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Globalization and Its Discontents

Posted April 16, 2015

While officials from the Obama administration have been more than usually active over the past month in trying to drum up support from lawmakers for Trade Promotion Authority and aggressively promoting the benefits of globalization and trade liberalization to the public (see here and here), free trade opponents have also been stepping up their efforts, direly warning anyone that will listen about the harmful ramifications of such policies to the U.S. economy.

In his 2002 book, from which the title of this post is borrowed, former World Bank economist and Nobel laureate Josef Stiglitz made the case against increasing global economic integration and trade liberalization better than most as part of his scathing indictment of the International Monetary Fund’s economic policies with respect to the developing world. More recently, Stiglitz has become an outspoken critic of the Trans-Pacific Partnership Agreement (TPP) for various reasons which he outlined in a 2013 open letter to the negotiating team of the U.S. Trade Representative.  

Speaking last month at a community meeting in New York to discuss the TPP’s implications to working families, Stiglitz complained about the secrecy and lack of transparency surrounding the trade deal. “One of the reasons you should know TPP is important is that they’ve tried to get it passed without anyone knowing about it,” Stiglitz said. “And that should make you suspicious.” The deal’s backers “always say ... they’re going to create jobs. If that were really true, you’d expect the unions that represent the workers to be all in favor of it.” But to the contrary, Stiglitz told the crowd of unionized labour, small business owners, activists and local residents, “the people that are in favor of TPP are the people in Wall Street.”

Aside from this crass demagoguery being unworthy of a Nobel prize-winner, Stiglitz is obviously correct in observing that organized labour is vehemently opposed to the TPP and other such trade deals. The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) vowed last month that it was “going all out” to block any bill granting the administration “fast-track” authority to complete the TPP.  “There is such a dramatic impact on the standard of living and a lowering of wages and a loss of jobs – this will have a major impact, and we will not forget this vote for a long time,” AFL-CIO boss Richard L. Trumka threatened Democratic lawmakers (as a matter of fact, the union is presently withholding all political contributions).

The question of why exactly the AFL-CIO is so passionate about this issue is somewhat less than clear, although David Wessel of the Brookings Institution attempted, without much success it has to be said, to provide an answer. While being easy to understand why labour unions representing manufacturing workers would be angered by more competition from foreign industries, the TPP actually does almost nothing to increase imports of foreign manufactured goods into the U.S.  Moreover, manufacturing unions only comprise a small share of the AFL-CIO’s overall membership. Organized labour, as Wessel says, seems to be “fighting the last war” and expending political capital over an agreement that doesn’t have all that much to do with its interests.

According to Ryan Olson of the conservative Heritage Foundation, the arguments that organized labour is making in its fight against TPP, such as those pitched by Trumka at a Peterson Institute event last month, are based on “particularly egregious misconceptions” about globalization and open markets. After debunking each of the alleged misconceptions, Olson says: “Unfortunately for Trumka, there is virtually no controversy about the benefits of trade freedom in the economics profession. Empirically, the benefits are clear and have proven themselves repeatedly over time. Instead of blocking free trade, labor leaders should be helping their members adjust to a growing and dynamic global economy. Failure to do so will only push them further to the periphery of the modern economy.”

Doubtless organizations like Public Citizen, an implacable foe of both globalization and trade liberalization, would strongly dispute that bold assertion – much as they did with the Obama administration’s release last week of state-by-state data on the U.S. jobs supported by exports. The advocacy group fired back with “50 Reasons We Cannot Afford the TPP’s Expansion of the NAFTA Model” complete with its own interactive map linking to data on jobs it claims were lost due to trade. The model of trade being advanced by the administration, Public Citizen says “has contributed to massive U.S. trade deficits and job loss, downward pressure on wages, unprecedented levels of inequality, lagging exports, new floods of agricultural imports, and the disappearance of family farms.”

For whatever it may be worth, the group was recently blasted by the Washington Post for its “misleading math” and awarded the dubious distinction of earning “Four Pinocchios” from the paper’s fact checker.  Although to be fair, the progressive Center for Economic and Policy Research took issue with the harshness of that judgment and further disputed the numbers, claiming the Post had gotten it wrong. And so it goes.