World Beater

...China emerges as the ultimate spoiler in the new global system...

...Such measures, more than any global trend now present, run the risk of tipping the global system into the vicious deflationary spiral that Greider so fears...

...Greider believes that, since there is a global crisis of overproduction, the potential for growth in the world's leading economies is actually much higher than the bond market or central bankers would allow...

...The global bond market, however, punishes any nation that engages in such policies, by raising interest rates...

...But he argues that developing nations like Malaysia and Thailand, whipsawed by competitive pressure from still-poorer countries like China and Vietnam, are replicating the worst abuses of early capitalism...

...Aggregate supply outstrips aggregate demand, and the whole system collapses...

...The American response is to let workers fend for themselves, with the result that the bottom 20 percent or so of the labor force—those with less than a high school education— see a significant drop in their real incomes...

...economy under a low-tax regime...

...While the problems of moving workers from declining industries to growing ones are often underestimated, aggregate employment is at historic highs...

...Almost all of them recognized that the international bond market, the threat of being undercut by upstart countries in Asia, and various other new social conditions limited their leeway in implementing social policy...

...A large and open American market has absorbed these surpluses for the past couple of decades...

...But he is right in criticizing the tendency of many to throw up their hands in the face of the global economic juggernaut and become politically passive in the face of its economic imperatives...

...Greider even admires the beauty of a state-of-the-art Motorola factory in Kuala Lumpur and the social impact it is having on the formerly powerless young Muslim women who work in it...

...The European route is to protect the wages and standards of living of these workers through a variety of welfare-state measures, with the result that long-term unemployment increases to double-digit levels...

...Rolling Stone national editor William Greider is not so easily intimidated...

...There can obviously be a crisis of overproduction in individual sectors, like autos...

...His One World, Ready or Not is an impressive effort to think through the social consequences of globalization and to come up with a clear-cut left-wing agenda for beating it into submission...

...Lowskill workers are in a double bind, since technology more readily substitutes for their labor than for that of their skilled counterparts...

...Hence Greider's frequent railing against what he calls "finance capital...

...Redistribution of the pie from capital owners to workers will lead to greater demand, stimulating growth, savings, and investment...

...At the center of Greider's critique is what he calls the global crisis of overproduction...

...His central recommendation is to revive Keynesian demand management through a modern-day New Deal...

...The consensus among bond traders is that pushing employment below its "natural" level by stimulating too much growth will lead to a "money illusion": Nominal growth will simply be offset by inflation, leaving everyone worse off in the long run...

...What stumped them was the complexity of the global economy...

...Greider's argument with the bond market revolves around what economists call the "natural rate" of unemployment...

...it took central banks a generation to finally wring the ensuing inflation out of the global economy...

...He urges a heavy across-the-board tariff, as a means of bringing the American current account into rapid balance...

...Globalization has clear-cut losers...

...The desire to see China observe human rights and ultimately democratize its regime is often portrayed as being at cross purposes with economic interests, but the two ultimately go hand in hand...

...But it strains credulity that overproduction can persist for years across the entire global economy without any market correction...

...Two-thirds of the American economy now consists of new services, from software design and systems integration to home health care and overnight package delivery, many of which didn't exist a generation ago...

...Greider can't wait that long...

...With its 1.2 billion people, it provides an almost bottomless pool of cheap labor that will continue to depress wages worldwide...

...A century ago, when a majority of Americans still worked on farms, many worried about a looming crisis of agricultural overproduction: Who, they asked, would buy all the food that was being produced by ever more efficient methods, and where would all those farm workers find jobs...

...Every job lost to American workers through international trade and investment means a job (or several) gained by workers in some poorer part of the world...

...Indeed it is not clear why we should celebrate American multinationals that use the coercive power of the Chinese state to undercut the wages of their American work force, just because they produce cheaper running shoes...

...Greider puts a grim human face on these statistics...

...Greider also worries intensely about the trade surpluses that a number of Asian nations have run, beginning with Japan...

...Indeed, most of the solutions he proposes will produce more problems than they will solve...

...So the world's leading industrial nations, according to Greider, must enter a global pact to redistribute wealth through new taxes and controls on capital, subsidies for labor, public spending on infrastructure, further welfare-state protections, and, of course, looser money...

...There are essentially two policy responses to this problem...

...But unlike nationalists such as Ross Perot or Pat Buchanan, who simply denounce globalization, Greider, as a man of the left, is aware that it has lifted millions of Third World peasants into industrial-age wealth...

...The global automobile industry, for example, has a maximum capacity of 60 million vehicles a year, but demand is only about 45 million...

...and more goods at lower and lower cost, but workers, whose wages are squeezed by the same pressures, cannot afford them...

...Of course, this "crisis" comes straight out of Karl Marx: Capitalist producers, under intense competitive pressure, can build more Francis Fukuyama is Omer L. and Nancy Hirst professor of public policy at George Mason University...

...Property rights, rule of law, and the creation of economic value have political foundations, and those foundations are ultimately defended through political rather than economic means...

...The world lived through such a money illusion in the late 1960s and 1970s...

...By promoting savings and subsidizing exports, while artificially holding down consumer demand for imports, they accumulated productive capacity, jobs, and trade surpluses...

...The possibilities for bringing the global economy under control are more limited than Greider thinks...

...In this he is joined not just by a number of other populist economists and politicians, but also by the editorial page of the Wall Street Journal, which for years has argued that markets underestimate the long-term potential of the U.S...

...But the global economy is constantly producing new products and services...

...Leftist economics holds such a mismatch to have been the cause of the Great Depression, and Greider fears that the current world system, for all its apparent prosperity, is headed for a similar meltdown...

...World Beater William Greider's War on the Global Economy By Francis Fukuyama At a conference last summer on the future of big government, I was struck that the left-wing attendees lacked any kind of an agenda...

...Given my own lifetime experiences, I'd rather bet with the bond market...

...China can scuttle any international action to moderate the global economy—and will, as long as it is ruled by a corrupt Communist party that has grown wealthy suppressing wages and denying rights...

...Since capital is highly mobile but labor is not, managers have new opportunities to grab a larger share of the pie by moving, or threatening to move, production to parts of the world where labor is cheaper...

...But a gradual adjustment should take place, as the United States boosts its savings rate by closing the budget deficit, and as Asian consumer markets grow wealthier and more open...

...But globalization means that a new New Deal could never be pulled off by any one nation...

...Greider is right, for political and economic reasons, that American borrowing to cover current account deficits cannot persist indefinitely...

...The crisis of overproduction Grei-der points to is a phony one, but the distribution problem he warns of is real...

...The problem with Greider's analysis is that it assumes that the global economy produces only autos...