Greenspan on Seattle (Jim O'Connor)

[Barbara Laurence]

Rakesh, you pooh-pooh the globalization thesis (increasing integration of a
single division of social labor; tendency for price differentials of
internationally trade goods to fall and disappear; and so on - there are
perhaps half a dozen main criteria).  You focus on the ratio of trade
growth/GDP growth, citing Giusanni to the effect that trade grew 2.8 times
faster than world GDP from 1950-1973. Then Giusanni, in your quote, gets
all mushy.  "The relatively fast growth of in world trade share of GWP over
the last 25 years was mainly the result of stagnating GWP, not that of
accelerating international trade.  Trade only seems to grow rapidly because
the GWP is exhibiting the lowest rate of growth over the last 150 years,
excluding...1913-1950." His first sentence is a contradiction: on the one
hand, we have "relatively fast growth in world trade share of GWP." On the
other hand, we have "international trade" "not accelerating." In fact, the
latter is wrong, the former is right.  Between 1975-1998 world exports grew
at a nearly exponential rate, while world GDP grew at an arithmetic rate
(as he says, lower than the rate between 1950-1975).  My sources are the
Economist, Nov 27, 1999, graph 1, p. 21. I became aware of this phenomena a
few years ago, from Bill Orr, The Global Economy in the 1990s (1992) and
IMF, Direction of Trade Statistics, 1972-1993 (date published?), which
shows essentially the same relationship.
This means that for world economy to grow at any given annual rate, say,
two percent, world exports must grow at an increasing rate.  This
underlines the importance of WTO for world capital, but mainly for the US
with its enormous import surplus. The US is desperate for more agriculture
markets, expanded high tech equipment, etc., markets; legal drugs markets;
TRIPs which transforms illegal exchanges into legally enforceable exports;
oh, yeah, Hollywood products.  To name a few.  And Boeing is the US's
biggest exporter, and China is Boeings' biggest customer, and China demands
local content rules which Boeing hates, hence Seattle was symbolically the
right place, for the deadlock between North and South, within the North,
within the South (many divisions here), on the one hand, and deadlock
between US organized labor and "civil society" vs WTO, on the other hand.
Beautiful.
Giusanni gets himself in more trouble when he writes "International trade
only seems to grow rapidly because GWP is exhibiting the lowest rate of
growth....excluding...1913-1950."
This is utterly confused.  All he's saying is that world GDP growth has
been slow while world trade growth has been fast.  Agreed.  But why, is the
question.
Why has the capitalist world become more dependent on world trade (X/GDP
1950 = 8 percent.  X/GDP 1998=26.5 percent)?
Your man doesn't offer a theory, rather an attempt to explain the trade/GDP
growth ratio as some kind of statistical illusion.
I can't go into the full theory here, and I'm not clear on some aspects of
it yet, anyway, but I can give you a crude and somewhat simple-minded
statement of it.  In the first 25 years, domestic investment, consumption,
and government spending were more important that exports (foreign spending)
in terms of a growth theory. Then, exports were the passive variable, being
the result of increasing imports as each country's GDP rose.  Exactly why
exports expanded 2.8 times faster than world GDP growth would require a lot
of explanation, which I can't do here.  In the second period, everything is
changed.  The South moves from ISI development to export-led development.
The US increases its exports from about 5 percent of GDP to over 12 percent
by the month the dollar bottomed out, April, 1995, and for a few years was
itself an export-led economy.  Every country that has got back to a decent
growth track, after stagnation, or after a deep crisis (1997-98) has done
it by leading with its exports, not domestic investment or consumption.  Oh
yes, the Japanese have been pump priming their economy for many years, and
have gotten exactly nowhere because their exports are weak (I include
exports from their sourcing plants all over Asia).
In other words, the ratio of X/GDP, globally, has risen much more during
1975-2000, than during 1950-1975, because states, politicians, planners,
economists, CEOs. etc., grasped the slow growth in the latter period (Asia
of course excepted) and reorganized world economy as.....dare it name it,
globalized. Globalized of course means more competition; cost-cutting not
just in slow years but in all years, permanently; new process and product
innovation, continually; and lots of other things.  States and capitals
have turned to international trade for answers to slow growth, hence in
export industries or sectors, competition is fierce because, at the limit,
you have all the big and strong capitals in the world all competing with
one another (a limit we haven't reached yet).
There is much more to this line of argument of course.  Hopefully this is
enough to persuade Rakesh that there is something to the globalization
thesis.