Capitalist Globalism In Crisis

When real world outcomes differ from the efficient ones predicted by mainstream models in text books, the memories of pro-capitalists are jogged to recall catchall phrases, like “perfect competition,” and “complete markets.” The word “perfect” refers to knowledge and requires complete and accurate information for all participants in the economy about the consequences of all their conceivable choices, as well as accurate knowledge about all present and future prices for all goods and services. When someone points out that there is uncertainty in the real world, mainstream theoreticians only think of things like earthquakes and hurricanes, and redefine “perfect” to include accurate information about the probability distributions of uncertain events. The word “competition” refers not to strategic behavior to best one's market opponents—which is what anyone grounded in the real economy would naturally assume—but instead, to the number of buyers and sellers in markets. A competitive market is one in which there are a sufficient number of buyers that no buyer can influence the price she must pay by deciding to buy more or less, and no seller can influence the price she receives by selling more or less. A “competitive” market is therefore one where all buyers and sellers are “price takers,” and all attempts at collusion are doomed to failure. In other words, the competitive market of mainstream theory is precisely a market in which all “competitive” behavior is pointless, and therefore not to be expected. Markets are “complete” if there is a market for everything of consequence. Completeness refers to coverage, and requires that anything that anyone cares about can be bought or sold in a market—a perfectly competitive market, of course.

Once our capitalist visionaries remember that text book predictions of full and efficient use of all productive resources (including labor) depend on the assumption that there are perfectly competitive markets for everything, as explained above, economic policy is straightforward and simple: reform the real world to conform more closely with the assumptions of the text book models. Create new markets, generate more information, and add sellers and buyers to markets by clearing away obstacles to foreign participants. This is the logic behind conventional “new architecture” proposals, which are the standard remedies recommended by those who orchestrated international liberalization in the first place.

Greater transparency and disclosure by both public and private national financial institutions is called for so that depositors and investors are less likely to operate in blissful ignorance of negative developments, only to be jolted by unpleasant revelations when they become impossible to hide. Improved prudential regulation of banks and other financial institutions for developing countries is now recommended as a panacea, ironically by many of the same people who presided over deregulation of the financial sector in the U.S. and in Europe during the past 20 years. It's amazing how many see the wisdom of “prudential regulation” of financial markets after a crisis has hit, but recommend removal of “regulatory obstacles” to financial market “efficiency” when the credit system is running smoothly. There is a general consensus that reducing moral hazard is called for. But the question is whose moral hazard, and how to reduce it. Some complain that IMF bailouts lead third world countries to borrow more dangerously than they otherwise would dare to, because they believe they can count on the IMF for emergency loans if need be. Others complain that IMF bailouts lead international investors to make riskier loans than they otherwise would, because they count on IMF bailout loans to their creditors which can be used to pay them off when their investments have gone sour. Still others complain that national banking policy traditions such as those in Japan, South Korea, and China encourage private banks in those countries to go further in debt than they otherwise would because they believe they can rely on governments to back them up in case of trouble even if there has been no formal or legal underwriting agreement. Finally, many argue that an unintended side effect of government deposit insurance has been to eliminate monitoring of banking activities by depositors—who if uninsured would have more incentive to discipline risky banking practices by denying those banks their deposits.

But there are sobering short-run economic costs to eliminating each of these practices that have, indeed, increased moral hazard. There are long run costs to consider as well. What will happen to people in the next third world economy that needs emergency international financial help if it is not given? What will prevent financial contagion from spreading to other economies deemed similar by international investors? What will prevent recessionary contagion from spreading from the economy that was not thrown a life saver to its trading partners? What will happen to the depositors as well as the stockholders in the next group of international banks, and what will happen to the shareholders in the next group of mutual funds whose international investments fall into default because no international relief effort is launched? What will prevent contagion from spreading to other banks and mutual funds with extensive overseas investments? What will prevent the ensuing financial crisis in the international investor economies from triggering an economic recession as those who lose their wealth consume less, and as financial institutions swamped with unexpected losses find it impossible to make new loans to perfectly healthy domestic businesses? Does not government deposit insurance reduce the incentive for runs on banks? Does not government deposit insurance keep interest rates lower and thereby stimulate economic growth? Nor is private deposit insurance a panacea. If equally effective, it creates the same moral hazard as public deposit insurance does currently. But it is unlikely to be as effective because the key to effective deposit insurance is that the insurer be perceived as “too big to fail”—otherwise we have an infinite regress of depositor doubts. Since nobody bests Uncle Sam in the role of “too big to fail,” private deposit insurance cannot discourage bank runs or lower the cost of borrowing as efficiently as government deposit insurance.

Calls for better IMF surveillance of borrowing countries and making staff reports and minutes of IMF meetings public are now commonplace, as are suggestions for improved supervision in creditor countries. Another suggestion is to encourage private insurance companies to go into the business of selling insurance against international defaults to international investors. The idea is that international investors could invest in Russian government bonds, for example, and then take out an insurance policy on that investment, and the IMF would no longer need to intervene in the event of a Russian default to prevent financial panic in creditor nations' financial markets because investor losses would be covered. Proponents characterize this suggestion as creating a private market to replace a problematic public intervention. But notice, this “solution” does nothing for the Russian economy. It also does nothing for international investors who opt not to buy the (expensive) insurance. If there are enough who do not insure, the practical dilemma of whether or not to intervene remains, even if the moral case for allowing risk takers to suffer losses is made even more compelling than it already is.

I agree with my colleague Professor Robert Blecker's evaluations of all these “conventional new architecture” proposals: “Most of these measures are helpful but they are not sufficient to prevent financial crises or to lessen their impact on real economic performance. They are also not adequate for restoring high growth rates with full employment and broadly shared prosperity. We need different kinds of policies to make capital flows serve these objectives, rather than just to make capital markets work more efficiently and with less disruptions for wealthy investors.” (Policies for Restoring Financial Stability and Global Prosperity, chapter 3, Economic Policy Institute, forthcoming.) However, I would add that if those who suggest these reforms offer them as alternatives to more far reaching reforms—which they usually do—then they are not “helpful,” but counterproductive to efforts to combat international inequity and prevent disruptions in the international credit system that cause terrible economic waste. I would also point out that precious few of the alternative proposals coming out of the “Keynesian” side of the mainstream discussed below address the issues of international inequality and environmental destruction. Not surprisingly they focus almost entirely on restoring financial stability and decreasing global disequilibrium.

Bring Back International Keynesianism

Within the mainstream the battle is between neoliberal free marketeers and a group of “new” international Keynesian who have recently found their voices. Prior to the outbreak of the Asian crisis neoliberals were riding high on the wave of free market triumphalism and the international Keynesians were a chastened lot. But the international crisis has put neoliberals on the defensive and heartened Keynesians who have crawled out of the closet and gone on the attack, full of suggestions about international economic reform. Yet this is actually an old debate, and the proposals of the newly vocal Keynesians are mostly old policies as well. Nonetheless, as usual, mainstream Keynesian policies are an improvement on policies based on a religious faith in orderly markets despite all evidence to the contrary.

Regulating Capital Flows: There is too much hot money sloshing around the world. Most economists would cringe at this way of putting the issue, and insist on definitions for “too much,” “hot,” and “slosh.” But that is the simple truth of the matter. Gerhard Schroeder, Germany's new Social Democratic Chancellor, gave voice to this sentiment when he told a recent gathering of the world's economic cognicenti “if even George Soro—and he's a man who ought to know, having earned billions of dollars through speculation himself—urges us to introduce regulatory factors it is high time for us to get down to some serious negotiation on a new international financial architecture.” (The Toronto Globe and Mail, 2/2/99) The best known suggestion for discouraging speculation in foreign exchange markets is the Tobin tax. More than 20 years ago Nobel laureate James Tobin suggested something on the order of a tenth to a half of a percent tax on all foreign exchange transactions to discourage speculation in these markets. Opponents immediately pointed out that unless all countries agreed to the Tobin tax, those who did would be penalized by free riders. Critics also asked who would enforce and collect the tax, and argued that taxing one kind of international investment only creates incentives to turn to other forms of international speculation, thus “distorting” international investment markets and possibly driving speculation into even more socially counterproductive areas. Given the present volume of activity in foreign exchange markets, it is now generally conceded that a tax of this size would generate considerable revenue but would reduce the volume of foreign exchange transactions by only an insignificant amount. No doubt Jacque Melitz's proposal of a 100 percent tax on short-term foreign exchange transactions would be a significant deterrent, but opponents point out this is politically out of the question even if it were good economic policy. Since IMF assessments of member countries are both a practical problem—getting U.S. Congress to ante up—and a source of inequity—forcing taxpayers to assume the risk of international lending while investors enjoy the benefits—the major attraction of a Tobin-like tax seems to be as a source of funds for international bailouts. Estimates are that a Tobin tax could generate between $100 and $200 billion a year which could be used for international bailouts and/or interventions to stabilize currencies. Since it is the international investors who benefit from bailouts and currency speculation, why not at least raise the funds for bailouts and currency stabilization by taxing them instead of taxing ordinary citizens as the present system effectively does?

Capital controls are far more likely to reduce speculative flows of short-term capital than are taxes on foreign exchange transactions. The Chilean government has placed a reserve requirement on short-term inflows, thereby discouraging international investment “quickies” and encouraging long-term investments not subject to any reserve requirement. Unlike countries who succumbed to the IMF's liberalization initiatives, China and India retained significant restrictions on foreign exchange transactions and foreign ownership of assets, and now Malaysia has reimposed restrictions. In wake of the damage to the East Asian economies caused by massive outflows of foreign investment, a return to restrictions on capital outflows has gained popularity in third world circles. Others propose risk-weighted capital charges on mutual funds and pension plans in advanced economies which engage in international investments to discourage particularly risky foreign investments by uninsured parties.

It is very difficult for individual countries to consider restrictions on capital outflows without sparking a panic. And it is very difficult for individual countries to maintain restrictions without jeopardizing new international investment. Only if international organizations like the IMF and World Bank sanction capital controls and facilitate coordination among borrowing countries would controls have much chance of success. Of course the IMF and WB long ago abandoned this role assigned them at Bretton Woods, and persist in actively discouraging capital controls despite recent rhetorical genuflections. Their Keynesian critics recommend going back to the Bretton Woods system of internationally sanctioned capital controls by individual country governments. This is a necessary step to stabilize the global credit system. So it is an important short run goal to press for international conditions that permit affected countries to deploy capital controls in their defense without courting disaster and punishment. For the borrowing countries can certainly not rely on governments in lending countries to solve the problem with restrictions on lenders. While proposals to impose prudential restrictions on capital outflows from industrialized countries through risk-weighted capital charges on mutual funds and pension plans abound, and restricting short-term capital inflows into the U.S. and other industrialized countries to discourage panic driven capital flight to “safe havens” are discussed, it would be extremely “imprudent” for underdeveloped countries to wait for any of these programs to be implemented before enacting capital controls themselves.

Reforming International Organizations: There is such a thing as a fireable offense. In a world where people take responsibility for the consequences of their actions IMF Managing Director Michel Camdessus and his chief advisor Stanley Fischer would have resigned long ago. And if they were not honorable enough to submit their resignations they should have been fired. But who would fire them? Clinton, Rubin & Co. have not even criticized the fund, so why would they fire its directors? Even with James Wolfensohn and Joseph Stiglitz, the President and Chief Economist respectively of the IMF's “sister” institution, the World Bank, in open disagreement with the Fund over its outdated analysis and policies, the Clinton administration has not even taken Camdessus and Fisher to the woodshed. One can only assume this is because Clinton, Rubin & Co. have not yet decided if they are unhappy with what the IMF continues to do. In any case, there is no sign that the Keynesian “B team” is about to be summoned to replace the “A team” of free market ideologues who have gotten us into this mess.

International organizations certainly need to be reformed, but if critics of globalization cannot even get its most visible managers taken to the woodshed, there is no reason to expect that serious and helpful reforms are yet on the horizon. Two long-time experts on East Asia who lie well within the mainstream have called for an Asian Monetary Fund. In the November issue of The Economist Robert Wade and Frank Veneroso argue persuasively that the IMF is either blinded by free market ideology or hostile to the successful Asian economic development model. In either case they point out that the Asian economies would have suffered far less had there been an Asian Monetary Fund that understood and was sympathetic to the Asian model to play the role of lender of last resort at the outset of the crisis. Wade and Veneroso are so pessimistic about the prospects of reforming the IMF that they recommend turning the Asian Development Bank into an Asian Monetary Fund to take over the IMF's neglected duties in the region. Apparently Japan was both able to put up the capital and willing to initiate such a venture, only to have the idea vetoed by the IMF and the U.S. In any case, it is obvious to any student of banking that in a highly leveraged credit system it is not only advantageous to the everyday functioning of the system to have a trusted and responsible lender of last resort, it is highly risky to operate without one—which is exactly what we have been doing. If I were advising Asian governments I would certainly encourage them to act on Wade and Veneroso's recommendation. If I thought the financial backing were there for an African Monetary Fund I would recommend it as well. If I thought the Inter American Development Bank could break away from U.S. dominance and obtain sufficient financing to play the role of lender of last resort for Latin America I would support it too. Unfortunately, only the Asian Development Bank has any realistic chance of pursuing this reform.

A credit system without a central bank is an accident waiting to happen. So as long as the global credit system operates without the equivalent of a global central bank we are playing Russian roulette. Regulating financial institutions to prevent them from destructive speculative excesses and counter cyclical monetary policy are necessary roles that central banks play. But we should be under no illusions that central banks are democratic or equitable institutions. They are largely immune from public opinion and influence from elected legislatures. They are secretive institutions that not only disenfranchise workers and consumers but prioritize the interests of bankers and investors over those of industrial capitalists. Of course we should demand that a global central bank should be structured democratically and equitably—that borrowers be represented on a par with lenders, that poorer economies be represented on a par with wealthier ones, in a word, that representation be based on population not wealth. There are dozens of proposals for a global central bank under various titles. The more progressive versions are by Jeremy Brecher and Tim Costello, Jane D'Arista and Tom Schlesinger, John Eatwell and Lance Taylor, Paul Davidson, and Grieve Smith. But we should be under no illusions about what kind of global central bank we can expect given today's political conditions. If one is created it will look a lot more like the national central banks as they now are than like the monetary authority of our dreams. When calling for a global central bank in today's context we are calling for a biased tyrant to create minimal order out of chaos for lack of a better alternative, much as someone might dial 911 to a despised police department from the scene of a riot.

But the IMF cannot even be trusted to play this minimal role—even though its current management has recently hinted that they would be willing to do so, if asked. For there is no reason to believe the IMF under its current leadership would not sit on its hands while financial contagion spread even if they had “lender of last resort” status sufficient to stop it. We certainly need an international lender of last resort. We have every right to demand one that is equitable and democratic as well as competent and effective. But at a minimum we need an effective one, not a completely ineffective one, which is all that could possibly come out of the IMF unless it were completely reorganized and restaffed.

Exchange Rate Management: Under Bretton Woods we had fixed exchange rates; since 1973 we have had flexible rates—broadly speaking. New proposals include perpetually fixed rates maintained by independent currency boards in developing countries and transition economies (Hanke), a three-way system of pegs between the dollar, euro and yen (McKinnon), fixed real targets managed by an international monetary clearing union (Davidson), and target zones with wide bands and crawling pegs (Williamson and Smith). In my view it is more important to implement some system of exchange rate management quickly than which version is settled on. None is perfect, none is fool proof, and the differences between them vis a vis democracy and equity are little. The essential ingredients to an effective system of managed exchange rates are: (1) a credible threat of massive intervention to deter speculation, and (2) preventing deviations that generate excessive trade imbalances. This will prove more possible to achieve the more speculative capital flows are diminished. Without capital controls exchange rate management will surely break down. But before either capital controls or an effective system of exchange rate management can be implemented opposition from free market skeptics like Treasury Secretary Rubin must be overcome. Bring back the Keynesians.

International Macro Policy Coordination: The objective of macro policy coordination is to diminish “beggar thy neighbor” monetary and fiscal policies that trigger global deflation and unemployment. Howard Wachtel proposes a plan where treasury secretaries and the heads of central banks of the major economies meet to coordinate interest rate reductions and fiscal stimulus when world demand is weak and interest rate increases and fiscal restraint when inflationary pressures are great—with promises not to “cheat” to gain individual advantage. He argues that if only this were done, the problems of capital controls and exchange rate management would be considerably lessened. John Williamson's plan focuses on coordinating interest rates while leaving countries' fiscal policies independent. His plan also relies more on formulas for determining a world average interest rate as well as country differentials, where the formulas are what would be agreed to in advance. Again, the differences vis a vis democracy and equity are minimal, and the trade-off between effectiveness and political viability are unclear. The important point is that individual nation rationality regarding monetary and fiscal policies often proves globally irrational. Hence, some rough system of coordination can yield significant improvements over the current state of affairs. Once again, there is no reason for us not to shout: “Bring Back the Keynesian. Any Keynesian.”

Debt Relief: Since the early 1980s progressives have been calling for debt relief on equity and humanitarian grounds—to no avail. Now some mainstream Keynesians like Jeffery Sachs have added their voices in support of strategic debt relief. What gives? Have these new international Keynesian suddenly had a change of heart and joined the campaign for international economic justice? We can only hope, but it is more likely that some of them have simply come to hard headed conclusions that without writing off some of the bad international debt it will prove impossible to restore order in the global credit system. We don't need to ask whether or not they are correct in this assessment—that is an argument between new Keynesians who think stability requires significant debt relief and new Keynesians who think stability can be achieved without such “concessions.” Our position should be “no debt relief, no global stability” even if stability were possible without debt relief. But the fact that some of the “best and the brightest” mainstream economists now counsel “power,” that getting what they want—stability in global financial markets—cannot be achieved without debt relief, does open discussion on an issue that had been taboo when only economic justice was at stake. Our job, of course, is to press to extend “strategically necessary” debt relief as far as possible into “equitable and humane” debt relief as well.

Labor and Environmental Standards

Suppose working conditions, or “labor standards” were the same in all countries. And suppose environmental laws and regulations, or “standards” were the same in all countries as well. But suppose that the real wage were lower in some countries than others. If capital becomes mobile businesses would move from high wage countries to low wage countries, depressing wages in the high wage countries and increasing wages in the low wage countries—assuming no offsetting effects in the low wage countries like the destruction of traditional agriculture discussed above. Even if capital were not mobile, if we open up free trade in goods between countries, businesses would specialize in producing capital intensive goods in the high wage countries and specialize in producing labor intensive goods in the low wage countries, also depressing wages in the high wage countries and increasing wages in the low wage countries—again, assuming no offsetting effects in the low wage countries. So unlike a world where national economies are isolated from one another so lower wages in one country have no effect on wages in other countries, international investment and trade create a mechanism through which lower wages in some countries will tend to depress wages in countries that have higher wages. But could workers in the high wage countries respond to the downward pressure from free trade and investment by offering to accept reductions in their labor standards, or in their environmental standards, rather than take a money wage cut? Obviously they could, unless some international treaty prevented them from doing so. Their employers could care less about what kind of cost reducing concession they make, just so the magnitude of the cost reduction is sufficient.

Which means that lower wages in third world economies not only put downward pressure on first world wages, they put downward pressure on first world labor and environmental standards as well when we engage in free market trade and investment. Similarly, lower labor or environmental standards in the third world not only put downward pressure on first world labor or environmental standards, they put downward pressure on first world wages as well when we engage in free market trade and investment. More simply, any form of lower living standard in the third world that lowers the private cost to businesses of producing goods or services there puts downward pressure on all aspects of living standards in the first world under free market trade and investment. So, raising labor standards, or environmental standards in the third world is not only good in and of itself, it also diminishes the downward pressure on living standards in the first world from international capital flows and free trade. But it does just as much to alleviate downward pressure on wages as it does to protect first world labor or environmental standards. Raising third world wages is not only good in and of itself, it also diminishes downward pressure on living standards in the first world from free market globalization. But raising third world wages does just as much to alleviate downward pressure on labor and environmental standards in the first world as it does to protect first world wages. Finally, if we actually established a uniform code of labor and environmental standards, then all differences in first and third world living standards must take the form of wage differences, and lower third world wages would of necessity exert all their downward pressure through international investment and trade on first world wages since concessions in other aspects of first world living standards would be prohibited by international treaty.

The basic lesson here is that any distinctions people make between labor standards, environmental standards, and wages is artificial when we are dealing with the consequences of globalization and strategies to combat its pernicious effects. The issue is living standards and differences in living standards. When national economies are integrated through free markets lower living standards in some countries make it more difficult to raise or preserve living standards in countries with higher living standards. Or, put differently, as long as their are differences in standards of living in different countries, making labor and environmental standards uniform throughout the world does not make the playing field even. It simply dictates that all of the unevenness will be squeezed into the part of living standards composed of wages instead of spread out over the entire field of living standards which includes wages, labor standards, and environmental standards.

For this reason we should not limit our equity demands to creating uniform labor and environmental standards. Contrary to popular opinion uniform standards would not create an “even playing field.” It would merely force all of the inequality in international living standards to take the form of differences in wages, and it would mean that all of the downward pressure of lower third world wages would be brought to bear on first world wages. Uniform standards is only a partial program for improving global equity, and an unwise retreat from a full program demanding equitable terms of trade and investment. The New International Economic Order program of the Non-Aligned Movement of the 1970s was a better program for reducing international inequities than a program calling only for uniform international standards.

To Integrate or Not to Integrate?

Among the stories buried under the past year's obsession with President Clinton's scandal is a remarkable transformation in the debate over the global economy and its effect on the jobs and incomes of Americans. While everyone talks about history's verdict on Clinton and impeachment, the change in our approach to organizing the world's commerce bids to play a larger role in defining this era's historical legacy. Clinton hinted at this in his State of the Union message. “I think trade has divided us and divided Americans outside this chamber for too long,” he told Congress. “Somehow we have to find a common ground.... We have got to put a human face on the global economy.” Clinton went on to embrace a new International Labor Organization initiative “to raise labor standards around the world” and pledged to work for a treaty “to ban abusive child labor everywhere in the world.” He promised trade rules that would promote “the dignity of work and the rights of workers” and “protect the environment.”

Behind these words is a battle that has been waged in Washington, largely out of public view, since the 1997 defeat of a bill that would have given Clinton the authority to negotiate trade treaties on a “fast track.” The fast-track defeat demonstrated that liberal, pro-labor Democrats now have veto power over legislation to promote free trade and to support global economic institutions such as the World Bank and the International Monetary Fund. Without the liberals, there aren't enough votes in Congress to pass such initiatives. Pro-labor Democrats have used their newly found influence to push for more assistance to workers who are hurt by freer trade and for stronger international rules to protect workers' rights and the environment.

Rep. Barney Frank (D-MA) says the new situation can be explained by the division of Congress into three groups. There are, in his terms: (1) “isolationists” who are skeptical of all international institutions and free trade; (2) “trickle downers” who favor free trade and free markets but oppose any rules to regulate the global economy; and (3) “international New Dealers” who accept the global market as a reality but care passionately about lifting labor standards and wages, in the United States and elsewhere. Because the “trickle downers” lack the votes to pass free trade or support international institutions on their own, they need the “New Dealers” to create a majority. The Clinton administration, particularly Treasury Secretary Robert Rubin, came to realize this and opened negotiations last year with Frank and his allies—they include House Minority Whip David Bonior (D-MI) and Rep. Nancy Pelosi (D-CA). In October, Rubin sent a letter to Frank making important concessions in pursuit of the group's votes on new financing for the IMF. “I believe that one of the ways to build the confidence of workers is to seek the adoption and promotion of policies abroad that will enhance the respect for core labor standards,” Rubin wrote. “The United States,” he went on, “will work to affect the policy dialogue between the IMF and borrowing countries so that recipient countries commit to affording workers the right to free association and collective bargaining through unions of their choosing.” Rubin also pledged to push the global financial institutions “to encourage sound environmental policies.” Clinton's State of the Union pledges were the logical next step in this running negotiation. Frank saw Clinton's promise to work against “abusive child labor” as especially significant. “It's important for some of the labor people, and it's one of the most visible examples that you can do something” to regulate the workings of the global marketplace.

C. Fred Bergsten, director of the Institute for International Economics, thinks the trade debate has changed fundamentally. “Most trade types thought the merits of free trade were so obvious, the benefits were so clear, that you didn't have to worry about adjustments—you could just let the free market take care of it,” he says. “The sheer political gains of the anti-globalization side in the last few years have made the free trade side realize that they have to do something to deal with the losers from free trade and the dislocations generated by globalization.” This battle has only begun and the common ground that Clinton says he seeks could prove elusive. “The jury is still out,” Frank says, referring to the administration's intentions. But creating a global economy that promotes growth with a measure of social justice is a big and worthy project—yes, the sort of thing that might matter more to historians than our current preoccupations.

Let's review: Round 1: In 1994 Congress passed NAFTA when Slick Willy sold trickle down snake oil to enough international New Dealers—promising only a few trinkets that he later reneged on—to overcome the “nay” votes of conservative isolationists. Round 2: Enough snake bitten international New Dealers voted with the conservative isolationists to deny Willy fast track authority—denying Clinton a blank check and waiver of future Congressional rights regarding international economic policy. Round 3: Conservative isolationists committed political suicide over the impeachment debacle, and Willy and the international New Dealers are now bosom buddies, having repelled the Republican attempted coup d'etat via impeachment. Willy, Rubin, & Co. are once again selling the same old snake oil dangling the same old trinkets in front of their international New Deal allies in Congress.

The good news is, thanks to the negative effects of NAFTA on most Americans, thanks to the sobering effects of the greatest economic crisis since the Great Depression, thanks to the arrogance of the MAI managers, and thanks to the tireless efforts of the international grassroots anti-globalization network, “liberal, pro-labor Democrats now have veto power over legislation to promote free trade and to support global economic institutions such as the World Bank and the International Monetary Fund.” The bad news is that “liberal, pro-labor Democrats now have veto power over legislation to promote free trade and support global economic institutions such as the World Bank and the International Monetary Fund.” This is the bad news because they are notorious wimps and the last people in the world you would want to rely on when their feet get put to the fire. It is hard to imagine that anyone could believe that Clinton, Rubin, & Co. would pressure the IMF to pressure governments of borrowing countries to improve their workers' living standards. But I am willing to bet that a number of liberal Democratic Representatives will sign off on a significant piece of international economic legislation before Clinton leaves office with only the fig leaf of a meaningless, unenforceable clause critical of “abusive child labor” (as if there were such a thing as “non-abusive child labor”) to hold up over their shame.

The unfortunate truth is that for the foreseeable future the balance of power in the U.S. government, the balance of power in international economic organizations, the balance of power in the mainstream media, the balance of power between corporate America and labor, and the balance of power between the rulers of the first world and the citizenry of the third world are extremely favorable to those who favor further undemocratic, inequitable, environmentally destructive and inefficient globalization, and extremely unfavorable to opponents of this unfolding disaster. This means that for the foreseeable future desirable globalization is not possible. We should not be charmed by the sellers of trickle down snake oil, or deluded into believing any concessions they offer would be better than just stopping further globalization for the time being. This is a time for opponents of reactionary globalization to organize under the banner “hell no,” and threaten any who negotiate on our behalf if they capitulate.