Wednesday, October 26, 2016

Is the New World Order Here Yet? (Book Review)

Written after the 2008-2009 financial crisis, Jerome Corsi strikes an appropriately skeptical tone towards globalization in America for Sale (2009, hardcover) (updated?): "What is left challenged by globalists is the possibility that globalism itself may be inherently flawed.  The world economy is moving to a leveled labor market in which a government and business elite will be the only winners... It should be clear... that globalism has not worked... What all Americans must understand is that global governance will end up destroying the very American nation-state our Founding Fathers intended to create for us to pass on to future generations."

Corsi--who seems similar to Lou Dobbs--fairly summarizes other influential thinkers' views, such as Joseph Stiglitz, who believes globalization has failed because it has operated without sufficient protection for developing countries; however, Corsi's own ideas have several issues:

1.  When America was exporting its own values and products all over the world and imposing its influence worldwide, Americans did not complain about globalization. Quite the contrary--American writers proudly proclaimed the 21st century the era of "soft power."  Now that other countries are gaining sufficient power and influence to export their images and perspectives to other countries, suddenly Americans are unsure of globalization. America seems hypocritical and small for taking such a view rather than seeking to compete on its merits.

2.  Corsi assumes that international governance necessarily requires a loss of sovereignty.  Yet, he never considers that it's worth giving up a small or measured loss of sovereignty to gain a substantial benefit, especially when so much of American innovation and prosperity come from its multinational corporations, which make most of their money overseas.

3.  Corsi assumes that all international governance mechanisms will harm American values; however, if American values are superior, why wouldn't they prevail in negotiations and other economic "battles"?  Corsi writes that in "a world economy, the United States was valued as a consumer country, not as a producer, manufacturer, or exporter." (pp. 162) There is no reason such a scenario must always be true.  With the appropriate level of tax credits and proper negotiations, the U.S. could produce (and export) whatever it likes.  Thus far, however, its tax incentives have failed to be on par with China's, creating predictable consequences.

When America's major source of innovation comes from military R&D, it's no wonder countries like Japan have been more innovative than America with respect to quality-of-life matters and domestic infrastructure.  Of course spending to kill will result in entertainment-oriented and consumer applications rather than constructive ones.  Ships and aircraft carriers don't have too many transferable uses in a landlocked domestic economy other than supply chain advantages (logistics), which benefit transporting consumer goods worldwide, not making everyday life easier for residents.  Innovation is different when it seeks to control and monitor populations in unknown or rural areas compared to when it seeks to make life more efficient in densely populated cities.  America once again looks small when it complains about trade deficits while creating budgeting incentives that guarantee them.

4.  Corsi correctly identifies America's relatively high wages as an impediment to eliminating trade deficits.  However, he once again fails to address them in a concrete or constructive way, assuming always that negotiations cannot resolve such issues.  Even if we assume that wages in America will stagnate over x number of years, there are ways to negotiate against artificial financial manipulation, such as devaluation in other countries' currencies.  One way would be to increase tariffs only one way by x percent relative to any devaluation.  (That one I got off the top of my head, so you can see that an almost infinite number of ways exist to balance trade in ways that force countries to compete based on quality or merits rather than price or labor costs.)

Another example would be the granting of x dollars to the country or corporation whose products are being copied due to lax copyright or IP enforcement.   The real problem is how to calculate such penalties and how to encourage domestic IP enforcement without resorting to lengthy or expensive litigation, and Corsi offers no solutions here.  Corsi and other protectionists lament the idea of international tribunals, but their whole point is to protect companies from having to litigate in other countries' "home courts," where they would be at a disadvantage due to language and cultural barriers, even if using local counsel.  The fact that international tribunals are slow or clunky is no reason to stop globalization.  A hardy people would seek to reform court systems or to implement better oversight, not to give up substantive economic activity due to slow lawyers and ill-prepared judges.  No one argues we shouldn't have the Olympics because some referees make terrible decisions.

5.  Corsi is fantastic when it comes to evaluating and explaining other economists' positions, but his own haven't stood the test of time.  Chapter 7 is titled, "The Plan to Destroy the Dollar."  From pp. 186: "Regional currencies like the euro are merely stepping-stones on the path to the Holy Grail of a one-world currency."

About a decade later, the US dollar and the Japanese yen are the world's strongest currencies, and the euro has been in steady decline.  This is one example of Corsi's narrow academic focus.

Here's another, from pp. 211: "Ironically, the United States may be approaching an era where it will be impossible to buy a U.S.-manufactured auto, or an era marked by a global economy in which the only manufacturers that survive will be the multi-national corporations with car-manufacturing capacity in China, aimed at taking China's low-cost labor markets."  Last time I checked, not only do Ford and GM make cars in the southern U.S., but even Volkswagen and other foreign car companies make cars in the U.S.

One more, from pp. 228: "Avoid Investing in Stocks and Bonds."  Since the publication of Corsi's book, both stocks and bonds have increased substantially.

6.  I did not see any substantive opinions on the state of American K-12 education, which is an interesting omission to the extent the quality of one's education matters as workers compete not just domestically but worldwide.

Corsi would benefit from adding a review of actual terms and conditions of the trade agreements he complains about, but the first half of his book is fantastic because it so clearly lays out many of the issues we face today. 

© Matthew Mehdi Rafat (2016)

Bonus:

Jill Stein supporters are generally smarter than other party supporters but they still don't realize their positions are effectively the same as Donald Trump's, but in different ways. 
Extreme liberals don't want to build a physical wall but they want to stop the free flow of global capital and development or restrict them so thoroughly, it's almost the same in the end. 
Her: "NAFTA costs American jobs, including good management jobs, and allows companies like Ford to take advantage of fewer regulations in other countries. It also reduces tariffs, hurting some industries like agriculture." 
Me: "I like poor people. I have no problem with a corporation helping them in other countries. The problem with the loss of manufacturing jobs isn't NAFTA--it's our own gov's failure to invest in retraining or other higher skilled work programs, along with extended unemployment benefits for displaced workers." 
Her: "But these companies destroy domestic competition when they move, like Walmart destroys mom and pop shops." 
Me: "You have not said how specifically, but if you're arguing Walmart pays better wages or makes products more cheaply than the competition, why is that a problem? Why shouldn't Venezuelans and Mexicans have better access to higher paying jobs and cheaper products? No one is forcing people to take those jobs, so the pay is probably much better than domestic companies. 
I agree working conditions must be monitored, but just because the level of legal protection isn't the same as here doesn't necessarily mean they're being taken advantage of." 
Her: "Over time, the competition destroys domestic industries and smaller businesses in other countries." 
Me: "But if GDP increases over time, then both countries benefit as industries are modernized and newer technologies are introduced to workers and residents who would not otherwise gain access to those advancements without corporate investment." 
Her: "The TPP allows corps to sue entire countries." 
Me: "Yes, because if the country confiscates corp assets, there needs to be a way for the company to protect itself. You have a billion dollars. Would you invest it in Venezuela without legal protection?"
Her: "The money shouldn't be there in the first place." 
Me: "So screw the poor people in Venezuela who would otherwise have greater access to jobs." 
Her: "You're raising your voice. This discussion is over."