Winners and losers of free trade and globalization mulled by panel
By Sally Acharya
(From the American Weekly, Oct. 3, 2006)

Who are the winners and losers in globalization and free trade? That was the question posed at a panel at Kay Spiritual Life Center that was planned as a Table Talk lunch but moved into the larger space of the chapel.

The definition of globalization is amorphous and “is in the eyes of the beholder,” noted School of International Service economist Stephen Cohen. But as a rule, “if you’re anti free market, pro government intervention, you’re not going to like globalization,” he said.

Although he cautioned that there is “nothing perfect,” and that he is not “an unequivocal believer,” Cohen sees it as the best of the available choices.

The alternative, he said, is increased government intervention to restrict trade and capital flows. “The reason I can’t go along with this idea of government as the savior of the downtrodden of the world is I simply have little faith in government,” he said. “Anybody who wants to put faith in government should, frankly, take a second look at the Bush administration.”

A different view came from Mark Weisbrot, codirector, Center for Economic Policy and Research. In his view, the policy changes described as free trade have been disastrous for Latin America and even had a negative impact on the United States. “The majority of the country has lost out, even if you take into account all the cheap DVD players,” he said.

The two panelists spoke on the topic “Globalization and Free Trade: Who Wins, Who Loses?”

Weisbrot said that he didn’t oppose the market. “I want to make capitalism work, too, but I want to make it work for the majority,” he said.

In the 1940s, ’50s, and ’60s, it was common for a U.S. worker to be able to buy a house on one income and send children to college without a massive debt, Weisbrot said. How, he asked, has globalization impacted this?

Manufacturing jobs have been lost and not replaced with jobs of similar pay, he said. Over the last 30 years, production has increased by 81 percent, but the median wage by only 9 percent. “Even if only a fraction of increased wage inequality was due to trade, it would still offset the gains from trade liberalization for most U.S. employees,” he said.

Cohen agreed there were drawbacks to globalization, but free trade is the best way that has been found to bring about the greatest good for the greatest number. The major obstacles to economic success in the developing world are not trade related at all, he said, but involve good governance and human capital.

“I don’t care if a government is 100 percent free trade, if the government is corrupt, that country is probably not going to do very well.” A country without an educated work force will also be unlikely to rise economically, regardless of its economic policies.

Nothing in the theory, he said, says there won’t be losers. “Globalization is simply the internationalization of the fact that in the market system, there will be winners and losers,” he said.

But the biggest losers, he said, are the countries that have not globalized in a world where, because of technological advances, “it is inevitable the world economy will function in a more integrated way.”

However, “If you want to eliminate winners and losers, go back to a Communist system where everyone’s a loser except the party leaders.”

Weisbrot said that he didn’t oppose the market, but that “free trade” is not truly “free,” but tends to involve policies that favor the powerful. “I love the market,” he said, “I’d like to see competition on pharmaceuticals.”

Cohen countered that if pharmaceutical companies are to keep investing in research and development, they need a reasonable expectation of making a profit. However, he agreed that “free trade is not free trade, because politics dominate. If it was truly free trade, it wouldn’t be a 400-page paper. It would be one sentence—‘no more barriers.’”