[This book
review was published in the Journal of
Social, Political, and Economic Studies, Winter
1997, pp. 497-503.]
Dwight D. Murphey
By William Greider
Simon
& Schuster, 1997
$27.50, Hardback,
528 pages
ISBN
No.0-684-81141-3
Next to
Jeremy Rifkin's The End of Work, William Greider's One World, Ready or Not is perhaps the most substantive book on the
market today about the changes that are taking place in the world's economy. The details he provides
are electrifying. His theoretical
analysis is less satisfying, but
even here there are points of definite value; and the policy suggestion he
makes at the end of his discussion is potentially of great importance.
In what
follows, we will note, first, some of the many developments about which Greider provides such
fascinating detail. Then, second, we will examine his analysis to
see what is valuable in it and what, in this
reviewer's opinion, is not.
Detail About
On-Rushing Events in the Global Economy
Increasing presence of low-cost Third-World labor, both skilled and unskilled,
in competition with higher-cost
labor in the western economies.
Greider
tells of “poor people who dwell in marginal
backwaters doing industrial work of the most advanced order ...making complex
things of world-class quality.” With the improvements in transportation and electronic communications,
this labor is fast coming into direct competition with workers in
the
The competitive pressure globally for lowest-cost production.
The rapidly increasing global competition is creating “dramatic opportunities both to
reduce costs and to increase output.” This “creates pervasive downward pressure
on prices,” putting profit margins in jeopardy unless ever-lower costs are achieved. Each enterprise seeks a
“continuous suppression of costs,
including labor costs.” Businesses continually restructure to become “fast, lean, flexible.”
“Peasant-pressure”
on the world labor supply.
“At the bottom of the global wage ladder is a seemingly inexhaustible supply of new
recruits: peasants leaving the bleak circumstances of rural subsistence. . .”An
example: “One hundred million rural
migrants [are] said to be roaming
The secular tendency toward world-wide wage equilibrium.
As the world's workers are thrown into competition with each other, the
pressure is for wages to fall in the advanced economies such as the United States and to be bid up elsewhere (although, we might add, the
almost infinite pool of workers at varying skill1evels in the Third World dilutes this pressure for
wages to rise there, so that what is in the offing is rather a fall of
advanced-economy wages to an equilibrium
that is not much higher than the
billions of people in the Third
World already earn). This is a process
that plays itself out in one
workplace after another, such as when
“Caterpillar demanded drastic wage reductions at [its] Midwestern factories”
and when employees, feeling insecure in their jobs, become reticent about seeking higher wages.
The displacement of workers.
Greider tells how between 1971 and 1991 the world's 500 largest multinational companies increased
their sales sevenfold - while not increasing their employment at all. In the
automobile industry, the number of hours of labor that is needed to manufacture a car has fallen drastically since 1979. The result? “
The displacement of firms and
industries.
Whole industries are packing their bags to leave
The accelerating growth of the
world capital market.
“Finance capital... has accelerated its movements around the world at an astonishing pace.” This includes international bank loans, bond
financing, stockholdings, and currency exchange. As economic theory would predict, capital flows to
the highest return. An official at Tudor Investment Fund is quoted as saying, “If the return on capital is 30 to 40 percent in
Increasing importance of multinational corporations.
Even Sony is ceasing to be distinctively Japanese as it
sets up factories and employs workers “from
Self-protective responses by firms and industries.
Everywhere one sees the forming-up of alliances, mergers,
cartels, and administered prices as firms and industries seek urgently to keep abreast of competitors’ ever-lower
costs. Greider tells us the
reason for downsizing: to lower “the break-even point in their capacity utilization... so they [will]
make a profit even in bad times.”
Undercutting national sovereignty.
"What
is
forming now is an economic system of interdependence
designed to ignore the prerogatives of nations.” The past few years have seen a decontrol of the
movement of capital in and out of a respective country. Capital flows are of
such size as to dwarf central bank reserves. Tax havens attract capital, and
countries vie with each other to offer the most generous incentives by way of
low taxes, inducements and less regulation.
The polarization of wealth.
Of the immense wealth that is being
created, most is not going in wages to the great mass of people, but is going
instead to the owners of capital, including the bondholders who own the
rapidly- increasing world debt.
The problem of purchasing-power in relation to supply.
The result
of all this is that supply is outstripping demand, a fact that has so-far been
obscured by the United States' willingness to incur vast trade deficits,
sopping up the excess production. Greider warns, however, that the
Greider's Analysis: a Critique
Greider is certainly right when he
points to the polarization of income and wealth and then to the problem of the
disparity between the amount of goods and services that are coming available
and the purchasing power that people (don't) have to purchase them. If recent
economic prosperity obscures these elements, it should be kept in mind that the
world is only a small fraction of the way into the technical changes that are
on the immediate horizon. Many of the changes are already here, with simply the
implementation remaining only part-finished. As they grow in number and
implementation, they will continue the trends Greider traces so well.
He falls short in some areas,
however. While he talks about “overproduction”, he doesn't seem fully
cognizant, as Rifkin is, of the exponential increase in productivity that is
coming through computerization, robotics, biotechnology, and other scientific
advances. To the contrary, there are times he speaks of stagnating growth.
There are reasons that economic commentators speak of growth as being slow in
the advanced economies, but that is more than likely a chimera caused by
inadequate statistics (which have not been able to keep abreast of the new types
of quality improvement in many things); or, in any event, slowness of growth
can hardly be thought the long-term trend.
Greider sees displacement of workers,
firms and industries from the cost-cutting discipline imposed by worldwide
competition, but he doesn't seem fully cognizant of its implications.
Computerization, robotics, biotech - these things
hardly intrude into his discussion. Their displacing potential is enormous
compared to anything the world has seen so far.
His analysis is based, instead, on
the standard pillars of Marxist economic analysis that have been around for a
century. These tell us that capitalism, by the very nature of the
“contradictions” (a favorite Marxist word that Greider likes to use) that
inhere within it, suffers from a chronic overproduction and underconsumption
based on a lack of purchasing power. He, and his predecessors in intellectual
title, could just as well (as they did) have written this same critique forty,
sixty, eighty or a hundred years ago. It is a critique that simply has not been
sound; the market economy has gone from success to success and enriched
hundreds of millions of people beyond anything any prior age thought possible.
Indeed, it has been perverse for Marxists to insist on capitalism's failures
when it has proved the world's greatest success story.
It is ironic, then, that events are
turning this on its ear. The global economy in the Information Age is actually
creating the polarization and purchasing-power-gap that Marxism has so long
postulated erroneously. Thus, Greider proves essentially to be right, with his
fault lying primarily (and ironically) in understating the problem (despite the
splendid detail with which he describes the problems as he sees them).
And so it is that a Marxist economic
analysis and a pro-market, classical-liberal analysis come head-to-head, and
must grapple with the same problems. Most market theorists will, predictably,
continue to deny that there are problems; and in their yearning for ideological
consistency they will embrace a wrong-headed position just as reflexively as
Greider, in his own ideological consistency, has, by dint of timing, been led
into embracing a correct one.
It is as important now for a
supporter of a market economy to address the issues of polarization-of-income
and purchasing-power-disparity as it has seemed all along for a Marxist to do
so.
How to do this? Greider may have a
pretty decent answer, based on the thinking of Louis Kelso. Kelso, writing in
the mid- twentieth century, wanted government to pay the way for everyone to
become a co-owner of every conceivable type of asset – sidewalks, streets, etc.
- and to receive a dividend as payment for his ownership. This was
redistributive socialism dressed up to look like broadly shared capitalism, as
this reviewer pointed out in an article in this journal in the spring issue of
1990. At the time Kelso proposed it forty years ago, it was the most
transparent ideological fraud. Today, however, conditions have changed so much
that a specific aspect of Kelso's thinking is not out of place. Much of the
market dilemma would be erased if the public at large were able to become
owners of shares in, say, an index fund that in turn would own diversified
stock market holdings. (There is no reason to own part of a sidewalk, which
isn't an income-producing asset; it is far more to the point to own part of a
mutual fund that owns shares in the vast worldwide economy.)
Classical liberals and libertarians
will oppose any redistribution by government to produce this widespread mutual
fund ownership. They may today accept a system of deferred taxation while
people build up their own savings that will provide a fund either for health
care or old age or general support. It seems that they would have no particular
ground for objection to a form of distribution that violates nobody's property
rights and that doesn't depend upon taxing some to give to others. Greider
points out, in the course of his discussion of Kelso's ideas, that “every year,
as it enlarges the nation's money supply to meet the needs of commerce in an
expanding economy, the Federal Reserve creates $30 billion to $40 billion in
new money... This money is now distributed through the private banking system,
lent out by commercial banks to people and businesses at market interest rates.
. .” If, instead, the Federal Reserve bought $30 to $40 billion in shares in an
index mutual fund, that would also get the new money into the productive
economy for new investment, research, enterprises and the like, while at the same time providing something that would be
distributed to citizens to make them
part-owners of the economy. After a few years, the annual increase would add up to far more than a pittance. The mutual fund holdings would provide people a flow of earnings, making them less dependent
on work for income in an
increasingly “workerless” economy, and providing “purchasing power” to provide a
market for the goods and services the economy would produce. So
far as business enterprise is concerned, nothing would change from the
current pursuit of earnings for stockholders.
A happy thing about this proposal
is that such a mechanism would have little potential for the
aggrandizement of governmental power that libertarians and classical liberals
rightly fear so much. Instead of
considering it “socialist” because it gives rise to “something for nothing,” it would be
wise to look upon it as simply part of the institutional framework that will be desirable (actually, quite necessary) for the
smooth existence of a market economy,
and of a free society predicated
on one, in the future.