part 6

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Posted by Sadie from D006033.N1.Vanderbilt.Edu ( on Wednesday, April 30, 2003 at 0:46AM :

In Reply to: part 5 posted by Sadie from D006033.N1.Vanderbilt.Edu ( on Wednesday, April 30, 2003 at 0:45AM :

The market fundamentalist’s version of history and economics is both more scriptural and more expedient than it is factual. The idea, for instance, that greater trade leads to greater general prosperity, which is an unshakable conviction not only among true believers but also among liberal globalizers, including most of the American journalistic establishment and the Democratic Party, is in many cases simply untrue. In Latin America, during the 1960s and 1970s – the decades preceding the great trade boom of globalization – per capita income rose 73 percent. During the last two decades, with trade expanding rapidly under neoliberalism, per capita income rose less than 6 percent. The same dismal pattern appears in the United States. Between 1947 and 1973, economic growth averaged 4 percent and non-managerial wages – that’s the pay of more than 80 percent of American workers – rose 63 percent, in real dollars. Since 1973, with international trade soaring, real wages have fallen 4 percent, while economic growth has averaged 3 percent. Nobody knows precisely what effect trade has had on American wages and growth, but even conservative economists ascribe a significant amount of the long-term American wage stagnation to the effects of globalization. These effects, when they are acknowledged at all by free traders, are, we are assured, only temporary. But they have lasted more than a generation now and, as the Springsteen song says about good jobs, “They ain’t comin’ back.”

Another core belief , that lower taxes promote economic growth by encouraging people to work harder and invest more, is equally unfounded in reality. Neither U.S. history, which shows no correlation between tax rates and growth, nor studies of other countries, which show randomly mixed results, bear out this article of free-market faith. If government collects high taxes and then spends the money wisely, growth may be enhanced. Of course, different groups in society will be affected differently by the progressivity and specifics of any tax regime – this is why wealthy corporations and individuals tend to be especially enthusiastic about lower marginal tax rates, which reduce their own tax bills.

But even economic growth, which is regarded nearly universally as an overall social good, is not necessarily so. There is growth so unequal that it heightens social conflict and increases repression. There is growth so environmentally destructive that it detracts, in sum, from a community’s quality of life. (Trade itself carries vast, and rarely calculated, environmental consequences, with pollution-spreading ships, trucks, and planes rushing goods around the globe.) Then there is the destruction of communities themselves, as nations frantically reshape their economies around exports and specialization – the mass production of those goods that may afford them comparative advantage in the global marketplace. Finally, there is the peculiar way that growth, or gross domestic product, is calculated, which is as a value-free measure of total economic output, one that does not distinguish between costs and benefits. Thus resource extraction is a plus, while resource depletion does not register. Strip-mining, clear-cutting, overfishing, pumping an aquifer (or an oil reserve) dry – these ravages and permanent losses do not figure in the growth equation. Neither is income distribution a factor, meaning that most people may be getting poorer in a context of economic “growth.” Medical bills and legal bills all count as growth, leading to an absurdist universe in which, as policy analysts Ted Halstead and Clifford Cobb put it, “the nation’s economic hero is a terminal cancer patient who has just gone through a bitterly contested divorce.”

This is not to say that the world’s poor are not in need of economic growth, in the sense of greater economic opportunity. They are. But the question remains: What policies and incentives will actually provide that opportunity? Increased international trade CAN be beneficial to the poor. BUT IT IS NOT AUTOMATICALLY SO. Markets CAN do great things, and yet they remain flawed, fickle mechanisms that favor those with money, and they must be carefully regulated.

-- Sadie
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