Foreign Policy In Focus Special Report: U.S. Leadership in the Global Economy

Whenever the occasion arises, President Clinton and like-minded proponents of free trade in the think tank, business, and academic communities recite a now familiar litany: Thanks to several hundred market-opening trade agreements--including the rule-transforming North American Free Trade Agreement (NAFTA) and World Trade Organization (WTO)--U.S. exports have grown at breathtaking speed, as have U.S. jobs in export industries. And, while the rest of the world has been shaken by financial crisis, the U.S. economy in the waning years of the 20^th century has remained the global bright spot of growth and stability.

Figure 1
100 Top Economic Units in the World: 1998
Countries-49	Corporations-51

Source: Compiled from data in Forbes, April 20, 1998 and July 27, 1998, and World Bank, World Development Report 1998/99 (Washington, DC: World Bank, 1999), pp. 212-213.

Media magnate Mortimer Zuckerman trumpeted America’s success in a 1998 Foreign Affairs essay: "The American economy is in the eighth year of sustained growth which transcends the ‘German miracle’ and the ‘Japanese miracle’ of earlier decades. Everything that should be up is up--Gross Domestic Product (GDP), capital spending, incomes, the stock market, employment, exports, consumer and business confidence. Everything that should be down is down--unemployment, inflation, interest rates."³ As fascinating and revealing as what Zuckerman includes in his measurements is what he omits: economic inequality and falling job security and benefits, weaker consumer protection, and environmental decay.

The Clinton policies represent a smooth continuation of his Republican predecessors and build upon the efforts of all post-World War II presidents to reduce trade barriers around the world. With the emergence of the governments of Ronald Reagan, Margaret Thatcher, and Helmut Kohl in the early 1980s, there was a growing consensus in rich-country governments and business circles that free trade, free investment, deregulation, and privatization were the best route to growth. At that time, most developing countries still favored a stronger state role in development, fearing that unfettered markets in a world of unequal nations would put them at a disadvantage.

Yet, by the late 1970s many developing countries had lost substantial leverage over their economic destiny as rapidly rising external debts to Western banks fell due at a moment of historically high interest rates and oil prices. Washington, working with Japan, Germany, the United Kingdom, and other rich governments, pressed developing countries into the free market paradigm as a condition for new loans and to ensure continuing payment of previous debts. The International Monetary Fund (IMF) was given the role of global policeman to enforce the free market policies, and the World Bank imposed similar reforms through its new policy-oriented "structural adjustment" loans. By the end of the 1990s, most developing countries outside the East Asian "tigers" had been obligated to liberalize trade and investment policies (although some--like Brazil, India, Saudi Arabia, and Iran--resisted in parts of their economies). In 1989, John Williamson (then of the pro-free trade Institute of International Economics) dubbed this move toward liberalization, deregulation, and privatization "the Washington Consensus," and he elaborated 10 sets of policies around which he saw elite agreement.⁴

In the 1990s, the Clinton administration triggered an acceleration of corporate-led globalization in all three major arenas of global economic policymaking. In trade, the administration completed Republican projects with the passage of NAFTA in 1993 and the WTO in 1994. In investment, a flurry of negotiations was launched for a Multilateral Agreement on Investment (MAI) and for regional agreements along the NAFTA model. And in finance, the multilateral agencies, in tandem with the U.S. Treasury Department, pressed for financial liberalization in South Korea, Thailand, the Philippines, Mexico, Brazil, Russia, and elsewhere.

Utilizing their trade associations, pressure groups, and thousands of well-paid lobbyists, corporations have been able to shape U.S. policy so they are the prime beneficiaries.

The acceleration of corporate-led globalization in the 1990s stems from a disproportionate (and growing) concentration of political power and influence in the hands of global corporations (see Figure 1). Utilizing their trade associations, pressure groups, and thousands of well-paid lobbyists, corporations have been able to shape U.S. policy so they are the prime beneficiaries. On a global scale, U.S. firms in the 1990s tended to benefit more from the new rules than firms of other countries due to U.S. corporate dominance of so many sectors, from cigarettes to high technology to biotechnology. Some of the wealth amassed by globalization has trickled down to U.S. citizens through the steady growth of the economy, especially to the mounting number of Americans who have some investment in the stock market.

One of the most disturbing outcomes of this march toward ever greater global corporate mobility is that the power balance between corporations and workers has markedly shifted in favor of corporations. University of Massachusetts economist Arthur MacEwan explains: "The deregulation of the international economy has meant a much greater freedom for capital movement but not a much greater freedom for labor movement. Since ‘freedom’ means having alternatives, and having alternatives means having power, a system that enhances the freedom of capital relative to the freedom of labor means giving capital more power relative to labor. The fact, for example, that NAFTA allows firms to move essentially at will among the countries of North America, but provides no such option for labor, nor for the organizations of labor (unions), means that it is an agreement that enhances the power of capital relative to labor."⁵

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