Deutsche Bank interpretation of the protests

Michael Pollak mpollak at panix.com
Mon Dec 13 06:09:24 PST 1999


New York Times Op-Ed

December 13, 1999

Caught in a U.S. Civil War

By NORBERT WALTER

F RANKFURT -- In the eyes of most outsiders, the United States,

with its dynamic companies and strong lead in high technology, is

the prime beneficiary of globalization. And yet, in the wake of the

disastrous World Trade Organization meeting in Seattle, it is

effectively presenting itself as one of globalization's most

aggrieved victims.

No wonder, then, that many abroad see the United States as a nation

divided against itself. It dominates the world economy with its

strong economic performance, but at the same time feels deeply

insecure about participating in the global economic system.

In my view, this confusing attitude is to a large extent due to one

phenomenon: Quite a few Americans are currently determined to make

globalization the catch-all phrase for issues that primarily

warrant debate within the United States: American wage inequality

and the accessibility of American workers to benefits.

American labor unions and their allies opposing globalization argue

that free trade is costing American workers their well-paying

manufacturing jobs with generous benefits, and thus contributes to

growing wage inequality. But the entire set of worker issues has

much deeper roots than globalization.

To prove this, you just have to look to Europe. While we have our

fair share of problems to deal with, sharp income disparities are

not among them, despite globalization. Moreover the same

corporations often give their employees higher wages and better

benefits in Europe than in the United States.

The American political system has chosen great flexibility in the

labor market and comparatively little government intervention in

the economy. These choices work well for many Americans but leave

others behind. And all of the issues they raise have been around

since long before globalization dominated the scene.

That is why people outside the United States worry now that, for

many Americans, the rest of the world simply provides a convenient

stage on which to carry out an internal debate. The W.T.O. -- with

its power over the entire world economy -- is not the right forum

for dealing with what essentially are domestic American problems.

Wage inequality in the United States will hardly be resolved by

imposing labor standards on developing countries and enforcing them

with sanctions, as President Clinton has suggested.

Observers who are not part of the internal American debate should

be forgiven for their irritation at being dragged into this family

quarrel. Viewed from abroad, the rather unexpected American attack

on the global trading system appears particularly strange. The

current system and its institutions -- like the International

Monetary Fund, the World Bank and the W.T.O. -- were created

largely by American design.

Now that most countries around the world are, at least to some

degree, embracing the American-inspired free-market model that

drives them, it is bewildering to see significant forces inside the

United States trying to distance themselves from it.

Of course, the root of the conflict is in domestic American

politics. Some analysts have begun to compare the trade policy of

the United States to its conduct of the Kosovo conflict, with

losses to be avoided at almost any cost. This leads to a surreal

negotiating strategy: unless American politicians can ensure that

globalization makes every last American a complete victor and

satisfies every American concern, it is an unacceptable proposition

for the United States.

This is disconcerting.

Historically, most successful trading regimes have relied on at

least one country that is strong enough -- and, above all, willing

-- to enforce the rules and, if needed, make some concessions to

keep the process moving. In the 50 years since the end of World War

II, the United States has done a tremendous job of filling this

role.

Americans will be quick to point out that others, especially the

Europeans and the Japanese, must share the burdens of economic

leadership. But political realists also have to consider that

Europe and Japan are in the midst of the painful transformation

that the United States economy underwent in the late 1980's and

early 1990's.

The United States economy is strong and continues to grow. The

United States has it in its power not to shun its global

responsibilities.

At a minimum, other countries, facing their own adjustment costs

from continued change in the world trading system, will not agree

to the American demand that no American be disadvantaged by global

trade.

Norbert Walter is chief economist for Deutsche Bank.

Copyright 1999 The New York Times Company



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