Shopping Till We Drop (Page 3)

Deepening indebtedness compels the United States to get its own house in order. Meanwhile, the logical outline for reforming the global production system is also visible, at least in the form of plausible principles:

(1) The global system needs a new, more sophisticated version of Article 12 that would allow countries to correct the injury from unbalanced trade flows, more or less automatically, with temporary limits on imports. The mechanisms would define reasonable levels for action and the point at which other governments must respond by applying national influence over both their multinationals and financial investors (ultimately, this also requires reform of international financial institutions like the IMF, which will be the focus of a subsequent article). This approach recognizes that the marketplace of competing multinationals cannot succeed in managing supply and demand worldwide--not without creating cartels and trustlike alliances to do so. It implicitly suggests the basis for a grand bargain in which the leading industrial powers agree, at least informally, to assume greater responsibility for the developing nations in their spheres--that is, to take a greater share of the exports from regional neighbors. Japan is the most egregious case of evading this obligation.

(2) The system must be refocused on the demand side: the promotion of rising incomes, in step with rising productivity. Multinational competition now produces a reflexive imperative for companies to do the opposite, that is, expand productive capacity while at the same time suppressing demand. Labor rights and public spending are two reliable tools for bolstering demand, but both are scorned by present dogma and its operating rules. Another tool is national measures to impose more accountability on global firms and investors--rules that require longer-term commitments from them to the new countries where they invest in production, as well as concrete penalties for players "gaming" the system by hopscotching from one poor country to another. For instance, if a US firm refuses to embrace labor rights for its overseas workers, why should American taxpayers subsidize it through Export-Import Bank loans, government-backed insurance for overseas investment or the many tax breaks designed to promote globalization? In short, governments have a lot of sovereign leverage over global firms if they will use it.

(3) The heavy-handed "Washington consensus" and the many international trade rules that accompany it must be scrapped so developing countries will have breathing space to pursue their own distinctive plans for industrialization. The World Trade Organization, instead of becoming more intrusive, should be forced to back off and acknowledge that a poor nation may be better off in the long run by concentrating first on domestic economic fundamentals--education and health, public infrastructure, self-sufficiency in producing basic goods like food and pharmaceuticals--than by turning itself into another exploited export platform. A global network of WTO reformers, including Global Trade Watch in the United States, is already staking out this approach as its new either/or demand: Prune the WTO or shut it down.

(4) Once new principles are established, the wealthier nations must follow through with the money to help make them succeed--that is, capital in the form of substantial aid commitments. The above measures ought to generate much more equity in the global system--more people sharing in its wealth-creating benefits through greater income equality--but they will also moderate the pace of globalization. Slowing things down is a necessary step toward more stability, less random wreckage, but it also threatens the poor nations disproportionately unless the advanced nations guarantee that capital inflows will continue. The Jubilee 2000 debt-relief campaign offers a good beginning in what should become a much larger program of governments. The AFL-CIO, among others in the movement, has advocated significant new aid from the United States (always a laggard compared with others). The money is available if the United States ever comes to its senses and begins paring down its bloated military-industrial establishment.

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