When whiners become winners, everybody loses

Jean-Pierre Lehmann YaleGlobal/Lausane

The French and the Dutch have voted "no", not so much against the proposed European Constitution, but as a visceral reaction to the perceived malaise induced by globalization. Much of the rest of the EU, especially the big continental countries -- Germany, Italy, and Spain -- feel negatively. In fact, negativity with respect to globalization is one thing that both sides of the Atlantic seem to share. What has happened?

Exactly a decade separates two great landmarks in the contemporary history of globalization: the collapse of the Berlin Wall, November 1989, and the chaos of the WTO ministerial in Seattle, November 1999. Thus, while Berlin -- briefly -- gave the semblance of centripetal forces creating a global community, Seattle saw cacophonic centrifugal forces running amok. Seattle was the first, but not the last, giant raspberry to globalization.

The violence of the anti-globalization movement in Europe and the U.S. has in recent years abated. But that is mainly because it has moved from the fringes to become embedded in significant chunks of society, including many NGOs, trade unions, religious groups, the popular media, uncompetitive industries (including agriculture and textiles), the public sector (often including school teachers), and a good deal of the political class.

Many of the EU's most vocal proponents see further integration as a weapon against outside globalizing forces which threaten to erode their sense of "European" identity.

Therefore, in urging the French electorate to vote "yes" in the referendum for the EU constitution, President Jacques Chirac positioned himself as a champion of anti-globalization. The vote was a resounding "no," not because voters were pro-globalization, but because they were even more anti-globalization than Chirac. Just a fortnight after the French vote, 86 members of the U.S. House of Representatives (a startling one-fifth of the total) voted in favor of a motion for U.S. withdrawal from the WTO -- this, from the world's leading economic and trading superpower, a nation where Chinese imports have produced over US$150 billion in cost savings for consumers.

The parochial Euro-naysayers have their transatlantic counterparts. Central America was a chaos of guerrilla wars, brutal regimes, and socio-economic collapse. While today the region is far from a social, political and economic paradise, there have been quite dramatic improvements both in society and in the process of democratization.

There is a chance that the region could pull itself out of the mire of poverty in which it has wallowed for so long, and the Central America Free Trade Area (CAFTA) could provide a solid step in that direction. Current prognoses indicate, however, that CAFTA has little chance of gaining U.S. Congressional approval.

The fear that the Central Americans will devastate the American sugar and textile industries is an example of the absurd paranoia that global market integration generates. The unpopularity of the North American Free Trade Area (NAFTA) has led George W. Bush to renege on his earlier commitment to open U.S. labor markets to Mexican workers. The economic rationale in favor of open labor markets among the three NAFTA countries is overwhelmingly convincing, yet the political "irrationale" -- as in so many cases arising from globalization -- holds sway.

In making the very conservative estimate that the importation of Chinese garments into France will reduce prices by 5 percent -- in the U.S., the reduction is estimated to have been 30 percent -- the French newspaper Libiration calculates that the purchasing power of French households will increase to the tune of $1.8 billion, which is about the same as the $2.2 billion gain from the 3 percent income tax reduction of 2004.

However, while the tax rebate incurs a loss for state coffers and benefits primarily the rich, the gain from the price reduction of garments has no budgetary cost. It benefits primarily the poor, who are more likely to spend than to save the money accrued, and hence provides a much more positive macroeconomic effect.

What is one to make of all this? There have been many winners from globalization. In both Europe and America, this includes above all consumers, especially the poor and lower-income earners. It also includes all those dynamic enterprises -- huge, big, medium and small -- that have obtained significant benefits both from the opening of new markets and from gaining access to resources (including human resources) that enhance their productivity and profitability. As pension funds are increasingly major shareholders of corporations, increased profitability is imperative to pay for the much higher pension costs that rapidly aging Western societies, especially in Europe, will face. Broad political support for globalization should, therefore, be the proverbial no-brainer.

Of course, in globalization, as in any economic transition, there are winners and losers. The sad reality is that the political field has been captured by the small -- and often highly privileged -- minorities that stand to lose from globalization, but who compensate for their numerical weakness by the vociferousness of their whining. Protection for outrageously pampered American cotton plantation owners was the major cause for the collapse of WTO talks in Cancun in 2003, thereby significantly retarding the global open trade agenda. Indecently subsidized sugar producers in both the EU and the U.S. are another important voice in the loud whiners' chorus. The same applies to the obsolete bits of the Euro-American textile industry. What is amazing is that not only have they obtained enormous political leverage, but they have gained the moral high ground as well. The anti-globalizers present themselves as the champions of the underprivileged.

Above all, this reflects the terrible mediocrity of political leadership on both sides of the Atlantic. This applies not only to the heads of government -- Chirac, Schrvder, Berlusconi, Blair, Barroso, Bush, and Martin -- but also to their parliaments. They find it much more politically expedient to coddle the whiners than to provide leadership in making the most of the opportunities and benefits of globalization. This political maneuvering, in turn, generates either political hostility or apathy. What is needed for the promise of globalization to be achieved is for winners, not whiners, of the West to unite

Jean-Pierre Lehmann is Professor of International Political Economy at IMD, in Lausanne, Switzerland, and Founding Director of The Evian Group. Reprinted with permission from YaleGlobal Online, (http://yaleglobal.yale.edu)