Globalization and Its Discontents

I

Globalization has gone from the corporate suites to the nation’s streets: in Seattle, Washington, D.C., Philadelphia, and this week in Los Angeles, demonstrators are protesting it, while politicians inside the convention halls are embracing it. Its proponents insist globalization is an ineluctable consequence of the information economy in an age of economic interdependence and creates and distributes wealth in ways that will ultimately benefit people throughout the world.

Adversaries counter that globalization is capitalism run amok, operating outside every conceivable regulatory frame, a human disaster for people’s jobs, communities and lives in the First World no less than in the Third. First World union members, citizens of the multiplying cities and towns that have watched jobs and then whole industries migrate abroad, underpaid teens slaving in Third World apparel plants and a great many ordinary citizens unable to see how they are benefited by multinational corporate mergers and international currency speculators will embrace the second claim. A great many politicians, most business people and the zany tribe of economists (save a few prominent dissenters) in the First and Third worlds will embrace the first claim.

What makes the dilemmas of globalization so perplexing is that both claims are at least to a degree true. Nor should this really be so surprising. Karl Marx noted long ago that capitalism was a dialectical system that could both harness unprecedented productive forces and produce even greater inequalities and injustices: untold wealth but untold oppression, greater productivity but diminished stability, economic progress but political tyranny, long-term growth but short-term revolution. Why should global capitalism, which permits the market to regress to an early 19th century kind of pre-civilized social Darwinist anarchy, be any different?

The headlines over the last six months have shown clearly enough how the globalization of the economy in the absence of any parallel internationalization of controlling democratic institutions can generate exuberance among its beneficiaries (the China vote) and anger and resistance, as well as a certain obdurate know-nothingism, among its victims. In the First World, where globalization has revolutionized markets and endangered the traditional job economy (work is portable, workers embedded in real families and communities and nations are not), it has jeopardized the old economy and all those dependent on it; and in the Third World, where it has made entry into the global economy dependent on the exploitation of women and children and the endangering of safety and environmental standards, it has jeopardized development.

Understandably, those appalled by global capitalism’s human costs have demonized its supporters and called for an end to it in the name of rights, protectionism or even anarchy. The street resistance by unions, environmentalists, protectionists and anarchists in Seattle in November, 1999, in Washington in April, in London in May and in Philadelphia in July, though colorfully many-hued, was dominated by Stop Globalization! rhetoric.

Nevertheless, trends rooted in the nature of the new telecommunication technologies, the interdependence of the information economy, the realities of ecological and biogenetic commonalty and the porous vulnerability of national boundaries in the face of capital flows cannot be arrested. History cannot be annulled.

Moreover, depending upon where you stand, resistance to globalization can itself appear as a reactionary rather than a progressive stance--a kind of stealth xenophobia by which First World countries use “progressive” values like opposition to child labor and environmental and safety abuses to raise labor costs in the Third World and thus attract jobs back to their own countries. Far from backing the Seattle demonstrators, the foreign ministers of India and Nigeria seemed nearly paranoid in their conviction that the demonstrators were actually doing the dirty work of First World governments, cloaking raw self-interest in high moralism. They understood there were two sides to Marx’s equation and that to abjure the costs of economic development by remaining mired in poverty was not an acceptable “progressive solution” to the problem of how to deal with its ecological and human rights costs. Environmentally safe workplaces are, after all, expensive, raising the costs of the goods produced and making them less competitive in the First World; factories that refuse to utilize cheap child labor also increase costs, making First World goods more attractive. And besides, the 12-year-old girls working for too little in Third World apparel factories would be working for even less, and probably as prostitutes, if they didn’t have these jobs.

Third World skeptics notwithstanding, globalization has its own noisy First World cheering section, from Francis Fukuyama’s triumphalist (if reluctant) paean to history coming to an end in the victory of global market democracy to Thomas Friedman’s recent “The Lexus and the Olive Tree” and a new book by two correspondents for The Economist, John Micklethwait and Adrian Wooldridge, called (tellingly) “Future Perfect.” Friedman’s “Lexus” and the Micklethwait-Wooldridge volume indulge alike in a pro forma acknowledgment of the “challenges” of globalization (“capitalism has often used capital to bully labor” admit The Economist authors, before forgetting about it) on the way to laying out a “this-is-the-best-of-all-possible-worlds” perspective that forgives the vices of globalism because the virtues are both so wonderful and so inevitable.

The triumphalists have learned not to discount skeptical critiques such as William Greider’s “One World, Ready or Not,” John Gray’s “False Dawn: The Delusions of Global Capitalism” and Edward Luttwak’s “Turbo-Capitalism.” It is always useful to be wary, caveat emptor to be sure, they say, on the way to declaring, as Friedman does, that globalization is as inevitable as the sun coming up, or as the authors of “Future Perfect” do, that theirs is “a measured defense of globalization” and that “yes, it does increase inequality, but it does not create a winner-take-all society, and the winners hugely outnumber the losers. Yes, it leaves some people behind . . .” but, rest assured, it also “makes us richer--or makes enough of us richer to make the whole process worthwhile.”

On the whole I prefer the less measured celebrations to such exercises in hypocrisy that acknowledge “challenges” and then bury them in a narcissistic rhetoric that privileges winners over losers and deep-sixes whatever moral and political problems it mentions en passant because--we read The Economist, don’t we?--we are surely among the winners. More honest are the anxious noises coming from key players in the international economy that suggest there is trouble right here in the global megalopolis; for example, James Wolfensohn at the World Bank, who said recently, “We live in a world that gradually is getting worse and worse and worse. It is not hopeless, but we must do something about it now.” And Joseph Stiglitz, formerly the chief economist for both the Clinton administration and the World Bank, who recently wrote a devastating critique of the IMF in The New Republic. But on the whole, the yea-sayers, supported by a chorus of bipartisan political leaders from old Republicans like the Bushes Senior and Junior to New Democrats like the Clinton-Gores, have presented themselves as both realists (globalization’s inevitable, so lie back and enjoy it) and quasi-moralists (don’t worry, we’re all gonna get rich sooner or later), while the dissenters have been cast by much of the media as mindless anarchists heaving rocks through McDonald’s windows and as naive kids dressing up as vegetables to make a point about ecology.

II

The literature is evolving, however, and a new set of books on globalization joins the argument with the uncritical global triumphalists frontally, substantively and extremely effectively. There are several careful microanalytic studies of the impact of economic globalization on American workers, including William M. Adler’s touching narrative history “Mollie’s Job” and John R. MacArthur’s somewhat more sweeping but equally affecting “The Selling of ‘Free Trade’ ” (note the interior quotes revealing the author’s full hand in the title of his book), which tells the story of how America achieved a bipartisan consensus on free trade that culminated in NAFTA (and implicitly set the backdrop for the successful pro-trade China vote this spring). These two closely observed and often moving accounts offer a striking portrait of the human costs of globalization in North America, exposing the insincerity of apologists like Friedman and Micklethwait and Wooldridge, who affect a passing interest in the costs of globalization that they then immediately discount. Affecting as they are, these two books finally seem on the side of the Stop Globalization! movement, however, which limits their usefulness as correctives.

There are among the new crop of works, however, a number that hope not to stop but in the title of Hazel Henderson’s new study, to get “Beyond Globalization,” accepting its inevitability but looking for ways to develop governance and civil society institutions as counterweights to its speculative depredations. Under her upbeat “Beyond” title, Henderson, who has been a leader in fresh thinking about a sustainable (ecologically sound) global economy, has written a pithy and useful booklet (less than 100 pages) summarizing a series of civic and political proposals from the Tobin Tax (a proposed tax on international currency transactions that could fund global civil society) to the Corporate Standards movement (which puts the onus of accountability on the for-profit world) and including charts, bibliographies and names and addresses of nongovernmental organizations, all of which will be of real use to activists and non-specialists alike.

Equally terse and even more political is the resistance and reform primer Sarah Anderson and John Cavanagh (with Thea Lee) have prepared under the title “Field Guide to the Global Economy.” More tendentious than Henderson’s book, the “Field Guide” offers a militant though largely undocumented argument indicting the corporate globalizers and international banks. It concludes, typical of its partisan tone, with highly charged sections on “worker power, shareholder power, voter power, consumer power, student power, people power, local power and artist power,” as well as “other forms of mass resistance including music, murals, comic books and the humiliation of corporations.” As a guide for those who come to protest with little more than conscience, this strident polemic actually provides a fair amount of basic information, including the crucial recognition that because we cannot stop, we must therefore try to shape the global future. As Barbara Ehrenreich writes in her foreword, the response to globalization’s inequities cannot be “a retreat to nationalism and rigid protectionism” but must be “even more connectedness . . . [l]abor unions in Mexico linking up with religious groups in Europe; students in California protesting on behalf of workers in Vietnam.” Unfortunately, because it is a good deal less than a judicious discussion of the difficult economic and political dilemmas posed by globalization, the “Field Guide” is unlikely to be taken seriously among those on the other side--a pity, for not only its heart but its mind are in the right place.

Michael Edwards’ dense and scholarly “Future Positive: International Cooperation in the 21st Century,” on the other hand, is probably too serious to be read by protesters, also a pity because Edwards, a student of nonprofits and nongovernmental organizations, offers a careful and realistic portrait of what Ehrenreich’s “connectiveness” might look like, of the potential role of cooperation in domesticating the competitive ethos of the global economy. He takes intervention to be “the dominant theme of the last 50 years” and cooperation--potentially--to be the “dominant theme of the next 50 years” and then sets out to show how this might actually come to pass. It is an important thesis on behalf of institutional cooperation and deserves a reading--perhaps in distilled form in, say, Harper’s or The Atlantic. Then there is George Soros’ striking rewrite of his earlier and underappreciated “The Crisis of Global Capitalism,” which, in the thoroughly revised version just published under the more appropriate title “Open Society” (but still carrying the original title in its subtitle as “The Crisis of Global Capitalism Reconsidered”), is perhaps the most important work in this new and rich collection of books on the challenges of the global economy. Soros does not write particularly well, obstructs his own economic analysis with long and dense (if necessary) diversions on epistemology and the philosophy of science and is especially weak on political theory, to which he turns for succor toward the end of his depressing assessment of the deep inadequacies of global capitalism in its current “market fundamentalist” phase. In fact, his book has only two virtues: It tells the unvarnished truth about the global economy with the blunt earnestness of a remarkably successful practitioner who nonetheless realizes that the economy that has made him rich makes the world as a whole a much poorer place; and it sets the question of remedy in the context of the theory and practice of the open society, a version of democracy associated with a fallibilist view of the world (we can’t prove things right, we can only prove things wrong, which means there can be no certain knowledge, least of all in the social realm). Carrying the imprimatur of an insider, Soros’ “Open Society” offers both a theory and a practice of reform aimed at rescuing global capitalism from its contradictions.

If you are looking for a one-book education on the history of globalization and the full context for the social science and policy debates over it, there is no better work than the magisterial text by David Held and his colleagues called “Global Transformations: Politics, Economics and Culture”--though if you get through its 540 pages you may need to read Saul Bellow or Philip Roth before continuing your global economics tutorial.

III

Before returning to Soros’ penetrating macroanalysis, let’s look more closely at Adler’s and MacArthur’s microanalytic examinations of what globalization means for American workers. “Mollie’s Job” is literally Mollie’s story, a story of life and work on the global assembly line as what begins as Mollie’s job in Paterson, N.J., (June, 1955-1989) migrates first to Mississippi (cheaper labor costs!) and then to Mexico (even cheaper labor costs!). Mollie James is a remarkable woman, the first woman union steward, among the first African American stewards, first woman to run a stamping machine making florescent light ballasts for Universal Manufacturing Co., 34 years on the job, the last to go. In the merger mania of the 1980s, the firm that had provided Mollie with a life work and the wherewithal for a life was sold twice, ending up with MagneTek, which eventually took the factory to Matamoros, Mexico, opening one of those endless foreign-owned assembly plants called maquiladoras that marry First World engineering and Third World labor.

Adler’s story has a simple and powerful moral: “The job in which Mollie James once took great pride; the job that fostered and valued her loyalty, enabled her to rise above humble beginnings, provide for her family--that job does not now pay Balbina Duque [the Mexican heir to Mollie’s job] a wage sufficient to live on.” This is the new economy in an all-too-human nutshell, in which corporate patriotism is no longer compatible with the spirit of transnational corporatism, in which worker disloyalty pays better than loyalty (see Micklethwait and Wooldridge, who celebrate this development) and in which vanishing jobs leave First World workers pondering the wonders of employability (Retool! Retrain! Forget that pension! Take two jobs!) even as those same jobs, reappearing in the Third World, fail to bring a living wage to workers supposedly empowered by fluid labor markets. Mollie’s story is the story of the death of unions, the rise of plutocracy, the disposability of workers and the portability of work, of “how government and Wall Street reward U.S.-based companies for closing domestic plants and scouring the globe for the lowest wages in places where human rights and labor rights are ignored; and about the ways in which free trade harms democracy, undermines stable businesses and communities, exploits workers on both sides of the border, both ends of the global assembly line.”

Change always exacts costs, and transitions from one economic mode of production to another have always been painful (look at what happened to America’s rural farm workers in the 19th century transition to an urban manufacturing economy). But economic change conditioned by democratic nation-states was measured, the losers shielded at least a little by Poor Laws if not welfare state redistribution. In the global economy there is neither democracy nor regulation. Absent the ameliorating impact of syndicalism, civility, the Tocquevillian institutions of civil society and a redistributionist democratic government, the essential contradictions of capitalism have free reign. Balbina Duque may be better off, low wages and all, than she was before; after all, union leader John Sweeney of the AFL-CIO is making cross-border union contacts and deals. But neither Balbina nor Mollie is ever likely to get a fair deal until we have figured out how to replicate on the global scale the civic, legal and governmental infrastructures that have domesticated capitalism within nation-states and saved it from its own greed.

Ironically, rather than embracing this challenging agenda, the United States and other democracies are actually collaborating in the triumph of economics over politics, in the denuding of the global arena of its potential regulatory institutions. How this came to be is the story told in riveting detail by MacArthur in his deeply troubling account of “The Selling of ‘Free Trade’.” Like Alder, MacArthur, the publisher of Harper’s magazine but also a first-rate investigative journalist, begins his story with the death of another old-line American manufacturing establishment, the Swingline stapler factory in Long Island City, N.Y. As a subsidiary of Fortune Brands’ American Brands, Swingline fled to Mexico in 1996 with hundreds of jobs.

MacArthur moves quickly from the local to the global scene, turning the Swingline story into a telling moment in the unsavory history of the “selling” of “anything but free” trade, as “another experts’ war, in which innocents not experts, the Americans and Mexicans whose livelihoods were at stake, served as cannon fodder.” Mexico, writes MacArthur, “had about as many options in the NAFTA negotiations as a punch drunk club fighter paid to take a fall in the third round . . . .” NAFTA itself was, for MacArthur, a product of what he calls the Democratic Party Inc.--President Clinton’s New Democrats who, in a “headlong flight from labor” cottoned to the agenda of the transnationals and banks who had greased their return to the White House. MacArthur provides the details on the critical meetings and the essence of the ruling ideology, which was about an investment strategy rather than about free trade. As Mickey Kantor said in 1999, “I don’t believe in free trade. There is no such thing. We want rules-based trading systems not free trade. Free trade is chaotic. I don’t know anybody who wants free trade.”

MacArthur reports on Clinton’s and Al Gore’s rhetorical brilliance in arguing they could both extend free trade and protect workers’ rights but believes extension trumped protection in just about every instance. Vice President Al Gore, he notes, refused to be interviewed for the book and prefers not to talk about NAFTA. This is perhaps why Ralph Nader is making inroads into the Democratic National Convention’s constituency and why Clinton has been irritating his own trade advisors by publicly criticizing the lack of transparency and accountability at the World Trade Organization and the International Monetary Fund. Maybe Gore should try out this line in his acceptance speech instead of merely echoing Mickey Kantor. In response to Kantor’s allusion to the need to develop “rules-based trading systems,” Gore needs to tell us: Whose rules? To what end? On behalf of whose legitimacy?

In his hard-hitting and uncompromising (if also partisan and one-sided) account, MacArthur does not really answer these questions other than to indict the beneficiaries of the aggressive investment strategy masquerading as “free trade.” Soros takes up the challenge where MacArthur leaves it: What are the rules of the global economy and how might they be democratized? Soros has answers, and delegates to the Democratic Convention would do well by those who are boycotting or picketing them to find out what those answers are.

IV

The author of “Open Society” seems initially to be two people: George Soros, the hard-boiled and successful investor in global capitalism who once upon a time dared to impoverish whole nations on the way to becoming rich, and Soros, the soft and sympathetic civic philanthropist who not only has developed a powerful critique of global capitalism but has put a good deal of his money where his mouth is, building civic infrastructure in Eastern Europe and Russia. The first Soros is an unapologetic capitalist and radical individualist, the second a thoughtful social critic and a citizen. Yet “Open Society” is the product of a single author whose singular perspective embraces both of these disparate fragments: for both the champion of capitalism and free markets and the hero of civil society trace their lineage to the fecund idea of the open society, which is the sovereign idea informing much of Soros’ practice as a financier and all of his analysis as a theorist in “Open Society.”

As purveyed by Sir Karl Popper writing immediately after World War II, the idea of the open society grew out of a critical reading of Plato, Hegel and Marx, a reading that led Popper to believe that the quest for the absolute truth in philosophy made for the nefarious politics of the closed society, of which Nazi Germany and the Soviet Union were recent and horrendous exemplars. True knowledge entails true knowers, and when true knowers be-come kings or fuhrers or commissars, they govern inflexibly and tyrannically, deploying orthodoxies derived from historicist understandings of truth that brook no resistance and are intolerant of democratic choosing and ordinary citizens. In a word, what Popper argued was that Certain Truth transformed into politics becomes the doctrine of totalitarianism.

What Soros the amateur philosopher learned from Popper the professional philosopher was that epistemology (the study of how we know things) has consequences for politics (how we do things together) and that a healthy fallibilist philosophy of knowledge (no one has the truth, all theories are fallible) is not only the sole reasonable epistemology for the working scientist but the sole reasonable perspective for the individual investor and the democratic citizen.

Fallibilism in politics and in economics means an open society in which doubt about certainty rules and all truths are contested. The idea of the open society becomes the foundation both for free-market economies--flexibility, acknowledging unpredictability and the willingness to consider one might be wrong can pay handsomely, but command economies paralyze the exchange system, impeding liberty and efficiency alike--and for democratic societies, which recognize that truth is elusive and human beings ultimately fallible and that no one’s voice merits more than a single vote. Architectonic social engineering (Five-Year Plans and Thousand-Year Reichs) destroy freedom without achieving utopia. Open societies prize practical politics and pragmatic economics over Certain Truth. After all, in a world where knowledge is uncertain, no one has the right to impose norms, values or goods on others.

Under the governing principles of the open society, Soros the successful financier and Soros the civic philanthropist are simply two expressions of the same idea. Inside the nation-state, where both the investor and the citizen have roles to play and appropriate institutions and rules by which to play them, the only important question is how to balance the two. In Soros’ terms, the challenge is how to assure that individuals as economic beings can act selfishly and yet, because economics has its rules (Mickey Kantor’s insight!), assure at the same time that as political beings, they have the power to make the rules. Individuals (Soros the investor) fight for their own interests, while citizens (Soros the philanthropist) fight for the common rules that transform individual interests into common goods.

V

Make way, however, for the “crisis” in global capitalism. In the international economy, the radical asymmetry created by the globalization of markets in the absence of a parallel globalization of political and civic institutions has meant that powerful individuals and corporations do as they please according to rules which, if they exist at all, reflect only their own interests. Hence creditors in the First World (individual banks and investors) are advantaged by IMF bailout policies, while debtors in the Third World (governments and the public goods and people they are supposed to represent) are marginalized. And because free markets reward efficiency and profitability (their virtue) but neglect stability and justice (their vice) in the absence of the democratic rulemakers who serve them, global capitalism is likely to create not only an ever more polarized and unjust world but also a more unstable and dangerous one--ironically, one that ultimately is as dangerous for the capitalist individual as for the democratic citizen.

On the way to describing this dilemma, Soros offers a series of powerful case studies told from the inside out (the 1997-’98 Asian crisis, the Russian crisis, anarchy in the Balkans) from his own perspective as both individual investor and civic philanthropist. The result is a book with a powerful credibility, one that utilizes both the private and public perspectives to make the same argument on behalf of the open society.

In considering the new global architecture necessary to domesticate global capitalism, Soros reinforces Popper’s social logic with Alexis de Tocqueville’s civic logic. An open society needs mediating institutions, a robust civic realm in which citizens can interact as more than isolated individuals and consumers but as something other than once-a-year voters. An open society rests neither on a market economy alone nor on a democratic constitution alone. A free economy greases individual relations and a democratic constitution formalizes social relations, but openness is rooted in civic relations which are not about what we know but about how we interact, how and for whom we set the rules. Justice and stability will not come to the global market until the open society finds its international venue.

Soros is an apt student of the open society. Although he is deeply persuaded that the international economic system is both destabilizing and unjust, and he makes a powerful case for a global open society, his are not easy answers. His book is dotted with the self-doubts of the fallibilist: “I don’t know,” “I’m not sure” and, most dramatically, “I was wrong.” But what he does know trumps what others pretend to know, and his modesty lends credibility to his arguments. His is an insider’s critique that cannot be shoved aside as the rant of some well-intentioned but naive street demonstrator. It may turn out that Soros will have to be taken as seriously in the future for his ideas as he has been taken seriously in the past for his money.

Read then Adler to understand what globalism costs ordinary Americans and workers in the Third World; read MacArthur to understand how “free trade’s” mantras have succeeded in a nation in many ways hurt by raw global capitalism because government has become the traders’ and investors’ tool rather than their regulator. But to understand how global capitalism has gone astray both as civics and as economics and how the survival of a healthy global market will depend on the building of a healthy global civil society, read Soros’ “Open Society.” In this book he has done something all the millions he has made as an investor and spent as a civic philanthropist have not been able to do: link the economics of free markets to the politics of democracy and show why, unless they are buckled together by the civic infrastructure of an open society, the former is likely to destroy the latter and make the world, for all its riches, a far poorer place.