Both Hillary Clinton and Barack Obama have stirred the protectionist pot in their campaigns to get the Democratic Party presidential nomination in the US. Politicians do that sort of thing to whip up electoral passions. John Kerry did worse in his 2004 campaign.
But we are forced to sit up and take notice when Larry Summers changes his stance on globalization, though ever so subtly. Summers is an outstanding economist, served in the Clinton administration as treasury secretary and was president of Harvard University. He was at the forefront of the great globalization push in the 1990s.
In two recent articles in the Financial Times, Summers suggests it is time to rethink globalization. He is not for a new protectionism or any such thing. But Summers now says, “The domestic component of a strategy to promote healthy globalization must rely on strengthening efforts to reduce inequality and insecurity. The international component must focus on the interests of working people in all countries, in addition to the current emphasis on the priorities of global corporations.”
Many other economists, such as Harvard University’s Dani Rodrick, have said that globalization is desirable, but how the world goes about it is also important. These economists argue that countries have eroded labour rights, blindly cut taxes, and eased regulations to attract business investment. Summers says, “Growth in the global economy encourages the development of stateless elites whose allegiance is to global economic success and their own prosperity rather than the interests of the nation where they are headquartered.”
These are all old and valid concerns. But, we fear that they could be used as a cover to justify a new protectionism, especially if the subtlety of Summers’ criticisms is not given its due.
The next US president is likely to hear more of such stuff when he or she takes the helm, especially if economic woes there continue. The temptations to then draw wrong conclusions from this talk will be strong.
Developing countries led by China and India may now need to take the lead in promoting the next round of globalization.
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