Globalization works for the bosses

Democracy : A Journal of Ideas
Issue #3, Winter 2007

Crashing the Party of Davos
Globalization works for the bosses. Can we make it work for workers too?

Jeff Faux

A ll markets have a politics, reflecting conflict among economic interests over the rules and policies that determine–as the American political scientist Harold Lasswell once famously put it–"who gets what." And when markets expand, so do their politics. Thus, in the nineteenth century, driven by improvements in transportation and communication technologies, commerce spilled across state borders beyond the capacity of states to regulate them. The power of large corporations went unchecked, generating bitter and violent class conflict. Fortunately, the democratic framework of the U.S. Constitution permitted popular challenges to the excessive concentration of wealth and influence. Ultimately, through the Progressive and New Deal eras, the United States developed a national politics that imposed a social contract–a New Deal that provided workers, as well as business, with enforceable economic rights. Over time, the contract was extended to racial minorities, women, and others who had been previously excluded from expanding economic opportunities.

Today, markets have expanded again, beyond national borders–and beyond the capacity of the world’s nation-based political institutions to manage them. As a result, the global economy is sputtering. Witness the collapse of the Doha Round of trade negotiations, popular hostility to the "Washington Consensus" of development in Latin America and other underdeveloped regions, and the spread of social tensions over immigration and foreign-wage competition in both rich and poor countries. The current pattern of globalization is undercut- ting the social contract that national governments, in developed and in many less-developed countries, had imposed over the last century in order to stabilize their economies and protect their citizens from laissez-faire’s brutal insecurities. Even as the world grows more tightly knit, it still lacks a common politics for managing its integration.

Just as bringing stability to the American economy in the last century required stronger national institutions, bringing social balance to the global economy in this century will require stronger global political institutions to regulate global markets. Already, many such institutions exist–such as the World Bank, World Trade Organization (WTO), and International Monetary Fund (IMF). But in make-up and in culture, they are dominated by those who own and manage large concentrations of internationally mobile capital, whose goal is to escape market regulation and break free of obligations to stakeholders other than the global corporate investor. In the politics of the global market, these institutions are dominated by a single party: Call it the Party of Davos, after the Swiss resort where several thousand global corporate CEOs, government leaders, and their assorted clientele of journalists, academics, and an occasional nongovernmental organization (NGO) or trade union head have the equivalent of their party convention every winter.

We are therefore faced with a catch-22: a global economy that is both prosperous and fair requires strong global institutions, but given the lack of a constitutional framework for democracy on that scale, strengthening existing global institutions is unlikely to generate a better distribution of global income and wealth. Indeed, under the present structure, as the world’s markets become more integrated, world inequality grows.

This fundamental contradiction cannot be resolved by unruly demonstrators at the entrance to the World Bank or the IMF. Nor will it be resolved in polite public policy seminars with proposals for globalization’s winners to share their gains with the losers; that is not what winners voluntarily do. Serious reform will only come from the development of a cross-border politics that challenges the cross-border power of the Party of Davos. Pulling together a worldwide movement is a utopian goal, but doing this in a region-by-region process is not. In fact, American progressives could begin the process right here in North America by transforming the North American Free Trade Agreement (NAFTA) into an instrument for continent-wide social progress. A redesigned NAFTA, in turn, could serve as a critical building block in constructing a global economy that is more equitable, more stable, and more democratic.