerance remains as powerful and unyielding as ever - or rather, has intensified, because the western expectation is now that everyone should be like us. And when they palpably are not, as in the case of the Islamic world, then a militant intolerance rapidly rises to the surface. The wave of Islamophobia in the west - among the people and the intelligentsia alike - is a classic example of this new intolerance. When I wrote a recent article for these pages on the Danish cartoons, arguing that Europe had to learn a new way of relating to the world, I got nearly 400 emails in response. Over half of these were negative and many were frightening in their intolerance, especially those from the US, which were often reminiscent in their tone to the worst days of the 1930s.

We live in a world that we are much more intimate with and yet, at the same time, also much more intolerant of - unless, that is, it conforms to our way of thinking. It is the western condition of globalization, and its paradox of intimacy and intolerance suggests that the western reaction to the remorseless rise of the non-west will be far from benign.

(Martin Jacques is a senior visiting research fellow at the Asia Research Institute, National University of Singapore. martinjacques@aol.com)

2. From Yale Global

Activists are not alone in grumbling about globalization. Financial crises in Latin America, government restrictions of foreign takeovers in Europe, increased outsourcing of both blue- and white-collar jobs in the US, and potential loss of social benefits in all countries have increased anxiety about globalization in recent years. Even supporters of globalization wonder if the process could hit a limit and then collapse. Economies tend to become insular when trouble hits, and the early 20th century offers lessons for analyzing globalization’s future. After the First World War, nations withdrew from trade, and economic policies resulting in uneven distribution of prosperity led to the financial crash of 1929. Modern financial institutions are less fragile than those of the late 1920s. However, modern globalization has a contradictory quality that poses dangers, contends author Thomas Palley. The current economic system depends on massive consumption, yet encourages companies to escape from communities or countries with high social-benefit costs. Polices that deregulated the financial markets mask stagnant wages and allow the consumption to continue. But those policies lead to excessive debt that has essentially hollowed out the middle-class, and the consumption cannot last without some increase in wealth. A weakened middle class with massive debt could produce another economic crash, warns Palley, and many critics will blame free trade and globalization. He analyzes possible responses to such a crisis, all of which challenge the elite. To both maintain globalization and support a social democratic mass-consumption economy, Palley recommends a new domestic and international system of rules to reduce extreme economic inequality.

3. Could Globalization Fail?
Policies that spawn economic inequality rather than free trade could bring about an economic crisis
Thomas Palley

WASHINGTON: Around the world there are growing rumbles about globalization, and these rumbles are not confined to activist anti-globalization movements. In East Asia, the financial crisis of 1997 left a jaundiced sense of globalization, though robust economic recovery has tempered that. Globalization’s standing has also been badly damaged in Latin America by the meltdown of the Argentine economy in 2000 and successive financial crises in Brazil in 1999 and 2001. In Europe, new fear about globalization is surfacing in a range of countries. In Poland it has taken the form of concern about foreign capital taking over the Polish banking system, and foreign takeover fears also permeate France and Italy. In France and Germany, working people link globalization with pressures to dismantle the social democratic state.

Among Americans, outsourcing of service-sector jobs has become a top concern, possibly the top concern. Opposition to free trade has crept up the income and social-strata ladder to include educated white-collar workers. This new opposition comes on top of existing resentments among blue-collar workers at the loss of well-paying manufacturing jobs.

These developments have raised concerns about the durability of globalization among its supporters. In April 2005, Martin Wolf of “The Financial Times” gave a lecture titled “Will Globalization Survive?” at Washington's prestigious pro-globalization Institute for International Economics. More recently, Harvard professor Jeffry Frieden published a new book, “Global Capitalism: Its Fall and Rise in the 20th Century,” featured at a recent International Monetary Fund book forum. Frieden supports globalization, yet the final section of his book is titled ‘Global Capitalism Troubled,” and he ruminates on the possibility that, like the globalization of the 19th century, today's globalization may falter.

Looking back to the history of what some historians call the “first globalization” can be highly instructive. However, one problem is an implicit tendency to identify its end with the beginning of World War I in 1914. This is wrong, and contributes to historical misunderstanding that impedes understanding today's globalization.

The first globalization ended with the Wall Street Crash of 1929 and the ensuing Great Depression. That said, WWI was hugely significant because it permanently transformed political conditions. Consequently, when the economic order collapsed in 1929, the response was profoundly affected by the political conditions created by WWI. In the US, Britain and France, the war created political and social conditions that fostered a turn to social democracy. In Germany, the onerous economic burdens of the 1919 Treaty of Versailles fostered a turn to Nazism.

This history has enormous significance for understanding today's predicament. The first lesson is that politics did not bring down the first globalization, which suggests that politics will not bring down today's globalization. The economic crisis of 1929 brought down the first globalization, suggesting that economic crisis will bring down today's globalization. The second lesson is that whereas political developments preceding 1929 did not cause the crash, they mattered enormously for the international response. That too is critical for today.

Governments substantially recreated the pre-war economic system after World War I. Britain and France held on to their empires, and the 1920s saw a revival of international trade and investment whereby trade exceeded peak pre-1914 levels. Technological innovation flourished in the form of automobiles, airplanes, and consumer durables, and Britain returned to the gold standard in 1926.

However, as with the pre-1914 system, the reconstructed system distributed prosperity extremely unevenly. In the US, wealth and income inequality grew during the “roaring twenties.” In Britain, the industrial midlands and north suffered from persistent stagnation because of an overvalued exchange rate. And prosperity simply bypassed Germany. Additionally, there was a popular turn to isolationism in response to the carnage wrought by the war. The system was therefore unpopular, and consequently it had few defenders when the crash came. That lesson holds for the current globalization, which is also unpopular and feared.

The so-called first globalization crashed because of inherent financial fragility. Banking systems lacked modern safety nets such as deposit insurance and lenders of last resort, and the gold standard was also intrinsically fragile because countries could demand payment in gold. Consequently, the system was vulnerable to panics, and the danger increased as financial markets and banking systems grew because the supply of gold, the backing asset, was fixed. Once panic started, it was near impossible to stop. Banking systems collapsed, bankruptcy and deflation set in, and the rest is history.

This history suggests that if today's globalization crashes it will also be because of economic factors, but those factors will differ from the past because the system is different. The New Deal era created a system that remedied earlier financial fragility by restricting private ownership of bullion, and creating deposit insurance and lenders of last resort. It also created a new social democratic mass consumption economy in which income was more broadly shared owing to unionization, minimum wages, and social security provisions. However, a social democratic mass consumption economy is expensive for individual capitalists, giving them an incentive to evade its costs. That has been a driving force behind globalization since 1980, and that is the contradiction in today's system.

Business has a private incentive to escape the system to countries with lower costs. Yet, it still needs mass consumption. The system needs a solid middle class, but is also driven to hollow out that middle class. This contradiction has been papered over by consumer borrowing provided by deregulated financial markets and a 25-year asset price boom. The problem is that such borrowing risks prove unsustainable if incomes are hollowed out, and that could stop the economic merry-go-round. If that stoppage produces an economic crash, globalization may crash, too. Globalization will lack political support, after being a primary cause of a hollowed-out middle class.

The pattern of retreat is difficult to predict. One possibility is a return to a world of tariffs and quotas. A second response may be the emergence of regional trade and investment blocs. A third response that would preserve globalization would be the establishment of new domestic and international rules that support a social democratic mass consumption economy. All three scenarios challenge today’s elite’s program.

Finally, if the global economy crashes, it will be important to correctly identify the economic causes. The Smoot-Hawley tariff was passed in June 1930. Its economic effects were minor for the US given the pre-existing high tariff structure and the minimal extent of US engagement in trade. Indeed, those effects may even have been beneficial in that spending switched from imports to domestically produced goods. Yet, for 75 years, free traders have sought to blame Smoot-Hawley for the Depression and thereby make a case for free trade. The rooster crows at dawn, but does not cause the sunrise. Smoot-Hawley did not cause the Depression. Likewise, trade stalemate and failure of the Doha trade round will not cause the next economic crisis. However, they may coincide, in which event rest assured that globalization boosters will argue causation.

(Thomas Palley runs the Economics for Democratic and Open Societies Project, and is the former chief economist of the US-China Economic & Security Review Commission. He is the author of "Plenty of Nothing: The Downsizing of the American Dream and the Case for Structural Keynesianism,” Princeton University Press, (1998). His writings can be found at www.thomaspalley.com)