book review-jagdish bhagwati's in defense of globalization
TRANSCRIPT
The term “globalization” has become a catchall term for all manner of political,
economic, social, environmental, and cultural change. Accomplished minds like Noam
Chomsky, Ralph Nader and Thomas Friedman cannot agree on what globalization
actually is or what caused it or what it will cause.
Despite its elusive definition, or perhaps because of it, globalization has acquired
many critics in the past decade or so. The anti-globalization movement first reached the
public consciousness through massive protests, which occasionally turned violent, at a
1999 meeting of the World Trade Organization (WTO) in Seattle. The protests have
accompanied almost all subsequent gatherings of the WTO. The regularity of dissent
implies some sort of cohesion within the anti-globalization crowd. However, depending
on the critic, globalization is either a cause or effect (or both) of all manner of political,
economic, social, environmental, and cultural ills.
For economic purposes, and presumably for the author of In Defense of
Globalization, Jagdish Bhagwati, the term “globalization” refers to the liberalization of
trade and trade barriers between countries and corporations. Still, Bhagwati’s defense
requires explaining the daily exchange of billions of dollars (and yaun and euros)
between far-flung companies. The exchange is facilitated by labor agreements that have
frequently been negotiated by the oft-maligned WTO.
More than one person has called Bhagwati the most published economist of his
time. Indeed, his mentor, Nobel Laureate Economist Paul A. Samuelson said of him: “I
measure a scholar’s prolific-ness not by the mere number of his publishings. Just as the
area of a rectangle equals its width times its depth, the quality of a lifetime
accomplishment must weight each article by its novelties and wisdoms...Jagdish
Bhagwati is more like Haydn: a composer of more than a hundred symphonies and no
one of them other than top notch.”
Bhagwati is a professor at Columbia and a Senior Fellow in International
Economics for the Council on Foreign Relations. He has also advised the United Nations
on globalization at the urging of Kofi Annan and advised the WTO as well as its
predecessor, the General Agreement on Tariffs and Trade (GATT).
Bhagwati’s goal is to demystify globalization for the layperson while taking on
the sincere concerns of its critics. The complexity of globalization makes this undertaking
no mean feat. By and large, Bhagwati is successful in this task. This should come as no
surprise since Bhagwati is perhaps free trade’s biggest advocate. He addresses the
greatest concerns of globalizations critics (exploitation of labor, political corruption,
environmental hazards and more) in detail, but while waving globalization’s flag,
Bhagwati is fair enough to address failures of the past and present.
By labeling such a massive amount of economic activity it is suggested that
globalization is a recent trend or phenomena. However, trade between countries goes
back to the West’s initial forays into China for silk and doubtless even earlier than that.
The East India Trading Company dates to the Seventeenth Century. Nevertheless, the
scale of trade has increased dramatically since those comparatively prehistoric times and
increases in all aspects from one year to the next.
What is recent is the feeling by many corporations to demonstrate some sort of
social responsibility in the face of globalization critics. The goal of corporations has
always been to be profitable. The rise of global corporations, or multi-national
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corporations (MNCs) according to Bhagwati, has in some ways coincided with the dawn
of the Information Age. The average American is more likely to have a personal financial
stake in an MNC—either through ownership of stock or a mutual fund—than ever before.
A company’s profitability, or lack thereof, is public knowledge faster than ever. With
ownership comes a demand for transparency.
In a previous era, both large and small corporations concerned themselves only
with profits and not with their public image. Although the rules may have changed, the
expectations of corporate responsibility by the public have changed as well. In the
January/February 2008 issue of Foreign Affairs, Klaus Schwab, Executive Chair of the
World Economic Forum encourages greater corporate responsibility. Schwab points to a
growing weakness in the nation-state, which, in turn, has shown the limits of political
power. He wrote, “The lack of global leadership is glaring, not least because the existing
global governance institutions are hampered by archaic conventions…” He acknowledges
that sovereignty still has potency, “but authentic and effective global leadership has yet to
emerge. Meanwhile, public governance at the local, national, regional, and international
levels has weakened. Even the best leaders cannot operate successfully in a failed
system.”
Schwab believes that since corporations provide so many services to the public
and to its own employees they are the natural choice to slide into the leadership void he
described. His article is a challenge as much as anything for corporations to raise their
own standards in a newly transparent environment.
Transparency can have a downside for MNCs, however. With the exception of its
own shareholders, many Americans find it unseemly that ExxonMobil is posting record
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quarterly profits while the cost of a gallon of gas heads toward four dollars. Many
Americans find some executives’ pay needlessly exorbitant. They wonder why
companies like Wal-Mart cannot afford to pay its employees a living wage and provide
them with affordable health insurance. Citizens, not just those especially concerned about
the environment, cannot understand why they foot the bill for an oil spill in San Francisco
Bay. Furthermore the indiscretions of Enron, Tyco and WorldComm, to name but three,
have not faded from memory. Many worry what corporations are doing when they are out
of the view of the public eye.
While Schwab urges an enhanced role for MNCs, Bhagwati points to several
instances where corporations’ involvements in affairs of state were less than noble.
Specifically, he talks about Royal Dutch/Shell’s involvement with a corrupt Nigerian
regime in the late 1990s and ITT and Pepsi’s complicity in the overthrow of
democratically elected Chilean President Salvador Allende.
At a fundamental level, Bhagwati understands that the goals of the state and the
corporation are different. Corporations, at the end of the day, exist to make a profit.
Governments, especially democracies, exist to help their people. The only thing they
have in common is the need for oversight, which Bhagwati endorses through such
measures as the United Nations’ Global compact. Any overlap of roles should remain
coincidental.
Despite Chevron’s advertisements about lessening their carbon footprint or Miller
Brewing Company’s commercials about coming to the rescue of Hurricane Katrina
victims the public is probably best served by assuming that corporations will continue to
put profits first.
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As such, corporations will continue to lobby governments for their own benefit
and citizen-based, special interest driven non-governmental organizations (NGOs) will
challenge corporations’ misdeeds to the very same government.
Yet, to deny that corporations influence politics in a positive fashion is to be not
only overly cynical but to fly in the face of research. Bhagwati undoubtedly has access to
ample empirical evidence to show that increased trade in despotic or non-democratic
nations is likely to be a strong step toward democracy and, therefore an improvement in
the quality of life of the country’s citizens.
Rather than focus on the numbers, he picks apart critiques of the democracy-
globalization relationship. Bhagwati is at his strongest when he points to the Organization
for Economic Development (OECD)—an organization that is a grandson to the Marshall
Plan—as support. OECD members have experienced a parallel increase in trade and
democratic elections. A member of Swedish parliament (and economist), Carl Hamilton
backs up Bhagwati’s assertions.
The rise of globalization neatly corresponds with the fall of the Berlin Wall and
the end of Soviet influence in Eastern Europe. Bhagwati successfully argues that this is
not a historical coincidence. The obvious contemporary exception is China. While China
is far from a democracy, few would argue that the current regime is not as violently
oppressive to its own citizens as previous generations. Perhaps the Chinese are simply
putting on a better face to the world as the 2008 Beijing Summer Olympics near, but
post-Olympic China is certain to be monitored for political and economic changes.
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There is a further point to be made about globalization being a tool of personal
empowerment—if not of clear-cut democracy. Paul Collier, author of The Bottom Billion,
has demonstrated in several research papers and articles, that foreign investment in
developing nations is the best alternative to bring an end to tribal governments and reduce
the spillover cost to neighboring nations.
Collier does not advocate unqualified aid and/or investment. He insists that,
“properly designed, aid is more effective than the political strategy of democratization,
and more cost effective than military intervention.” Collier estimates that using
traditional methods to turn the fortunes of a failing country would take approximately 60
years and cost in excess of $100 billion. His estimates do not include what effect outside
military intervention might have. Given that the United States is engaged in two wars that
appear to be of considerable length and has expressed little reluctance to embark on a
third (Iran), aid to developing nations, through United States corporations, seems
preferable to even the slimmest military involvement.
Collier sharply observes that the extended, and seemingly open-ended military
involvement in Afghanistan and Iran in and of itself is evidence that military solutions
alone are not enough to revive a failing state.
Similarly, corporations supplanting government in places of leadership
(symbolically or literally) as Schwab seems to endorse, would be too one-dimensional a
solution.
Throughout Bhagwati’s book the theme emerges that even though globalization
may be the catalyst to significant change for the better, it is not monolithic; it is the
confluence of economic, political, social and cultural forces.
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As vague and all encompassing as the term “globalization” has become, the same
could be said for the word “culture.”
Instinctively, countries think of “culture” as those things that make them unique
to other parts of the world. However, it might equally be argued that “culture” are those
things that other countries associate with a particular state or region. In the United States,
citizens quickly tag things as being “Asian” or “French” or “German.”
Culture, as many have said, is the number one export of the United States and
Bhagwati from that perspective. Countries all over the world have expressed resentments
of varying intensity about the presence of American culture in their own country. From
McDonald’s to SUVs to Hollywood action movies people have vigorously and
continuously voted with their feet. While conservative elements, especially in Islamic
countries, reject American culture out of hand, overwhelming majorities have welcomed
it with little reservation. According to a study completed in 2007 for Social Research
citizens in Lithuania and Ukraine maintain strong identities to their homeland but at the
same time indicate receptiveness to cultures other than their own. This is not insignificant
considering that both nations are not even a generation removed from being part of the
Soviet Union.
But, what of Americans themselves and their culture? Any person who has
traveled throughout the United States, including a foreigner, is certain to notice regional
differences—in all aspects of life. Or would they? The perception of many non-
Americans is that there is a pervasive American culture that exists in Louisiana and
Maine. In some cases, Americans welcome the impression of unanimity. On the other
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hand, a native of either Maine or Louisiana would almost certainly laugh at the
suggestion that life in one state is similar to life in the other.
If there is a flaw in Bhagwati’s book it is his failure to address the internal conflict
the United States is having with itself regarding culture. He does not omit the issue but
considers it a non-issue: “Americans certainly find it difficult to see global integration as
a threat to culture, for they are truly an exceptional nation here, as in most matters (119).”
It would be excessive to cite Pat Buchanan and say that America is in the midst of
a culture war, but in the face of globalization the country is reevaluating itself.
During the Asian Miracle of the 1980s, Japanese ownership of such institutions as
Rockefeller Center was met with howls of disbelief and self-pity. Yet, the economy not
only rebounded, it exploded due in large part to Silicon Valley-based Internet boom
during the 1990s.
Now, presidential candidates speak about jobs lost to Mexico and China. The
country, for the time being anyway, has virtually conceded (with their wallets) that Japan
makes better cars. Lost in this is the fact that American-based companies were
responsible for many of the jobs that left for other countries. By the same token, Japanese
auto companies have opened large plants in Alabama and Tennessee. On a smaller scale,
Chinese-based printing and machinery companies are opening offices and plants in the
United States in increasing numbers. In 2007, United States investment in China was $2.7
billion while China’s investment in U.S. companies was over $9 billion. Admittedly, the
latter figure is inflated by two particular investments—in Morgan Stanley and The
Blackstone Group—that neared $8 billion. Still, the idea of what is “American” is
becoming increasingly difficult to determine.
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Even within its own borders regional differences are becoming blurred. It is
entirely possible to wake up in a Ramada Inn in Ohio on one day and a Ramada Inn in
Oregon on the next day and see a Gap, a Wal-Mart, a Pizza Hut, a Home Depot, a Dunkin
Donuts and a Radio Shack on both days.
A look around the suburbs of America would probably reveal that many of them
look the same. There are lots of strip malls and lots of what have become known as
“McMansions.” Where there aren’t McMansions there are waves of condominium
developments where farmland used to be. This sameness—some would say blandness—
is probably not what the global community thinks of when they think of something that is
“American.” Being American is a way of life and uniqueness that cannot be detected
superficially, at least that is what many Americans like to think. Part of this perception is
related to a sense of independence, the ability to choose free of influence, what is best for
each person. Over and over Americans have chosen the Gap over the locally owned
clothing store. They have chosen the guaranteed low prices and convenience of big box
stores over the family owned department stores of yesteryear. But, in asserting their
independence have Americans ceded some of their identity to the forces that are
globalization?
For the average person, globalization is a win-win proposition. The increase in
competition and benefits of comparative advantage do not take long to identify.
I personally can attest to this just within the past week. While I was not thrilled to
find that my stockbroker’s new office is between a beauty salon on one side and a
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Subway branch on the other, the benefits of this thing called globalization were hard to
miss.
There was fire down the street that started on the second floor of a residence. Fire
trucks—having been notified by a cellular device (probably made in Norway)—arrived
within minutes. The firemen dismounted a truck, built from parts that almost certainly
came from over the globe which were probably assembled in Canada or Mexico. The fire
hoses they used to quickly put out the blaze and minimize the damage were probably
made of fibers from a developing country and maybe even assembled in yet another
developing country. I can only guess where the boots, coats, ladders, chemicals and other
materials came from. And I doubt the family whose home was spared really care.
The fire broke out while I was watching the film El Topo, whose eccentric
director Alexander Jodorowsky said of himself, “I was born in Bolivia, of Russian
parents, lived in Chile, worked in Paris, …founded the “Panic”' movement with Fernando
Arrabal, directed 100 plays in Mexico, drew a comic strip, made El Topo and now live in
the United States.”
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Reference List
Bhagwati, J. Biographical Information on Professor Jagdish Bhagwati. Retrieved on
April 27, 2008 from http://www.columbia.edu/~jb38/biography.html
Chauvet, L & Collier, P. (2005). Policy Turnarounds in Failing States. Oxford. Centre
for The Study of African Economies, Department of Economics, Oxford
University.
Chauvet, L & Collier, P. (2005). Alternatives to Godot: Inducing Turnarounds in Failing
States. Oxford: Centre for The Study of African Economies, Department of
Economics, Oxford University.
Čiburienė, J., Guščnskienė, J., & Orehova, T. (2007). The Changes of Cultural Values:
Lithuanian and Ukrainian Case. Social Research. 2007 (2), 33-38.
Ebert, R. (2007, October 6). El Topo. Retrieved April 30, 2008 from
http://rogerebert.suntimes.com/apps/pbcs.dll/article?AID=/20071006/
REVIEWS08/71006001/1023
Gifford, R. (2007). China Road: A Journey Into the Future of a Rising Power. New
York: Random House.
Klein, N. (2000). No Logo: Taking Aim at Brand Bullies. New York: Picador.
Lee, D. (2008, May 5). To Chinese Firms U.S. is a Bargain. Los Angeles Times. pp. 1A,
4A.
Levy, B.H. (November 2005). In the Footsteps of Tocqueville. Atlantic Monthly, Vol.
296, No. 4, 127-138.
Samuelson, P. On occasion of 70th Birthday Festschrift Conference Jagdish Bhagwati,
the Wunderkind who Became the Tireless Theorist of International Trade.
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Retrieved on April 27, 2008 from http://www.columbia.edu/~jb38/Festschrift
%20Dinner_Speech_Samuelson.doc
Schwab, K. (Jan/Feb 2008). Global Corporate Citizenship. Foreign Affairs, 87 (1), 107-
118.
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