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■Remanal Street Roots • October 6-12, 2017 Commentary Page 11 The argument for globalization worthy of support A D IK I U A U iu r a BY ROBIN HAHNEL X X ---------------------- C O N T R IB U T IN G C O L U M N IS T I W s long as capitalism is with us, the only solution to this problem is to erect barriers to deter companies from changing location when they are already earning a reasonable rate of return and moving would be detrimental to the communities where they are located. At a fundamental level this means challenging the notion that stockholders should always be free to do whatever they wish. This means distinguishing between a legitimate rate of return and the notion that any rate of return one can achieve is what is fair and legitimate and beyond challenge or rebuke. In the case of monopolies it is an established economic principle that if left to do as they please, stockholders would charge prices and enjoy profits that are unwarranted and unfair. The accepted response is regulation, where regulators restrict prices to yield a fair rate of return lower than what the monopoly would otherwise achieve. We must make the same case about large employers in our communities. If leaving would seriously damage communities where they operate, and if they are making a reasonable rate of return, they should not be free to take advantage of their greater mobility to move abroad to earn an even higher rate of return elsewhere. Just as federal legislation requires an environmental impact review, we can pass legislation that requires a community impact review when companies wish to move operations abroad. Nor is there anything preventing the federal government from passing legislation to authorize a division of the Justice Department to monitor and prosecute U.S.-based firms which want to move plants abroad, just as the anti-trust division of the Justice Department monitors and prosecutes firms for price fixing. A This is the second in a series o f columns addressing the economics o f globalization. You can read the others as they are published at news.streetroots.org. — w f neither the neoliberal globalization peddled by establishment political parties, nor xenophobic protectionism preached by right wing populists like Donald Trump is the answer, what kind of international economic program would serve the interests of the vast majority? It is important to make two things clear at the outset: Only when a greater international division of labor increases global productivity should we allow it to happen: And when there is an efficiency gain from globalization it must be bargaining position: Do you want to keep distributed so as to reduce inequality Robin Hahnel is a your job? Then sign a contract for lower between and within countries. professor o f economics wages and benefits. Because if in our haste to compete emeritus at American Capital has always been more mobile than against right-wing populism we search for a University in Washington, labor, but neoliberal globalization has program which benefits only workers in D. C., faculty affiliate at magnified the difference. In the mid-20th more developed countries we will Portland State University century when unions were organizing unnecessarily betray fundamental principles and co-director o f workers in the Northeast and Midwest, they of fairness and lose global allies. economics fo r Equity and only had to worry about companies picking Fortunately, the global economy can be the Environment. up and moving to the South where there reorganized to benefit majorities in both were no unions and wages were lower. Now more and less developed countries. unions anywhere in the U .S . must worry It is also important to focus attention that if they do not capitulate to employer where it is most needed: ultimata, companies that are even more International finance and direct foreign footloose will pick up and move to Mexico investment are far more responsible for Street Sm art Economics is a periodic series written or China where wages are even lower than current problems than international trade. for Street Roots by professors emeriti in economics. the depressingly low U .S . minimum wage. Reformers need to focus on these culprits Read related columns at news.streetroots.org On D e c.l, less than a month after and not be distracted by the media and Unfortunately, as we discovered in 2008, becoming president-elect, Donald Trump politicians who invariably frame the the dog is the real economy where the rest announced to great fanfare that he had met discussion as a debate about trade policy. of us live and work. Similarly, when properly with Carrier, a unit of United Technologies, Over a 30-year period the U .S . regulated, international financial investment and convinced them to keep 1,100 jobs in government weakened and removed can promote global efficiency gains. But Indiana that they had previously scheduled regulations on the mortgage industry, the when left to its own devises theory predicts to move to Mexico. The number of jobs insurance industry, the rating industry, and - and experience confirms - that saved turned out to be only 730 as 1,873 the banking industries in the U S. The international debt and currency crises will jobs were still lost, and the concession to financial crisis of 2008 which spread from follow. The historic task of the IM F when keep 730 jobs in Indiana was made only the U S to Europe was the predictable founded was to help country governments after the state of Indiana, where Vice result. And just as the financial crisis of regulate and manage international financial President-elect Mike Pence was still 1929 triggered the “Great Depression” of capital flows so as to avoid debt and governor, promised Carrier an additional tax the 1930s, the financial crisis of 2008 currency crises. Unfortunately beginning in break of $7 million. One has to wonder if triggered the “Great Recession” from which the 1980s, the IMF, at the insistence of the the 730 who kept their jobs would not have Europe has yet to recover. U .S . Department of the Treasury, has preferred to simply receive a payoff of Safeguards put in place after World War II pressured countries to abandon capital $96,000 each ($7,000,000 divided by 730)! to prevent international financial crises, controls. Unless new capital controls But it was not improper for a U .S. however, they were eliminated when the suitable to 21st century conditions are president to try to intervene to save finance industry was deregulated. So established, we will continue to live in fear American jobs. The problem was that restoring prudent regulation of international of the next international financial crisis. Trump’s claims of success were over as well as domestic finance before another exaggerated and deceptive. The problem crisis erupts is the first order of business. was that what he achieved was a drop in the Properly regulated, the financial industry hen capital is free to pick up and move bucket rather than a systematic approach to can provide a useful service and help the plant and machinery to any country saving significant numbers of jobs. The real economy perform better. But when where wages are lower - while labor is not problem was that it was merely a publicity unregulated, the financial industry becomes free to migrate to any country where wages stunt by our self-declared “great negotiator.” the tail that wags the dog - to its own are higher - labor is put in an untenable delight, but to the detriment of the dog. The Carrier gas furnance plant in Indianapolis, Indiana was the center of global regulation arguments when President- Elect Donald Trump said he saved the jobs from moving to Mexico. Carrier is in the process o f moving the production and most of the jobs to Mexico, but did preserve around 800 positions after receiving $7 million in tax breaks from the state.
