Globalization

Americans have dealt with significant increases in their costs of living during the Bush administration. One of the most significant is rising energy costs, most visibly seen in high prices at the pump. This issue has suddenly found itself at the center of the Presidential campaign in the form of a proposal to suspend the gas tax for the summer, saving the average American, according to estimates, at most about $30 over that time.

From the New York Times:

As angry truckers encircled the Capitol in a horn-blaring caravan and consumers across the country agonized over $60 fill-ups, the issue of high fuel prices flared on the campaign trail on Monday, sharply dividing the two Democratic candidates.

Senator Hillary Rodham Clinton lined up with Senator John McCain, the presumptive Republican nominee for president, in endorsing a plan to suspend the federal excise tax on gasoline, 18.4 cents a gallon, for the summer travel season. But Senator Barack Obama, Mrs. Clinton’s Democratic rival, spoke out firmly against the proposal, saying it would save consumers little and do nothing to curtail oil consumption and imports.

While Mr. Obama’s view is shared by environmentalists and many independent energy analysts, his position allowed Mrs. Clinton to draw a contrast with her opponent in appealing to the hard-hit middle-class families and older Americans who have proven to be the bedrock of her support. She has accused Mr. Obama of being out of touch with ordinary Americans who are struggling to meet their mortgages and gas up their cars and trucks.

Mrs. Clinton said at a rally on Monday morning in Graham, N.C., that she would introduce legislation to impose a windfall-profits tax on oil companies and use the revenue to suspend the gasoline tax temporarily.

"At the heart of my approach is a simple belief," Mrs. Clinton said. "Middle-class families are paying too much and oil companies aren't paying their fair share to help us solve the problems at the pump."
…

Mrs. Clinton said the tax on the oil companies, which have been reporting record profits as oil prices soar, would cover all of the lost revenue from the federal tax on gasoline and diesel fuel. She also said no highway projects would suffer.

Mr. Obama derided the McCain-Clinton idea of a federal tax holiday as a "short-term, quick-fix" proposal that would do more harm than good, and said the money, which is earmarked for the federal highway trust fund, is badly needed to maintain the nation’s roads and bridges.

Here at NDN, we are pleased to see the candidates addressing energy reform and discussing America’s weakening infrastructure. NDN Green Project Director Michael Moynihan recently wrote a paper about the need to invest in America’s infrastructure, and the Green Project has been promoting a long term solution to America’s energy needs. Going forward, we encourage the candidates to incorporate long term solutions these issues into their policy prescriptions.

Following a double digit loss in the Ohio primary and a high single digit loss in Pennsylvania, Barack Obama’s campaign is undergoing what First Read has termed a “re-launch,” and focused on the economic woes of everyday people. Articles appeared today in the New York Times, Washington Post, and Wall Street Journal about this style and policy shift designed to pursue the blue-collar votes that have recently proven elusive for him.

From the Washington Post:

Sen. Barack Obama came this past weekend to this factory town, where the loss of hundreds of jobs at the Delphi auto parts plant was only the latest blow, and told 2,000 voters that the way to fix things was not just to vote for him -- but to join a bottom-up mass movement to change the way government works.

He didn't put it that way exactly. But in a noteworthy shift, the Illinois senator is trying to reach working-class and middle-class voters by arguing more explicitly that the reform ideas driving his campaign can address the economic troubles that threaten their way of life. Supplanting lobbyist influence with citizen activism, uniting the country beyond petty partisan gamesmanship and bringing more candor to government, he argues, are not just abstract goals, but concrete steps that can level the playing field and lead to a more equitable distribution of the nation's wealth.

"When we push back the special interests, when we unify the country, when we speak honestly with the American people about our challenges, there's nothing we can't accomplish, nothing we can't do," he said here. "When we unify the country, we will change our economy."

Much also has been made about the cosmetic changes the campaign is undergoing. Obama recently showed off his basketball skills in Indiana (where the sport is sacrosant), and has reverted to a common practice from earlier in the campaign: going without coat and tie and rolling up his sleeves.

From the Wall Street Journal:

During his weekend tour of Indiana, Sen. Obama shed his suit jacket and rolled up his shirt sleeves. Rather than pace up and down the stage like a law professor addressing a lecture hall, the Illinois senator has taken to speaking more often from behind a podium.

"If you had watched the last few weeks of this campaign, you would think that all that politics is about is taking hits and bickering," he said. "There's no serious discussion about how we're actually going to bring back jobs to Anderson."

The candidates are turning their attention to the economy at an important time. Global food shortages are starting to have effects at home, and the San Francisco Chronicle today documented the ongoing economic shift that will force many Americans to accept a new standard of living due to the weak dollar.

At NDN, we agree that far more attention needs to be paid to the economic woes of everyday people. NDN President Simon Rosenberg recently blogged on the need to keep political attention on laying out an agenda that restores broad-based prosperity, which the Globalization Initiative has been advocating for the last three years.

With the economy on the wrong track, the candidates need to pick up their rhetoric and provide a cogent narrative on America’s place in the new globalized economy. While it may be easy to pander on these issues for short term political advantage, greater benefit, to both candidate and nation, will come from providing a convincing argument that deals with the realities of globalization. Hopefully, a renewed focus on everyday people will do just that.

American awareness of famines is generally limited to pictures on television or the internet of people starving in faraway places. Surely global food shortages and rising prices cannot affect Americans at home – or so went the thinking. No more.

Costco and Wal-Mart’s Sam’s Club have placed limits on the amount of rice customers can buy. These limits are too high to affect the average consumer, but some businesses may be affected. The reasons for this limit, though, are worth noting. From the Washington Times:

Costco and other grocery stores in California reported a run on rice, which has forced them to set limits on how many sacks of rice each customer can buy. Filipinos in Canada are scooping up all the rice they can find and shipping it to relatives in the Philippines, which is suffering a severe shortage that is leaving many people hungry.

While it is difficult to nail down the specific causes in terms of what bears the greatest amount of responsibility for these high prices, it is worth noting that many experts point to the global hoarding and speculative buying of these goods as well as policies promoting the use of corn for ethanol production. It is also worth noting that this issue is starting to create domestic fears.

NDN Globalization Initiative Policy Director Maggie Barker recently blogged on the causes of these high prices, and I wrote about the political turmoil they are creating globally.

With Democrats voting today in Pennsylvania, we are coming to the close of a six week period in which Senators Obama and Clinton have been talking non-stop about the loss of manufacturing jobs. During that time, they have, to one degree or another, been touting one of the most highly anticipated benefits of dealing with climate change – aside from saving the planet, of course – the entire sector of new “green collar” jobs that will come with it.

Skilled labor will be required to create the solar panels, wind turbines, hybrid engines, energy efficient buildings, and other, as of yet undreamt of clean technologies. Presumably, the argument goes, Pennsylvania’s un- or under- employed workers will benefit from these new jobs. The buy-in to this concept from organized labor has been strong. (The Blue Green Alliance, a partnership of the United Steelworkers and the Sierra Club, has been pushing this side of the argument. They hosted the “Good Jobs, Green Jobs National Conference” in Pittsburgh last month.)

The consensus on green collar jobs – at least on the Democratic side – is broad. New ads from the Alliance for Climate Protection showcase the bipartisan support for creating a solution to climate change. Politicians, of course, love green collar jobs. What better way to go into an economically depressed community than with the promise of a new generation of good-paying jobs?

The green collar jobs argument illustrates just how far the environmental movement has come since its first round of huge legislative successes and awareness campaigns of over a generation ago. The new attentiveness to climate has allowed the environmental community to partner with government, labor, multinational corporations, and religious and community groups to launch a powerful arsenal of multi-disciplinary arguments that environmentalists have been formulating for decades about why and how to stop climate change. These arguments go far beyond what many, until recently, saw as the traditional purview of environmentalism.

This new, broadened approach to environment is working in the fight to advance a solution to climate change – in part because the challenge is so large that it will have far reaching affects on everything from the economy to national security, and in part because the environmental movement now has the ability to make arguments that reach into the polling places of Pennsylvania. This Earth Day, it seems that the climate debate, which has been called “Environment 2.0,” goes hand in hand with environmentalism 2.0, a movement so powerful it can produce a blockbuster documentary, win a Nobel Peace Prize, and – hopefully – create a broad political consensus to save the planet while creating good, new jobs.

In this short video, NDN Globalization Initiative Chair Dr. Robert J. Shapiro expands on his quote from John Heilemann's recent piece in New York Magazine on Barack Obama's economic argument, entitled "Econobamanomic Theory."

From the article:

Robert Shapiro, another veteran of the 1992 Clinton economic team and author of a new book on globalization, agrees. "The narrative is: The U.S. is way ahead in the global economy, but we need to make basic changes so that everyone can prosper," Shapiro says. "We need to get control of health-care and energy costs, because without it, American workers will never see rising wages-since the burden on businesses is otherwise too great." As for training, Shapiro has proposed giving grants to all the community colleges in the country to keep their computer labs open on nights and weekends so that anyone can show up and learn (for free) the skills they need to compete in a tech-centric economy. "We can do it for $125 million a year, and even if it costs twice that much, it would be worth it."

In the video, Dr. Shapiro discusses the necessity for Presidential candidates to explain the vast global changes that are affecting the economy and to provide real plans to make globalization work for all Americans. He argues that John McCain has created an unrealistic economic narrative focused on tax cuts for corportations, but that Senators Clinton and Obama must create a truly compelling one.

Take a look:

Since its founding 39 years ago by John McConnell, the plastics pioneer and peace activist who first proposed a holiday to honor the Earth at a UNESCO conference in San Francisco, Earth Day has grown in into a global holiday observed by billions. But the idea espoused by McConnell of stewardship of our beloved planet has taken on a new urgency, with the outbreak of multiple crises, the ongoing threat of global warming, sky high oil prices and now soaring food prices and shortages. Indeed the crises are so many and so great that some are proclaiming a neo-Malthusian crisis in a world that has outstretched its resources. Whether one believes as Paul Krugman wrote yesterday—that lack of inventories suggest the world is truly in the grip of a crisis of supply--or like George Soros and many traders that we in the midst of the mother of all commodity price bubbles—it is clear that we are in a crisis.

My view is that human ingenuity is more than equal to the task of sustaining society but that something has gone awry. And what has gone awry is the functioning of markets. Whether one looks at turmoil in the credit markets, volatility in the currency markets where the dollar has undergone a freefall, the seizure of food markets that is exacerbating the food crisis or the hard-to-explain global surge in commodity markets across the board, it is clear that the market system undergirding the global economy is under stress.

In part, the problem is that as markets have grown rapidly in the last fifteen years due to globalization, they have outgrown market structures. Certainly in the area of management of derivatives and bank supervision, market governance has failed to keep up with technology. However, it also appears that markets are failing in agriculture and oil. And more broadly, the global trading system itself is experiencing a seizure as the impulse for free trade that has powered the last 60 years of global growth has stalled—in Doha and recently, in the case of a Colombian agreement, in the US Congress.

When markets seize up—as they do from time to time and did disastrously in the 1930s—the result is a regression to earlier forms of allocation of goods. Anthropologists have shown that markets are a relatively late development in the million year history of human. Allocation based on command and control, is far more basic and when markets seize up, this is what happens. We are seeing this currently in food markets as countries ban exports and hoard grains in the anticipation of riots and political unrest.

Markets are a far better way to allocate goods and essential to today's wealthy societies but they depend critically on confidence. Confidence, in turn, depends largely on transparency and comprehensibility. When economic historians assign a cause to the current recession in the United States, they may place the blame on a technology shock in the financial markets that has created securities that no one can possibly reliably value.

It is no good to repeat the nostrum that we need to let markets resolve the crisis when the crisis is in the markets themselves. Nor are the one-off activities of the Federal Reserve sufficient in the long term. While the Fed seems to have been successful in injecting liquidity into the system, its unprecedented actions are at best an emergency response and do not provide the predictability and stability needed to promote long term growth. Instead, we now have to undertake the painful process of reforming financial, agricultural and energy markets. However, this won’t be easy.

One critical element of the spirit of Earth Day is that people need to work together. When one country goes it alone, the result is mistrust, a decline in confidence and ultimately a downward economic spiral. This was the easily foreseen--but recklessly ignored--consequence of the unilateralist policies pursued by the Bush Administration in rejecting Kyoto, a variety of multilateral initiatives inherited from the Clinton years, and of course in Iraq and foreign policy in general.

The way out of the current crisis is to resume multilateral approaches to creating functioning markets that will replace fear and mistrust with cooperation and confidence. But for that we may have to wait at least until the next Earth Day, after the next Presidential Election.