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Global warning.

If a modern-day Rip Van Winkle had fallen asleep a decade ago to awaken this month, he would surely be shocked by the stories in his morning newspaper. The absence of the Soviet Union would surely catch his eye. But Rip might also be startled to observe how joyless most citizens of the West have become in the days following the collapse of our erstwhile adversary.

It is hard to remember today how euphoric political, intellectual, and business elites were about the prospects of extending free market institutions to the rest of the globe. The opening of foreign markets was supposed to bring greater prosperity to the peoples of Eastern Europe and, in turn, open up new opportunities for Western businesses. The Japanese intellectual Francis Fukayama was so bold as to proclaim that history had ended; only one model of political economy would endure.

This new global economy, however, has been most successful in bringing Third World inequalities to the United States. Over the last decade, the top 1 percent of American families has seen its share of total national wealth rise from 33 percent to 42 percent. Meanwhile, the bottom 80 percent of families has seen its share of wealth fall from 19 percent to 15 percent. Similarly, the new world economy has not produced the levels of growth long promised as the reward for accepting harsh, free market `reforms." Economies in most of the major industrial democracies are essentially stagnant. Workers and the middle class are restive everywhere.

The explanation of the day among political leaders is that the world is undergoing the costs of "transition" to a more prosperous economic order. On the contrary, I would argue that, without the breakup of the Soviet Union, the threat of nuclear annihilation has diminished somewhat, only to be replaced by enormous economic and social risks.

The new free trade regimes have inordinately strengthened the rights of business elites to relocate factories throughout the globe. These new corporate freedoms carry risks seldom discussed or even recognized. One consequence of these freedoms has been a movement in the European social democracies to scale back a range of benefits to workers, including unemployment compensation, health, and social security programs. Although these benefits remain more generous in Western Europe than in the United States, they face increasing business opposition everywhere. Communism's demise plays a role here too. With the decline in the military threat of the Soviet Union and no possibility of discontented workers receiving its aid or being tempted by its example, European leaders feel no reluctance about shredding the safety net. When grass-roots groups protest cutbacks, they meet a constant response: the demands of global competition require a low-cost workforce.

Russia's travails have other economic implications, as well. This nation stands near economic collapse. Stephen Cohen, a Russian studies expert at Princeton University, reports in a recent issue of the Nation that American media have barely acknowledged the full dimensions of "insider privatization, impoverishment, and disintegration of the middle class" in Russia. Rather than a future market for our goods, Russia may become a sinkhole for future public and private aid.

As communism and European social democracy unravel the New Deal welfare state, never as fully elaborated as its European counterparts, has virtually collapsed. Fewer than 40 percent of American workers are now covered by unemployment compensation. The success of union-busting campaigns over the last decade leaves only about one in ten private sector workers still unionized. Welfare as an entitlement has been eliminated, and there is enormous pressure to scale back social security and other benefits.

While these trends have obvious implications for social justice, they carry much less noticed risks for international stability. Put simply, the world is engaged in a social experiment as vast as the initial transition to capitalism two centuries ago. The gamble is that, in a world of rapid transportation and communication, unregulated corporate economies can deliver steady economic progress. Management is to be trusted to organize workplaces, set wage rates, and relocate the new production technologies. If worker wages and purchasing power lag here or there, low interest rates and low production costs will encourage new corporate investment.

Advocates of some version of social democracy, myself included, respond that no capitalist economy has ever functioned that smoothly. All face business cycles that governments must individually or collectively moderate through some combination of economic stimulation, redistributive taxation, and union wage and hour protection if markets are to continue functioning smoothly. Should private investment lag, the absence of such traditional "automatic stabilizers" as unemployment compensation, social security, and jobs programs could lead to very deep recession or even depression.

But our warnings are countered by the response that corporate capitalism never would have failed before had it been given sufficiently free a rein--especially on a world scale. There is and can be no completely convincing rejoinder to this emerging conventional wisdom, except to reiterate that the world's major industrial democracies are conducting an experiment--on all of us. Worse still, many conservatives have upped the ante by seeking to lock their economic nostrums into fundamental law.

Hence, in the United States, tax caps and balanced budget amendments aim to make it harder for democratic majorities to reverse course should the new conservatism run aground. In Europe, the German central bank now runs the fiscal policy for all members of the European Economic Community. Those governments which seek to stimulate their economies by borrowing money to finance public sector jobs during any future downturn will face penalties administered by the central bank. Thus, the hands of elected policymakers are increasingly tied elsewhere.

The globalized economy could produce a vicious downward spiral as sluggish economies bereft not only of safety nets but even of the political tools to reconstruct them pull each other downward. If experiences during the Great Depression are any guide, protectionism and "beggar thy neighbor" agendas in especially stagnant economies could result. Such initiatives could put even more pressure on the world economy.

On top of the attempt to suspend democratic politics comes an ostrichlike unwillingness even to concede the experimental nature of these initiatives. For example, one of the least noticed and most significant aspects of last year's welfare "reform" agenda was the defeat of an amendment proposed by Senator Paul Wellstone (Democrat--Minnesota). His amendment would have required continued assessment of the effects of welfare reform on employment, poverty, and hunger.

It is easy and perhaps too tempting for progressives to proclaim that the sky is falling. But it is also prudent to call attention to possible problems and to attempt to construct humane, democratic alternatives to corporate excess. We need new rules of engagement for world trade. These would include wage standards pegged to national productivity levels and long term loans to developing societies for ecologically friendly energy and transportation systems. Domestically, we must protect and extend adequate wage standards and the rights of labor to develop an independent voice within the workplace. More than the adequacy of wage levels is at stake here. A safe working environment and an effective voice in one's community require a modicum of power in one's workplace.

Both domestic and international struggles are clearly related. In the United States, the strength of labor depends in part on reducing the exploitation of foreign workers. And international labor solidarity gains greater plausibility and appeal when it makes the voice of labor within the workplace and community a preeminent goal.

Modes of survival under other dangerous circumstances may provide a lesson here: the Cold War did not produce nuclear annihilation, in part because of the activism of domestic antiwar organizations on both sides of the nuclear divide and the informal communications between them. Our greatest priority today is an equally vigorous commitment to understanding and reorienting the new global economy.

John Buell is a freelance writer with a special interest in labor and environmental topics and the author of Democracy by Other Means: The Politics of Work, Leisure, and the Environment (University of Illinois Press, 1995).
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Title Annotation:Humanistic Economics; dangers of a globalized economy
Author:Buell, John
Publication:The Humanist
Date:May 1, 1997
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