"Money On My Mind" is a monthly column by Jay Mandle. The views expressed here are those of the author, (not necessarily those of Democracy Matters or Common Cause), and are meant to stimulate discussion.

March 2006
By Jay Mandle

An industrial revolution has occurred in Asia during the last twenty-five years. Countries such as India, Thailand, Indonesia, Bangladesh, and especially China, have taken advantage of the new technologies associated with globalization and an increasingly open trade environment to become important exporters of manufactured goods and components. The result of the region's rapid economic growth has been a dramatic decline in its poverty rate. Estimates of this achievement vary. But all estimates agree that Asia, growing more rapidly than either Latin America or Africa, has been more successful than the others in raising standards of living. They also agree that China, with Asia's most rapidly expanding economy, has experienced the most dramatic decline in poverty.

It is therefore very disturbing that among large numbers of people in the United States, the progress in reducing human misery has not been welcomed. Rather, globalization often is seen as damaging, a process to be feared and, if possible, reversed. This negative judgment, if acted upon, would unnecessarily place the interests of the American people in conflict with those of the poor people of the world.

What globalization's critics do not recognize is that industrialization elsewhere benefits the United States. More goods and services become available to American consumers, and the increased supply tends to result in reduced prices. Because they thereby gain access to more low-cost products, globalization is particularly beneficial to low income Americans. At the same time, increasing incomes in Asia create markets, allowing American exporters to increase their sales and in the process create more relatively well-paying employment opportunities here at home.

While our country as a whole benefits when economic development spreads, however, it has to be acknowledged that there are Americans who are hurt in the process. In the new global economy, some workers in the United States in effect find themselves in the same labor market as workers overseas. Because new technologies allow firms to profitably relocate to countries where wages are far below those here, some United States workers find themselves under irresistible pressure to accept reduced wages.

This downside of globalization has long been recognized. In responding to it, a wide spectrum of economists argues that the gains associated with globalization should be shared with those who, as a result of that process, lose their jobs or find their incomes cut. Simple justice requires that the innocent victims of progress not bear all its costs. They should receive support in the form of wage and health insurance, job retraining, and employment-search assistance. But as Lori G. Kletzer and Howard Rosen have recently written, such programs in the United States are "inadequate." As they put it, "relative to five other major industrialized countries, the United States spends the least on active labor-market adjustment programs."1 Under these circumstances it is not hard to understand why many come to oppose globalization, particularly when they are influenced by globalphobic public figures such as Lou Dobbs on CNN or Lori Wallach of Global Trade Watch.

Why have European societies more effectively shared the costs as well as the benefits of globalization than we have? To a large extent the difference is traceable to the fact that our political process alone depends exclusively upon private funding and the campaign contributions of the rich. In Austria, Germany, France, Sweden, Norway, the Netherlands, Belgium and even Canada, extensive public support is provided to candidates for office and/or to political parties, as well as for media purchases. In all of these countries then, the power of wealth in the political process is mitigated by public financing. As a result, wealthy special interests are less able to block legislation that compels them to share the gains they receive from globalization with those whom the process places in jeopardy. Not surprisingly, these countries with public financing for electoral efforts all possess more extensive economic support mechanisms than does the United States.

We need to face the two sides of globalization. It reduces poverty in underdeveloped countries, even as it raises both incomes and, unfortunately, inequality in rich ones. In response, we should affirm the desirability of the spread of economic development that globalization allows, but at the same time implement domestic policies to offset the inequities that result. The comparative experience of the United States and Europe suggests that offsetting growing income disparities first requires democratizing the political process with a system of public funding of election campaigns. Making globalization fair requires that we liberate our political process from its addiction to private financing.

1. Lori G. Kletzer and Howard Rosen, "Easing the Adjustment Burden on US Workers," in C. Fred Bergsten (ed.) The United States and the World Economy (Washington DC: Institute for International Economics, 2005), p. 314, 315