A Myth About Globalization

Over at Digby's place, David Atkins has argued against any cuts to Medicare or Medicaid as part of a laughably unnecessary "grand bargain" meant to avoid the largely mythological "fiscal cliff," by referring to increasingly depressed wages of working people in the U.S. But in a recent post, he repeated a myth about how globalization has factored into the downward pressure on the livelihood of the vast majority of Americans:

Now, it's certainly true that we live in a brave new world that structurally advantages the wealthy: labor is global and expendable, jobs are increasingly mechanized, the world is flattened, vertical integration and economies of scale are commonplace. But as Hacker and Pierson persuasively argue, this is also a product of intentional public policy, including (as I have frequently argued) an obsession with inflating assets over wages.

Atkins correctly points out that a major part of the story that explains the stagnation of median incomes has to do with wealthy elites using their effective capture of the U.S. government's policymaking powers to advantage the ownership of assets over the earning of wages. I would add that they have also sought to advantage certain types of wage earning that occur only in the upper echelons of the income ladder (the carried interest loophole for hedge fund managers is one example).

In effect, a whole political movement that has often characterized itself as group of small government conservatives has in reality enacted a Great Wealth Transfer to benefit the rich and politically well-connected. Writers like Jacob Hacker, Harold Meyerson and Dean Baker have carefully articulated the specific big government policy mechanisms by which the Great Wealth Transfer of the last three decades has taken place. The mechanisms include everything from highly dramatic union busting to extremely dry changes in tax and trade policy.

But Atkins' makes a mistake when he repeats a well-worn canard about globalization's role in creating a "brave new world" where high income inequality and working class insecurity happen as a result of the magical workings of the free market.  This appears to be a serious misapprehension of the facts even among the well informed who are aware of the real story.

Harold Meyerson recently wrote an article about the current state of American labor movement that makes it eminently clear that globalization was not actually a significant factor contributing to the decline in median incomes in the U.S. in recent decades. There are two key ways to understand this. First, the vast majority of U.S. jobs can't actually be outsourced. And if globalization were a major factor, we would expect to see less of a contrast between the economic experiences of the U.S. and Germany, both of which cannot compete with the low wages of the developing world, but have very different stories when it comes to the trajectories of working people's wages.

There is simply no need for thinking people to invoke globalization to explain the Great Wealth Transfer. The evidence suggests that the Great Wealth Transfer is almost entirely the result of the policies of the U.S. government, as lobbied for by organized cliques of the wealthy and well-connected. And notice that I use the plural, 'cliques,' because this is far from being a single grand conspiracy. It's merely a matter of a bunch of different people with converging interests having an enormous effect in the aggregate on lawmakers in Washington.

It's time to bury this myth about globalization once and for all.