Globalism is failing
08 SEP 98 - Now, with Russia and much of Asia having crashed, Eastern Europe and Latin America imperiled ... the certainties of only a year ago seem far from certain." So wails The Washington Post in a Labor Day lament titled "Don't Quit on Capitalism Yet."
Sound advice, but what is failing the world is not capitalism, but globalism. We are reaping the harvest of having tried to weld the world's national economies, in disparate stages of development, into one Global Economy.
Consider what has been sacrificed to this moloch. Huge slices of our mighty industrial plant have been carted off. Our dependency on imports is at levels unseen since pre-1860. The world's greatest creditor-nation has become its greatest debtor. The real wages of our manufacturing workers are below 1973 levels.
Herewith are 11 steps that helped lead to today's disaster:
To convert a ruined Europe and Japan into powerful allies, Dwight D. Eisenhower throws open U.S. markets to foreign manufactures and asks nothing in return. The legendary industrial policy of the party of Abraham Lincoln and Theodore Roosevelt is jettisoned.
Japan begins to export its way to prosperity and to capture U.S. markets, as high-wage U.S. industries cannot compete with the low-wage Japanese. One U.S. industry after another - radios, TVs, machine tools, autos, motorcycles, optics - is hammered.
LBJ completes the Kennedy Round of trade negotiations in 1967. U.S. markets are thrown open to the world. Asia, seeing how Japan grew rich, copies Tokyo, cordons off its own markets and begins competing for the United States. American consumers love it.
By 1970, U.S. trade surpluses have begun disappearing, and America, fighting Asia's war in Vietnam, is running both trade and budget deficits. Dollars are pouring out. Our allies start cashing in dollars for gold. To save Fort Knox, Richard Nixon slams shut the gold window. The dollar sinks. U.S. economic hegemony is at an end.
The Arabs impose an embargo in 1973; oil prices quadruple. U.S. dollars pour out to OPEC, which deposits its petrodollar billions into U.S. banks. The banks begin madly lending to Latin America for higher returns than they can get in a dying American Rust Belt.
The Latin loans start turning sour in the 1980s, and the big banks cry for a bailout. The International Monetary Fund and World Bank begin to envision new careers - as "global lenders of last resort."
Congress and Bill Clinton pass the North American Free Trade Agreement (NAFTA) and then the General Agreement on Tariffs and Trade (GATT) in a special session. U.S. companies continue shifting production abroad to take advantage of low wages, no unions, minimal regulation and the freedom to export at will back to the U.S. market. Asia booms.
China now emulates Free Asia, devalues its currency to get a leg up on its rivals and begins inundating the U.S. market, running up huge trade surpluses. Free Asia is slowly shouldered aside.
The peso collapses, and investors who had plunged into Mexico start crying for a new bailout. Robert Rubin, who had led Goldman Sachs into Mexico and is now Treasury Secretary, collaborates with the IMF on a $50 billion package.
The message goes out: The Global Casino is a place where you pocket your winnings and the house makes good your losses at the end of the night. Money pours out to Asia, Russia and Latin America.
Debt piles on debt as competition for the U.S. market gets ever fiercer. The IMF suggests that Thailand and Indonesia would benefit from devaluation. They devalue. Much of Asia follows suit. Then, Russia devalues and defaults. Western investors flee - and begin to howl for the IMF and United States to send money to the bankrupt regimes so they can pay off their billion-dollar loans - to Western investors.
Asia's crisis is not due to fiscal folly but to over-production to capture the enormous U.S. market and over-investment from the United States, Japan and Europe.
Countless nations are today awash in debts that will never be repaid. The great question now is: Who will bear the losses?
Will it be the investors themselves, and shareholders in the institutions that made those investments, or will those vast losses be smoothly transferred, via the IMF, onto the U.S. national debt - and the backs of our children and grandchildren?
Had the United States followed a traditional policy of tough reciprocal trade agreements with Japan and Europe, had we let the markets do their winnowing work when foreign investments went sour, today's crisis would not be at hand. Again, then, what is happening is not a failure of free enterprise; it is a failure of Globalism.
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PAT BUCHANAN
Copyright 1998, Creators Syndicate |
