The end of the globalization consensus

(written by lawrence krubner, however indented passages are often quotes). You can contact lawrence at: lawrence@krubner.com

After 1945, the USA lead the effort to establish a liberal zone of less restricted trade, an effort to step away from the protectionism of 1914-1945. And for awhile the leadership of the USA was unified on the need for this effort. But consensus is dying:

Summers’s ascendance is a reflection of the abandonment by much of the party establishment of neo-liberal thinking, premised on the belief that unregulated markets and global trade would produce growth beneficial to worker and C.E.O. alike.

Summers’s analysis of current economic conditions suggests that free market capitalism, as now structured, is producing major distortions. These distortions, in his view, have resulted in gains of $1 trillion annually to those at the top of the pyramid, and losses of $1 trillion every year to those in the bottom 80 percent.

At a Feb. 19 panel discussion on the future of work organized by the Hamilton Project, a centrist Democratic think tank, Summers defied economic orthodoxy. He dismissed as “whistling past the graveyard” the widely accepted view that improving education and job training is the most effective way to reduce joblessness.

“The core problem,” according to Summers, is that

there aren’t enough jobs, and if you help some people, you can help them get the jobs, but then someone else won’t get the jobs. And unless you’re doing things that are affecting the demand for jobs, you’re helping people win a race to get a finite number of jobs, and there are only so many of them.

He adds that he is “all for” more schooling and job training, but as an answer to the problems of the job marketplace, “it is fundamentally an evasion.”

This line of thought has strong appeal to liberal economists and policy makers who argue that government must intervene to create more demand for workers, primarily by spending more, especially spending that goes to private contractors who would then start hiring.

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