Review of books about globalization
Par Henri Astier
First time published in the Times Literary Supplement on the 18th of March, 2005
Version augmentée par rapport à celle publiée dans le TLS.
- Jagdish Bhagwati, In Defense of Globalization, New York, Oxford University Press, 308p, $28, £19.99, ISBN 0-19-517025-3
- Martin Wolf, Why Globalization Works, New Haven and London, Yale University Press, 398p, £19.99, ISBN 0-300-10252-6
- Jean-François Bayart, Le gouvernement du monde. Une critique politique de la globalisation, Paris, Fayard , 448p., €24, ISBN 2-213-61653-1
- Daniel Cohen, La mondialisation et ses ennemis, Paris, Grasset, 264p., €18, ISBN 2-246-66401-2
The debate over globalization in most countries is reminiscent of the debate over Darwinism in America. In both cases there is a yawning gap between basic knowledge and public discussion. That life is billions of years old and has evolved though natural selection is among the best-established facts in science. It is supported by rigorous theory and overwhelming evidence. Biologists disagree on many things, but they agree on this. Yet in US politics evolution is hugely controversial. American newspapers routinely describe the Darwinian orthodoxy as an idea under fire.
The storm over globalization also has a baffling dynamic of its own. That trade brings wealth and that a country hurts itself by blocking imports is among the best-established ideas in the social sciences. It is supported by rigorous theory and overwhelming evidence. Yet all over the world this idea is regarded as hugely controversial. Rich countries view cheap foreign goods as a threat to jobs and living-standards. The growing tendency of Western companies to move production and administrative tasks overseas — “outsourcing” — is seen as doubly destructive: capital is being sucked out of decent domestic industries, to help set up sweatshops in poor countries.
The media describe the free-trade orthodoxy as an idea under fire. But the bedrock of this idea, David Ricardo’s law of comparative advantage (which shows why it makes sense even for countries with no natural advantage to specialise and exchange), has never been credibly challenged. You would not suspect this from reading newspapers, which tend to misrepresent academic debates on trade. Sceptics like Nobel laureates Paul Samuelson and Joseph Stiglitz are routinely billed as representatives of a surging anti-globalization movement among economists. But the argument is over the size of the benefits from trade, not their existence. Neither Samuelson nor Stiglitz has set out to refute Ricardo; both condemn protectionism.
What we have is a case of “wasted knowledge”, as the French philosopher Jean-François Revel called the failure of known facts to inform public debate (1). Faced with this muddle, what should economists do? Most let the world rant and focus on serious campus work, in the hope that some students will remember the basics beyond graduation. But for thick-skinned academics, joining the fray has its attractions. Those who rubbish trade have such weak arguments are so weak that intellectual supremacy is assured. This is not enough to win in the public sphere, of course, but an economist who writes with wit can help set the record straight and become famous in the process, as Paul Krugman did in the mid-1990s (2).
Krugman, now a celebrity columnist, has spawned a new genre: books by economically-literate writers refuting misconceptions about globalization. Three of the books under review fall into that category. The fourth, a brave attempt to challenge the critics without resorting to economics, raises interesting issues of its own.
At this point, some clarification is needed. The word “globalization” means many things — from the freer flow of goods, to falling communication costs, increasing ease of travel and cultural cross-pollination. “Anti-globalists” have nothing against many of these. They thrive on communication technology and laudably embrace other cultures. Moreover, their creed is rooted in Marxism, an internationalist doctrine. What they oppose is market-driven, or liberal, globalization. A world united under benevolent guardians apportioning resources would suit them fine. French activists call themselves altermondialistes, signalling not their opposition to globalization, but their wish for a different kind. English equivalents, such as “anti-globalist”, should be used with this proviso in mind.
Jagdish Bhagwati, a top-notch economist who teaches at New York’s Columbia University, has long sought to enlighten the public debate. He writes regularly for newspaper to explain the benefits of globalization. His latest book pulls together the various aspects of the case in a compact volume aimed at the general reader. The point of In Defense of Globalization is two-fold: to uphold the orthodoxy on trade and to warn against dangerous new trends in global policy.
The orthodoxy on trade is based on a simple idea. We would be much poorer if we tried to grow our own food, build our own homes, and generally produce all the things we consume. It makes more sense to focus on specific jobs and buy what we need from other specialists. The same wealth-maximising logic applies to groups. “If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry,” Adam Smith wrote.
This is as true now as it was in the eighteenth century. Bhagwati reviews a wealth of studies showing that economies sheltered by high tariffs – which remain the norm in Africa — have paid the expected costs in efficiency. East Asian countries, by contrast, opened up and grew spectacularly from the 1960s. The same has been happening more recently to Bhagwati’s native India.
Growth, crucially, helps the poor. The widespread myth of rising inequality is an update on Marx’s prediction that capitalism would bring wealth to the few and misery to the many. As it happened, growth swelled the ranks of the middle-class and dramatically reduced poverty across the West. Asia’s developing countries are rapidly travelling down the same route. In the early 1970s 11% of the world’s poor lived in Africa and 76% in Asia. Those figures are now almost reversed. The most glaring cases of the privileged growing fat while masses starve are found in such militant non-globalizers as North Korea and Zimbabwe.
Bhagwati’s survey of the gains from globalization is eloquent but hardly groundbreaking. He is, after all, reminding us of Economics 101. But his warnings against new trends in policy are more original. Trade talks, he notes, are increasingly concerned with non-trade issues. Child labour is a case in point. It is a serious problem but one that has nothing to do with globalization – 95% of working children produce goods that are not for export.
Globalization is in fact part of the cure, as it helps remove the real cause, poverty. This is why trade restrictions are dangerous. In the early 1990s many Bangladeshi garment factories closed down when the US threatened sanctions over child labour. The children laid off did not stop working: they ended up in illegal sweatshops and in brothels. Rich countries can help relieve child labour – through, say, building schools — but trade action is worse than useless.
The same applies to the environment. Some export activities are dirty, but so are many protectionist policies, such as Europe’s notorious farming system. Environmental concerns, Bhagwati argues, should be tackled in their own right. In general, he argues, mixing trade with other issues – as is increasingly the norm – is never a good idea, and provides an excuse for special interests in rich countries to keep foreign goods out.
Bhagwati is often accused of “market-fundamentalism” – a handy charge levelled at anyone who questions any type of state intervention. It is particularly unfair in the case of Bhagwati, who made his name by warning against some harmful effects of trade. His latest book has a chapter on globalization’s downsides, notably increased volatility, and ways to cope with them. If anything, Bhagwati is too inclined to give anti-globalists the benefit of the doubt. He distinguishes between thuggish zealots and NGOs that “are susceptible to, and indeed invite, reasoned argument”. Sadly, he provides no evidence of such open-mindedness.
For a systematic, no-holds-barred demolition of anti-globalism, turn to Martin Wolf, a British economist-turned-journalist. In Why Globalization Works, he covers much of the same ground as Bhagwati. But where the latter – who is perhaps eager not to intimidate the reader with his science – gives us the big picture, Wolf piles on the evidence, tracking down every fallacy, every deceit, every half-truth that confuse the public debate.
Take the inequality question. Anti-globalists are fond of saying that the income gap between the richest and poorest countries is growing. And so it is: Spain was quite a lot richer than Kenya 50 years ago, and is immensely more so now. Does it mean that global equality is growing? Not at all. Looking at the extremes is deceiving. The Taiwanese were as poor as Kenyans in the 1950s, and are now as rich as Spaniards. More significantly, billions in China and India have been lifted out of poverty.
People, not countries, are what matters. The proportion of extremely poor people (living on one dollar a day or less) has been falling for decades – from half the world population in 1950 to a fifth now. Absolute numbers began declining in 1980. Every other indicator of well-being – health, life-expectancy, child mortality, education, food consumption – shows a narrowing, not a widening, of the gap between North and South.
This, however, can be concealed though various statistical sleights of hand exposed by Wolf. One of involves measuring dollar incomes at official exchange rates – as if what mattered most to Malians was what they could buy while on holiday in New York rather than on the Bamako market. True assessments of living standards, based on Purchasing Power Parity, show a dramatic reduction in global inequality.
Another trick consists in measuring gaps in absolute, rather than relative terms. Consider a hypothetical case: incomes in rich country A double every twenty years, and rise five-fold in developing country B. Thus incomes in A have gone from $20,000 to $40,000 since 1985, and from $1,000 to $5,000 in B (a fair approximation of Asian growth). People in B will say, correctly: “We used to earn 5% of incomes in A and now we are earning 12%: at this rate we will be level with A by mid-century!” But Western doomsters will say, speciously: “The wage differential between A and B is rising all the time: it has grown from $19,000 to $35,000 in just two decades!” QED: globalization is not working.
We swallow this not just because we are bad at maths, but we do not understand the very point of trade. Imports are seen as bad, and exports good. Economists have long shown that this mercantilist view is false: the benefits of trade are the things foreigners bring, and our exports help pay for them. This is where the notion of terms of trade comes in – the relative prices of a country’s imports and exports. People usually grasp this notion in relation to developing countries. If the price of cocoa falls, Ivorians can afford fewer Finnish phones. They are worse off. When oil goes up, Arab rulers can buy more jets. They are better off.
But we lose sight of this in relation to developed countries. When Koreans sell us cheap cars we do not thank our good fortune, or the Koreans; we view them as unfair competitors. But as Wolf notes, they have made us more competitive by improving our terms of trade: “The paradox of the popular debate is that improvements in competitiveness, thus defined, are generally seen as a deterioration instead… The reason for that is that, as usual, people are confusing the fate of the particular import-export sectors with that of the economy as a whole.”
Does trade depress wages in the North? Do multinationals exploit workers in the South? Does globalization restrict policy choices? Are unfettered financial flows dangerous? Are rich countries not being outrageously protectionist? Wolf provides careful answers to every question raised by globalization (the answers to the above are: no, no, no, up to a point, yes). No complaint is too far-fetched for him to consider. He even bothers to consider Naomi Klein’s “tyranny of brands”, and George Monbiot’s fears of a subverted democracy.
Wolf does more than answer complaints: he goes to the heart of ideological anti-globalism, which he identifies as a resurgence of the collectivist utopia. If only the profit motive was removed, we would all be so happy! Today’s protesters have the same mental reflexes as collectivists of old. All the problems found in capitalist societies, from pollution to inane TV programmes, disqualifies capitalism itself, which is compared to a perfect system that does not exist.
The book has one shortcoming: Wolf devotes the first 130 pages to a disquisition on the efficiency and virtue of markets. This is logically correct, as trade is the international dimension of markets, but tactically unhelpful. Pro-trade views are rarely derived from first principles. Many of the leaders who have opened up their countries in the past twenty years have not been right-wing doctrinaires, as is commonly claimed, but pragmatic left-of-centre polititians such as New Zealand’s David Lange or Brazil’s Fernando Enrique Cardoso (not to mention Chinese or Vietnamese leaders). The US economist Ronald Coase, one of the past century’s great advocates for trade, insisted the case should be made the case on utilitarian grounds only. Wolf does precisely that in the body of his book, which is why he might have cut down on the (admittedly brilliant) liberal manifesto.
This quibble aside, this is a terrific book. If the anti-globalist chatter you hear on television or at dinner parties irritates you, buy Why Globalization Works. You will get enough ammunition to refute the most opinionated ignoramus (although you may get fewer dinner party invitations).
While Bhagwati and Wolf go back to economic basics, Jean-François Bayart, the French sociologist who wrote Le gouvernement du monde, (“World Government”) undertakes to study globalization from his vantage point exclusively. Economists will be “infuriated by my ignorance”, he boasts. To see things properly, “it is necessary – urgent? — to return to the foundation of social sciences”.
Bayart, it must be stressed, is no friend of the anti-globalists: his aim is to counter their claims that economic forces are undermining the state and threatening the fabric of society. He rightly ridicules the idea that consuming Coca-Cola, or the products of any multinational, amounts to a relinquishment of cultural identity.
Bayart may be a pro-globalization – or at least anti-anti-globalization – sociologist but he remains a sociologist above all. His heavy use of jargon makes him hard to take seriously. When he writes that international hotels have “extended to the nodal points of the globalization process a homogenization of the material framework for certain bodily functions” (meaning you can be fairly sure you’ll get a clean bathroom at the Kuala Lumpur Sheraton), you wonder if he is not being funny.
Another occupational hazard for sociologists is guru worship. Bayart’s hero is Michel Foucault. You might have thought that a philosopher who expounded on the repressive nature of Western society makes an unlikely critic of modern anti-globalism. But Bayart rises to the challenge, showing that the free flow of goods has gone hand in hand with a gigantic Foucaldian locking-up of people – whether in airport transit halls or refugee centres. We are all being penned in, to the extent that the US prison at Guantanamo Bay prison is a “microcosm of globalization”, writes Bayart – who throughout the book regales us with anecdotes from his travels around the world.
Sociology may or may not be able to shed light on globalization. But what this book brilliantly demonstrates is that discussing an economic fact without referring to economics is futile. It is like trying to analyse the evolution of life by relying on metaphysics rather than science (as Pierre Teilhard de Chardin did). Again, you do not need a PhD to make a meaningful contribution to the globalization debate. Many brilliant writers on trade have been only amateur economists – such as Frédéric Bastiat or his talented modern heir, the Swedish author Johan Norberg (3).
Daniel Cohen, unlike his countryman Bayart, has a firm grasp of his subject. He is an economics professor and clearly accepts the orthodoxy on trade. However his book, La mondialisation et ses ennemis (“Globalization and its Enemies”) chooses not to dwell on economic basics – as though it was not polite to do so.
Cohen has no time for the theory that globalization leads to exploitation of poor countries: “If anything, they are suffering from not being exploited enough,” he writes. He shows why a Vietnamese worker being paid $2.75 to make a Nike shoe that sells for $70 in the West is not a case of gouging – we must not forget about the huge non-labour costs, the iron link between wages and productivity, and the fact that Nike is not particularly profitable.
But no sooner has Cohen made the orthodox case than he reassures us that the world is unfair after all: powerful forces are preventing the poorest countries from joining the wealth-creating process of globalization.
To make this point, Cohen seeks theoretical support outside economics. He draws, for instance, on Jared Diamond’s Guns, Germs and Steel, a groundbreaking study of the influence of geography on the development of societies. This book is a model of enlightening social science. It explains how agriculture arose in Eurasia, why explorers from Europe came to America rather than the other way around, and why that contact was so devastating for native Americans. But, pace Cohen, Diamond tells us nothing about contacts between modern nations. Pizza Hut opening an outlet in Lima is not the modern equivalent of Pizarro descending on the Incas.
The evidence used by Cohen to support his claim that trade will widen the gap between rich and poor countries is as shaky as his theory. He makes much of the fact that the colonial relationship between Britain and India failed to enrich the latter. But far from being an example of “the purest free trade”, as Cohen claims, the Raj was a textbook example of managed trade. India was barred from exploiting its comparative advantage by selling textiles to Britain.
Nineteenth-century imperialism was indeed a form of globalization, but certainly not a liberal one. Free traders have always defended liberty, and condemned empire as an extension of protectionism. Bastiat called colonialism “reciprocal monopoly”.
Cohen has the cause and effect backwards: developed countries do not trade because they are rich, they are rich because they trade. Eighteenth-century Europe was poorer than most of Africa is today. Not so long ago hunger stalked Asia. There is no reason why Africa, given the right policies, should not also escape poverty and hunger.
Cohen is an interesting case of “wasted knowledge”, an intelligent analyst who neglects his own expertise. He is like a doctor who knows that a medicine works but is reluctant to prescribe it to the worst-affected patients, having convinced himself that it will do little good to them.
One reason for Cohen’s ambivalence could be the politics of his audience. Cohen himself is close to the modernising Left – a trend that combines market-friendliness with distrust of “unbridled capitalism” and takes a cautiously positive view of globalization (4). While modernisers are dominant among European socialists, they are very much in the minority in France.
Since the French Right and Left are equally hostile to markets, Cohen’s tepid endorsement is as strong a defence of globalization as you can mount in France without being branded a “neo-liberal” crackpot. The subtext of his book seems to be: the case for trade is difficult to make as it is, it would be counterproductive to antagonise people more than I have to.
Such an attitude amounts to an admission of semi-impotence. It accepts that knowledge can be of only limited use in the politics of trade. But the effectiveness of the orthodox case must not be underestimated. Free traders have scored decisive victories, from the repeal of Britain’s Corn Laws to the establishment of the post-war liberal order a century later. Public opinion is not doomed to remain in the dark, and the bright light shone by Wolf and Bhagwati is more likely to help than Cohen’s dimmed beam.
(1) Jean-François Revel, La Connaissance inutile, Grasset, 1988.
(2) Paul Krugman, Pop Internationalism, MIT Press, 1996.
(3) Norberg wrote In Defence of Global Capitalism, Timbro, 2001.
(4)A British representative of this trend is Charles Leadbeater, author of a sensible book on globalization Up The Down Escalator, Viking, 2002.