The Collapse of Globalism

MJ: OK, but haven’t millions of people in, say, India and China, the 21st century’s rising economic powers, benefited enormously from globalization?

JRS: What you're seeing with India and China is the building and rebuilding of nation states on their own model. The Chinese are really going back to the Middle Kingdom view of themselves, and in the case of India they have a history as a nation state very different from the European one. In a sense they're building something that's about the nation. Does this mean they don't want to trade with the world? No, of course not. But they're not buying into globalist theories of inevitability. They have some stuff to sell; they want to sell it.

What's interesting is how much difficulty we're having with them. We actually don't want to give them the kind of access to our markets that we expected would be a normal part of globalization. And I think what it tells you is that for 25 years we've said what matters is globalization; borders don't matter; nation states are weakening; it's the global market place that matters. And suddenly we're saying, 'Hey, you can't export all that stuff to us, that's not fair.' And so you suddenly realize that what we were always saying is that globalization is great—as long as it's based out of the West.

MJ: Your general argument runs counter to the conventional wisdom, which is that globalization is on balance a good thing. Witness some recent books—say Thomas Friedman’s The World is Flat, Martin Wolf’s Why Globalization Works and Jagdish Bhagwati’s In Defense of Globalization—which all take a much rosier view than you do.

JRS: First of all, Friedman is barely worth considering. It's basically one of those 'How to succeed' books; it's very embarrassing, frankly. On the other hand, when you read people like Baghwati—who are very intelligent—when he says he thinks it's a great success, you read the book and you find that 50 percent of it says the opposite. He thinks the inclusion of intellectual property in the WTO was a terrible mistake and could well bring down the international trade system. And he says the deregulation, willy nilly, of international money markets is a terrible mistake. He feels he's on the side of globalization, but when you really get to what he means by globalization, it's very very narrow. [Joseph] Stiglitz is a bit further along that road. He says that globalization obviously isn't working very well, but there's no way out. John Williamson, the author of the ‘Washington Consensus’ [essentially, the policy advice being addressed by the IMF and World Bank to Latin American countries in the 1980s and 90s, emphasizing open markets] regularly says, “Well, that's not what I meant....”

MJ: So are you arguing that deregulated global trade hasn't delievered any benefits?

JRS: Globalization did some small things; but the previous period brought improvements that gave us levels of comfort and education that were unprecedented. What nobody wants discuss is whether or not the black-and-white argument about trade— you're either a free trader or you're a protectionist—is the right one. It’s the old 19th century argument. Why don't we ask, 'Is this trade?' 'What is trade?' 'What does trade actually do?' 'What is a proper balance between deregulated and regulated?' 'Does it make sense to deregulate some things and regulate others?' At this very moment the practitioners of free trade are in confusion over what to do, and we're seeing only the first act of the confusion.

MJ: You argue that at the heart of the problem is a tendency to think about the world in exclusively economic terms.

JRS: When I sat down to write the book I tried to decant what is being said, and it's this: globalization is a theory of truth, and the truth is that you must look at the world through an economic prism, and in that way you'll understand nation states, war, how to organize politics, what to do in society—everything will be judged somehow through this economic prism. But economics does not apply to a still life; economics applies to real societies. All real societies have problems, have challenges, have things that aren't what you'd expect. It has to work in the real world.

MJ: And the argument is that economic forces are inevitable and ultimately beneficent.

JRS: There are warning signals of [ideological thinking]—of ideas as religion—and one of them is this idea of inevitability. As soon as you hear somebody saying 'This is inevitable,' you basically know they have a weak case and are true believers in an ideology. Globalization has been immersed in just such an argument.

MJ: And it's an argument that doesn't have much use for the concept of the public good, correct?

JRS: Once you believe that the market is inevitable you start believing that the lower the taxes the bigger the growth, and the happier people will be. Well, there's absolutely no historic proof for that at all. That doesn't mean taxes can't be too high or that they can't be badly spent or that you can't have bureaucratic inefficiency—you can, but those are all different issues. But once people start believing that the sign that individual rights are being successfully asserted is that you're not paying taxes, then your society's in real trouble. There’s nothing wrong with paying taxes; they should be paid in proportion to how rich you are. This idea that you're going to get better growth by cutting taxes at the top has no historical justification. And it's certainly not an argument in favor of capitalism.

MJ: If globalism has collapsed, it’s in part because developing countries weren’t seeing the promised gains, right?

MJ: Yes. The obvious sign that this system wasn't going to last was the Asian meltdown in 1997/98. You had these very successful smaller countries—Thailand, Malaysia, and so on—collapsing, really because we'd stuffed a massive amount of money in there—money they basically didn't need, because they had a very high savings rate—and then when we'd overheated their economy we withdrew the money, all over about a 12-month period. So you then had this international theory of globalist economics applied to them with a vengeance, what I call "crucifixion economics," you know, you get put on gruel and are forced to wear hair shirts and to self-flagellate, and they're supposed to come out of it cleansed, reborn. And after a year of this the prime minister of Malaysia, Mohamed Matahir, said, 'We're not going to do that. We're going to raise tariffs, and freeze our currency, and block capital flight.' And everybody looked away in horror—and then a year later they were doing better than anyone else. Four years later Matahir was invited to make the opening speech at Davos during which he lacerated globalization—and they gave him a standing ovation!