Paul Jay speaks with Jomo K.S. about the change in production patterns all over the world as a result
PAUL JAY, SENIOR EDITOR, TRNN: Welcome back to New York City at the United Nations with Jomo KS. He is the assistant secretary-general for economic development at the United Nations. Thanks for joining us again.
JOMO KWAME SUNDARAM, ASSISTANT SECY. GEN., ECONOMIC DEVELOPMENT, UN: Pleasure.
JAY: Let’s talk about the real economy. We’ve been doing reports from a nickel miners strike in Sudbury, Ontario, we did reports from Detroit, and the one thing the workers are debating and talking about, maybe perhaps more than anything, is what do we do, how do we compete with this cheap labor around the world. In the nickel miners strike in Sudbury, they’re dealing with the same Vale Inco—a Brazilian company, owns a nickel mine in Indonesia. The autoworkers are talking about autoworkers in Brazil. This ability of multinational corporations to play workers off against each other and have a general lowering of wages and purchasing power around the world, how much is this at the root of the crisis? And if so, what can we do about it?
JOMO KS: I wouldn’t say that this is at the root of this current crisis, although I think this is suddenly part of the problem of globalization as we have experienced it over the last three or four decades. The roots of the current crisis have a lot to do with the deindustrialization which has taken place in the United States and the inability of the United States to export very much beyond certain types of products which have very high R&D content—pharmaceutical products, perhaps, some higher-end electronics products, some armaments, planes, that kind of stuff. But there has been otherwise a significant deindustrialization as a consequence of the relocation of productive capacities abroad, in south of the border, part of it as a consequence of NAFTA, and elsewhere as well. The big problem is that all workers are also consumers, and insofar as consumers they enjoy the benefits of lower prices for their commodities, they do appreciate that aspect of globalization. But globalization is a double-edged sword, and so while they appreciate globalization in terms of being able to access products much cheaper, they also resent the fact that the basis for their own livelihoods is often being undermined by that very same process. So this is part of the whole contradiction. And so at any particular point, you know, you have the entire public thinking as consumers, appreciating globalization, and segments of that public resisting globalization because of the threats to their livelihoods. And it’s often that they’re often [inaudible] minorities as a consequence of this, and as a consequence it’s unlikely to change. But one of the major consequences of this change in production patterns around the world was that the United States became a net consumer, importing stuff from all over the world and exporting far less. And this was made possible because the rest of the world was quite happy to lend to the United States. So the United States was no longer a net saver; it was the rest of the world which was saving to the United States, and there was this illusion, perpetuated by some very, very senior officials, that the United States was doing the rest of the world a big favor by using their foreign excess savings, ostensibly, from the rest of the world. And this lasted for, you know, at least half a decade, some arguably up to a decade. But it was a very untenable situation, because, you know, the rest of the world is not going to indefinitely lend to the United States. This happened in the late 1960s, and it led to the end of the Bretton Woods system in 1971, when Nixon pulled out of the Bretton Woods System. Same thing happened in the first Reagan term. And finally in 1985 there was a meeting at the Plaza Hotel here in New York which led to the yen appreciating very significantly against the US dollar. And in a sense this is the third major episode in recent times. But part of the problem right now is that we do not have a system anymore. When Nixon pulled the plug out of Bretton Woods System in 1971, we’ve basically survived in a non-system for the last four decades, and this is part of the problem.
JAY: The solution being proposed—and there’s going to be a resolution at the AFL-CIO meeting coming up in Pittsburgh in a few weeks—buy American, and the rise of a protectionism is the way to solve the crisis in the United States. What do you think of that? And what will that mean for the rest of the world?
JOMO KS: Well, it’s going to be an exhortation that will have very limited consequence unless it’s translated into policy. And if it’s translated into policy, that policy becomes problematic because it would violate the World Trade Organization. I mean, it’s been the United States, especially in the last couple of decades, which has been actively pushing very, very hard for further trade liberalization at a time when the United States did not have the major trade deficits it currently has. So it pushed very successfully for that trade liberalization. It has undoubtedly been able to gain a lot of revenues, at least for the corporate class, from the sale of intellectual property rights and so on and so forth. But in terms—the major consequence of trade liberalization has actually been the deindustrialization not only of the United States but many of the richer former industrial economies.
JAY: So, if that’s the case, do you see a rise in protectionism here?
JOMO KS: I see a strong rise in protectionist tendencies. But whether or not those tendencies will be allowed to translate into actual protectionism remains to be seen. I do think that the earlier tendencies towards trade liberalization will be checked if not reversed, but it will be very, very difficult to reverse many of these older commitments. I think the protectionism which we are likely to see in the West is going to be of a new type. In other words, you’re going to disguise protectionism under a guise of doing something else, ostensibly, for example, saving the environment, or in the name of human rights, or something like that. Those will be the new pretexts.
JAY: What’s an example [inaudible]?
JOMO KS: If you look at the bill which is currently before Congress on climate change, it does suggest that those countries which do not do enough for climate change, including very, very poor countries who have hardly the means to do anything, the default mode of response will be to basically restrict imports from those economies, which would be—you know, so you have, ostensibly, green protectionism in this particular case. But you can imagine, you know, a protectionism ostensibly because labor rights are not being recognized in a particular economy, and on the basis of some violations you can basically introduce regulations. You shall say, okay, if the minimum wage is not such-and-such an amount in a certain economy, therefore we stop importing from that economy.
JAY: But what’s the alternative to something like that? If you’re going to put some pressure or push back on this global competition amongst workers for workers wages, what other mechanism is there if there isn’t some kind of push-back on minimum wage and working conditions?
JOMO KS: Well, that’s a pretty tricky thing. I think the major thing would be to really have major reforms in terms of improving the quality of education and health in this country. And especially with health, we are quite aware of the huge problems which actually unnecessarily raise the cost of health care in this country and makes, you know, many US products quite uncompetitive. But I think it’s not a problem just of the auto industry, or, you know, it’s a more general problem. And I think in the longer-term interests of everybody there is a need to try to reorient our economy, to do, to reconsider some of the proposals which came out of the 1930s. If you think about Roosevelt, for example, and you think of some of his major initiatives, one of the things that he did at that time, when the US had a much, much smaller population, was to introduce what we call the Citizens Conservation Corps [sic], which did—you know, the National Park system came out of that and a whole bunch of other things came out of that. And 2 million people out of a, you know, [inaudible] over 100 million people were employed at some point [inaudible] in the Citizens Conservation Corps. Now, given the problems of climate change and a whole range of other things, if you think about renewable energies and the labor requirements of renewable energies, a major shift of investment in that direction—. But you need to create the conditions for that investment to be desirable, and the conditions have not yet been created. Likewise, I would say that if you think about the Tennessee Valley Authority (TVA) and how it created the conditions for development of the South—. After the South lost the Civil War, there was relatively little development, but TVA basically opened up conditions for very significant development in certain parts of the South. So there’s room for that kind of initiative. And there have been very important initiatives in this country. But the thought of recognition of the importance of such initiatives—you think about military spending and the tremendous role of military spending R&D has had in terms of American industry—the Internet, the CT scan, and a whole bunch of other things. But there is no explicit endorsement of industrial policy in what is arguably the richest economy in the world and arguably having some of the most, you know, developed scientific minds and so on and so forth. It’s all been left to the private sector. But we clearly need a major public-sector initiative in dealing with some of the problems we have at the beginning of the 21st century.
JAY: Much of what’s being talked about now in terms of reforms of the finance sector and other kind of economic thinking is to get back to where we were before the crash. But even before the crash, the economy was not working very well for most of the people of the world. So in the next segment of our interview—and part of what your work here at the United Nations is is to imagine what a different kind of economic order would look like—tell us what that would be. Please join us for the next segment of our interview on The Real News Network.
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