Jeff Faux comes across more like its Saul Alinksy.
By James K. Galbraith Issue Date: 04.08.06
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The Global Class War: How America's Bipartisan Elite Lost Our Future -- And What It Will Take to Win It Back by Jeff Faux (Wiley, 304 pages, $27.95)
Jeff Faux has written a less ambitious book with a harder edge. Though he titled it The Global Class War, Faux is a regionalist. He is focused on a country, Mexico, that Sachs barely mentions and on an institution, the North American Free Trade Agreement (NAFTA), that Sachs does not mention at all. If Sachs is Mother Teresa, Faux brings to mind Saul Alinsky, with an entirely bracing conviction that the rich are the problem, not the solution, for working people.
NAFTA was a debacle for America's left, as the fight to stop it exposed the higher loyalty of the Clinton administration to Wall Street. In the face of defeat on free trade itself, labor and the environmentalists settled unhappily for "side agreements" that they knew would have little effect. Faux was a prime mover on the losing side, and here he details the struggle and exacts a measure of revenge, well-earned with a decade's hindsight, on those who advanced the cause of NAFTA behind dishonest arguments, especially relating to the large-scale creation of American jobs. Of course, that issue was argued heatedly on both sides. It turns out that U.S. jobs are mostly made or lost at home, and there is very little evidence, 10 years later, that NAFTA made any substantial difference to American employment either way.
NAFTA was not forced on Mexico; as Faux notes, it was largely a Mexican idea. NAFTA helped the neoliberal leadership of Mexico's then-permanent ruling party, the Institutional Revolutionary Party, or pri, to cast off its historic coalition with labor and the peasantry. In so doing, they brutally destabilized Mexican farmers, forcing large-scale migration to the cities and, of course, to the United States.
>From this evidence, Faux constructs his larger charge: that the world
is run these days not by national political coalitions but by an
international consortium of finance capital -- the Party of Davos --
whose writ knows no boundaries. The U.S. elites supported Carlos
Salinas, he writes, because he was "one of us" -- Harvard-educated and
a member of the club.
Faux has well understood the new global culture of the bankers and corporate chiefs -- though he overestimates their enduring power, which is already under sharp attack in Latin America (including Mexico, which may this year elect a leftist government), Russia, and much of the Islamic world. And yet Faux's argument also shows why NAFTA was the wrong fight. For, given that it served the purposes of Mexico's neoliberal elite, almost every important aspect of NAFTA could have been imposed unilaterally, even if the agreement had never been negotiated. Tariffs for Mexican manufactures flowing north were already low. NAFTA mainly reduced Mexican tariffs on machinery and barriers to the importation of American grain. Salinas could have done this on his own, completing a process that Miguel de la Madrid had started in 1986, by bringing Mexico into the General Agreement on Tariffs and Trade.
So why did Salinas need NAFTA? Apart from political cover, the main reasons were financial and macroeconomic. In 1982, in the face of a devastating crisis, Mexico could not secure adequate U.S. assistance to cope with its inability to service its debt. Years of severe depression resulted -- bad for business. The Mexican elites saw that if they were in a free-trade agreement, they would become "too big to fail." In 1995, this judgment was proved correct. And while Mexico still suffered a severe currency crisis, and while the bailout definitely helped the American creditors, stabilization and recovery were nevertheless much more rapid after 1995 than after 1982. This was not a bad thing. Without NAFTA there would still have been a crisis, and the U.S. reaction to it would have been worse.
Now, for Faux as for Mexico, the NAFTA moment has passed, and the new challenge to workers comes from China. Faux writes that in China, "wages are suppressed with bayonets," but this claim would surprise workers in Guangdong or Shanghai, who went there for wages far higher than paid anywhere else in the country. Faux also does not seem to realize that though the best Chinese wages may be one-twentieth of ours in dollar terms, urban workers do not live at one-twentieth of American working-class standards. For they pay far lower prices for everything: food, clothing, housing, education, and medical care, and they enjoy booming cities that are not slums. It's outside these regions that extreme poverty persists in China, though almost everywhere it's lower than it was a generation back. All in all, the country is a huge exception to the rule of stagnant living standards for ordinary workers. It is cheered by globophiles, hated by globophobes, and understood by neither.
What is the Chinese secret? The other day, the distinguished Russian economist S. Menshikov put it to me this way, "Well, it's because they are communists, you see."
More precisely, China has adopted markets without capitalism; it has not had broadly open, speculative markets for capital assets and land. The result is that you usually have to make something in order to get rich. So companies produce and produce, flood the markets with goods, accept low profit margins, improve quality, and hope to strike gold by exporting to the West. If they have losses, as they often do, these may be covered by borrowing from China's rotten, state-owned banks, protected by capital control. Workers thrive on the glutted market for goods. Meanwhile, the richer local governments finance themselves with land rent and spend the proceeds on infrastructure at an incredible pace. The system looks like capitalism to the naked eye. But it is not capitalism; it's an outgrowth of what was there before. What was communism has become, one might almost say, Galbraithian -- private affluence, with much less public squalor than one finds elsewhere in the Third World.
In an important closing, Faux realizes that North American integration is irreversible. He therefore argues that North America should now aim for a deeper union -- something approaching the European model. He looks at modern Europe through rose-colored glasses, seeing there a bastion of social democracy and solidarity that the average resident of, say, the Paris suburbs would not recognize. But the point is correct: A United States of North America, with its openness to expansionary budgets and easy money, and with 69 million Mexican voters, would very likely be more democratic and more prosperous than the present-day European Union, and also not more corrupt than the current crowd in Washington, D.C. Moreover, two aspects of the European model -- free migration and a common currency -- would help solve many of Mexico's deepest development problems, as the euro and low interest rates have done, remarkably quickly, for Spain.
Of course, to go that far, one would have to protect the interests and address the sensibilities of our neighbors to the north. And to do that, I have long favored naming the new North American money along the lines chosen in Europe. With special deference to our friends in Quebec, it should be called the Amer.
[If I were the namer, I'd call it the "Namer."]
James K. Galbraith holds the Lloyd M. Bentsen Jr. Chair in Government/Business Relations at the University of Texas at Austin's Lyndon B. Johnson School of Public Affairs. -- Jim Devine / "There can be no real individual freedom in the presence of economic insecurity." -- Chester Bowles