■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.