Globalization in Your Face: A New Book Humanizes Global Captialism

For example, concerns over trade and incoming foreign direct investment (FDI) provoked the poor countries' battle cry from the 1950s through the 1970s: that "international integration leads to national disintegration" (in the words of Chilean intellectual Osvaldo Sunkel). And the "benign impact" models that economists espoused -- which portrayed international trade and direct investment as mutually beneficial for all countries involved -- were replaced by contrary and deeply pessimistic approaches. "Malign impact" models fretted that interaction with the "center" countries would harm the economies of the "periphery" (the developing world). Other "malign impact" arguments contended that the periphery was being put at political risk through an unwitting loss of sovereignty to rich nations and their corporations (the celebrated dependencia thesis of the then-sociologist and now Brazilian president, Hernando Cardoso). And "malign intent" models of neocolonialism asserted that globalization of trade, aid, and investments was no more than a calculated reimposition of colonialism by other means.

These arguments should sound familiar to anyone watching the news today. If the poor countries once worried about the outflow of their skilled -- the brain drain -- to the center, scholars like George Borjas and Orlando Patterson and the unions now fear the inflow of the unskilled from the periphery. Poor countries once worried that trade with the center would harm their nascent industrialization and development; today, trade with the periphery strikes terror in the hearts of the center's unions, who believe their wages will be reduced to Chinese levels. Whereas the periphery once resisted the inflow of FDI, rich-country unions now resist its outflow. If the periphery once opposed being dominated by the center, the center now fears losing its identity to the periphery. And the examples run on.

CLUELESS

In the face of these cascading complaints, today's rich-country antiglobalists must be taught the same lesson before damage is done -- what the poor-country antiglobalists had to learn painfully years ago from the policy choices dictated by their doctrines. And since there is almost always a morsel of wheat underneath the abundance of chaff, the residual, legitimate complaints of the antiglobalist camp must also be addressed. The energy that drives the antiglobalist campaigns stems from four different types of fallacies.

THE FALLACY OF AGGREGATION

Micklethwait and Wooldridge's account excellently describes how globalization raises many diverse issues, including culture, national identity, and economic organization (e.g., whether big corporations will displace the small mom-and-pop outfits). It is particularly fascinating when it describes in loving detail the growing tribe of "cosmocrats" -- graduates of rapidly homogenizing business schools who circumnavigate the globe with cell phones and laptops, our noisy neighbors on planes and trains like a throwback to the "ugly Americans" of yesteryear. They aptly note that the gulf, indeed the chasm, that separates these ceaselessly orbiting elites from their own local communities creates tensions that feed the antiglobalist paranoia.

But they fail to emphasize that globalization attracts gratuitous criticism because few care to analyze its anatomy. That failure, which leads critics to commit the fallacy of aggregation by visiting the sins of one type of globalization on all others, is most manifest in the reactions to the Asian financial crisis. It has been widely assumed that if freedom of capital flows had caused a devastation in Asia, free trade must be judged a mortal peril as well. But as every serious student of globalization knows, important similarities exist among freer trade, freer capital flows, and freer migration. Yet there are also striking dissimilarities, both economic and political. For example, it would be fanciful to imagine that free trade could lead to the kind of upheavals wreaked by financial liberalization.

THE FALLACY OF MISASSIGNED BLAME

The antiglobalists also make the mistake of attributing to globalization the blemishes of other faces. To take the most telling example, many workers and unions fear that the deterioration, then stagnation, of unskilled workers' real wages in the 1980s and early 1990s resulted from trade and foreign investment. That would appear to be another black mark against globalization -- except that the argument cannot be sustained. Most of the empirical work of the last decade suggests that trade with the poor countries has not produced paupers in our midst. Marx, who wrongly predicted the proletariat's immiseration in the nineteenth century, is not striking again courtesy of globalization. Recent work suggests that trade may have moderated, rather than accentuated, the decline in real wages (especially in the 1980s) that other factors such as unskilled-labor-saving technical changes were forcing.

This tendency to blame globalization for the evils of the world that are attributable to other causes is evident all too often. The literature of the radical groups in Mexico's Chiapas, which has endured poverty for more than a century, would have one believe that the 1993 North American Free Trade Agreement had much to do with it instead.

THE FALLACY OF THE WRONG QUESTION

Then again, some critics ask the wrong question. The United Nations Development Program and the World Bank have fallen prey to repeating endless condemnatory variations on the theme that globalization has led to greater income inequality. But even if such a causal relationship could be established -- and it has not been -- they do not explain why should it matter, given that inequality's consequences will differ hugely across countries, from negative to positive effects.