The Toronto Star
OPINION, Sunday, June 9, 1996, p. F3
Elites get wake-up call on perils of global economy
By James Laxer
A conceit of those with orthodox economic views is that they are the supreme realists of our era, that anyone who disagrees with their formula for a lean, mean globalizing economy is out of touch.
But just how realistic are those at the helm, the sort of people Conrad Black hosted at the Bilderberg Conference at a luxury estate in King City last weekend?
The lead article in the current issue of Foreign Affairs says the orthodoxy preached by the types who showed up in King City is imperiling the world order over which Black and his friends preside.
The article by Ethan Kapstein, director of studies at the Council on Foreign Relations, warns the post-war bargain between business and labor has been broken and that the new global economy is "leaving millions of disaffected workers in its train."
A lot of people have been making this point recently. But Foreign Affairs, published by the Council on Foreign Relations in New York, is not just any periodical. The council is the American establishment's inner sanctum for world policy making. For decades, its membership has included virtually all U.S. presidents and secretaries of state.
From the heart of the establishment, Kapstein's article sounds an alarm that the world is nearing a social precipice.
He contrasts the post-war decades - when the emphasis was on full employment, rising real incomes for workers and more generous social programs - with the present. Today "what governments are really trying to do is break their post-war deal with workers while maintaining their commitment to an open economy," he writes.
Kapstein provides plenty of evidence of the worsening fate of workers in the new global economy:
* The real hourly wage of American workers without a high school education dropped from $11.85 to $8.64 between 1973 and 1993.
* Between 1978 and 1990, U.S. manufacturing jobs plunged by 1.4 million, and when the displaced found new work it was usually at a lower rate of pay. (Canada has 170,000 fewer manufacturing jobs today than when free trade with the United States went into effect in 1989.)
* Western Europe has been experiencing frighteningly high unemployment rates, which have coincided with a sharp rise in anti-immigrant extremist politics.
Kapstein likens the advanced world's policy makers to "firefighters idly wondering what started the blaze while the house burns down." For him, the principal problem is that "restrictive economic policies - reduced deficits, reduced spending, reduced taxes, and that most exalted deity, low inflation - have favored financial interests at the expense of workers and have created an international rentier class."
The chief villains, in other words, are none other than the world's bond holders.
Kapstein calls on leading states to "reorient their economic policies toward growth," warning that if they fail to undertake "a co-ordinated international effort," the world "may be moving inexorably toward one of those tragic moments that will lead future historians to ask, why was nothing done in time."
The article is a cri du coeur to the economic and political elite to undertake enlightened reform from above. There have been times in history - Bismarck's launch of the first welfare programs in 19th-century Germany, Franklin Roosevelt's New Deal in the 1930s, and the U.S. Marshall Plan for the rebuilding of post-war western Europe - when reform from above has worked.
More often than not though, those who hold economic and political power fail to see the warning signs of impending disaster. World War II was the product of such a failure, and its aftermath - 25 years of enlightened economic and social policies - was the consequence of the new social and political alignments that emerged during the conflict.
The course we are now on, as Kapstein plainly sees, is not viable over the long-term. The question is: Will change come through reform from above, or through upheaval from below?
In my April 7 column, I erred in saying that Imperial Tobacco paid no corporate income tax in 1994. In fact, Imperial accounted for a substantial part of the $313 million in corporate taxes paid by Imasco in 1994.
James Laxer is a professor of political science at Atkinson College, York University. His column normally appears Sunday in The Star.
Subject(s) - The Toronto Star : economy
Length: Medium, 579 words
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