Monday, May 07, 2007

the french election and sacrificing for the market

The elections in France demonstrate the power of faulty economic analysis, and more generalized problems with arithmetic, to shape ideas and possibly the future of not only a nation, but a continent.The United States has faced similar problems with its debate over Social Security, in which the majority of Americans were convinced - based on verbal and accounting trickery - that the program is facing serious financial problems when the baby boom generation retires. (It isn’t).

The general theme that has propelled Sarkozy into the lead is that the French economy is somehow “stuck” and needs to be reformed to be more like ours. It is also widely believed that France needs to be made more “competitive” in the global economy, since competition is tougher now in a more globalized world.

New York Times columnist Thomas Friedman has been the most popular proponent of the idea that French workers must lower their living standards because of the global economy. “All of the forces of globalization [are] eating away at Europe’s welfare states,” he writes . . . “French voters are trying to preserve a 35-hour work week in a world where Indian engineers are ready to work a 35-hour day.” For Friedman and most of the pundits, this is impossible.

It is important to understand that there is no economic logic to the argument that the citizens of any rich country need to reduce their living standards or government programs because of economic progress in developing countries. Once a developed country has reached a certain level of productivity, there is no economic reason for its residents to take a pay or benefit cut, or work more hours, because other countries are catching up to their level. That productivity, which is based on the country’s collective knowledge, skills, capital stock, and organization of the economy, is still there, and in fact it increases every year. To the extent that international competition is being used by special interests to push down the living standards of French or German or U.S. workers - and it is - it just means that the rules for international commerce are being written by the wrong people. It is a problem of limited democracy and lack of representation for the majority, not a problem that is inherent to economic progress.

- Mark Weisbrot

So now Sarkozy (as many predicted) is the new president of France and ushers in the 3rd straight conservative govt. for the French marking a 12 year cycle. Admittedly I have watched this election cycle on the vaguest of terms but I was impressed by the massive voter turnout (80%+) and intrigued by the issue that Sarkozy is the first immigrant elected in French history. I also have been struck by the chorus in the MSM as to how this a great outcome for the U.S. So of course if Wolf Blitzer or George W is thrilled about the election results then something must be ugly about this.

Then I read the above by Mark Weisbrot and all the hoopla makes sense. It's a financial plot line that has "people" so excited. Sarkozy's big theme is rupture, a break from the the past that touts reforms such as making it easier for employers to fire workers, cutting taxes - including inheritance taxes, pushing back against the 35 hour work week, and other measures to redistribute income upward.It still seems unclear to me that these measure automatically result in economic growth or employment growth.He is also infamous for calling unemployed youth (many immigrants) - "Scum".

I think these assumptions shed some light on the accepted premises of globalization in general. With this important election for France, there seems to have been no standard debate happening here about "the tension between developing countries needing to restructure their financial, labor, and trade institutions versus the damage that entails to traditional ways of life, local values, culturally-ingrained practices, and identity".

more on this by Helmut at Phronesisaical:

...perhaps the debate should be placed elsewhere. That is, if the evidence shows that globalization is corrosive of what people perceive to be valuable, and if there is good evidence that this corrosion plays out in the empirical terms of running towards a lower common denominator in terms of social goods, then we have to ask again the question of what globalization - economic liberalization, that is - is good for.
So that is the question - What is this good for? Ultimately we are all asked to make individual and collective sacrifices in the name of an abstraction - "the idealized global market". It will be curious to see how the French receive their new president and the American Style he plans to bring. The riots of 2005 may get replayed.

and just for fun here are some potential results of the American Style for American workers:

[The forces of globalization] don't look so benign from the viewpoint of an American computer programmer or accountant. They've done what they were told to do: They went to college and prepared for well-paid careers with bountiful employment opportunities. But now their bosses are eyeing legions of well-qualified, English-speaking programmers and accountants in India, for example, who will happily work for a fraction of what Americans earn. Such prospective competition puts a damper on wage increases. And if the jobs do move offshore, displaced American workers may lose not only their jobs but also their pensions and health insurance. These people can be forgiven if they have doubts about the virtues of globalization.

....It's also going to be large. How large? In some recent research, I estimated that 30 million to 40 million U.S. jobs are potentially offshorable. These include scientists, mathematicians and editors on the high end and telephone operators, clerks and typists on the low end. Obviously, not all of these jobs are going to India, China or elsewhere. But many will.

....That is why I am going public with my concerns now. If we economists stubbornly insist on chanting "Free trade is good for you" to people who know that it is not, we will quickly become irrelevant to the public debate. Compared with that, a little apostasy should be welcome. - Economist Alan Blinder


Chris said...

Too often the term globalization is used in the context of job movement -- it's almost synonymous with outsourcing if you ask some people. Viewed that way, it's hard to see globalization as anything other than capitalism eating everything, with the short-term results being profits for a few and the long-term result being the boom in the landfill industry, as we produce a bunch of garbage (at a profit).

In international health care systems development, globalization carries a more positive connotation. It has to do with the pursuit of globally recongized standards for everything from the training of health care professionals to the nuts and bolts of how health care is carried out at your local hospital. And it's not theory anymore -- it's happening. In much of the developing world, particularly in the East, this is helping spur the development of middle-income health care providers that see Western standard care as a competitive advantage. More people are therefore gaining access to good quality health care, whereas before their options might have been (a) be filthy rich and get on a plane to the UK or US or (b) go visit the decrepit local government hospital.

This has the potential to contribute to dramatic changes in global health by helping to reduce the health care worker brain drain from developing countries, increasing private investment in health care (we'd love it if governments around the world could handle it, but by and large they are not willing or are unable to properly fund it), and encouraging the development of sustainable ways of doing everything, including the design of hospitals.

highlowbetween said...

Chris - that's a great distinction you make. Your right, the outsourcing -which depending on viewpoint is the negative that too often works as a whole definition. There are many positives to globalizing efforts. The medical field example is a quite a rich one and I think this idead of stemming "brain drain" from "developing" countries is critical to stability and cooperation worldwide.
From the arts perspective, I'd like to think that a similiar phenomena is possible - and perhaps happening - with the new "global" art market. It is certainly nefarious on some levels but it also holds the potential to foster a middle class for artists in multiple settings and give financial mobility to not only artists in the G8 but the rest of the world as well.