Question for Discussion: According to Friedman, who is wearing
the Golden Straitjacket and who is controlling the rules of
Readings: Friedman, pp. 101-111 ; Korten, "Illusions of the Cloud Minders";
Issak, "The Revolt of the Rich"
Video: VHS: "Losing Jobs: Dobbs--Exporting Jobs and
Levis is sending jobs to China segments"
Creating the Global Economy in the 1980s and 1990s
The World Trade Organization and Globalization
Challenging the WTO and Globalization
Learning Goals for Today's Classes
- What does Friedman mean by the Golden Straitjacket?
- What are the rules nations must follow in order to be
competitive in this new global economy?
- Can this new global economy protect the democratic rights
of nations and citizens within those nations?
1. YouTube; Governments Don't Rule the World,
Corporations Rule the World
(See this Sept. 2011 interview);
2. Metaphors for our Cultural World --
Terms like the Golden Straightjacket, the Electronic Herd, Free Markets, Free Enterprise, and Free Trade are metaphors that describe a much more complex reality. Because they are metaphors, we shouldn't confuse them for the larger complex reality.
2. Eras of Globalization
- 1991-2008 -- Era of Free-Market Globalism
What future for capitalism? - (Crisis of Globalization) (.45 min)
- 2008- 2015 --- Era of Economic Collapse and Global Decline
- 20? - 20? -- Era of Regulated Globalism and Economic Recovery?
2. The central question posed by globalization is who
makes the rules for the emerging global economy?
3. The next question is what are the rules by which
the global economy operates.
4. Jobs and Eployment today (2012)
5. Increasing Inequality in 21st century America
- Elysium (2013)
- Elysium's Director Thinks His Hellish Paradise Is Our Future.
- Elysium Is a Wake-Up Call | Abra Deering Norton - Huffington Post
- David Rothkopf Reveals the Superclass Elite (video) (in-class)
- YouTube:The Rise of the Superclass - David Rothkopf (Author) ( 2:50, in-class)
- Mapping The Wealth Of The World's Billionaires - Forbes
- Number of billionaires in the United States 1987-2012
- World could see first trillionaire in 25 years - Telegraph (2014)
- CNBC Gushing at the Thought of Bill Gates as 'World's First Trillionaire (2014)
- Obscene wealth: World’s 85 richest have same wealth as 3.5 billion poorest: (2014)
A total of 210 people became billionaires last year, joining the existing 1,426 billionaires with a combined net worth of $5.4 trillion.
Also, according to the Oxfam data, the richest 1 percent of people across the globe have $110 trillion, or 65 times the total wealth of the bottom half of the planet’s population – which effectively “presents significant threat to inclusive political and economic systems.”
- Richest 1 Percent Account For Nearly All Of U.S. Recovery's Gains:
In 2010 -- the first full year since the end of the Great Recession -- virtually all of the income growth in America took place among the country's very wealthiest people, says an economist at the University of California, Berkeley. The top 1 percent of earners took in a full 93 percent of all the income gains that year, leaving the other 7 percent of gains to be sprinkled among the vast majority of society.
- The richest get richer | David Cay Johnston
(See graph of Income Gains)
- How Did Inequality in America Get so Bad? (in-class)
(See 2011 Graph for top 1 percent share)
- 2011 CBO Study on Income Inequality
(See Share of Income 1979-2007)
- CBO Graph of Income Inquality
(Share of Income going to top 1 percent)
- Top Earners Doubled Share of Nation's Income, C.B.O. Says
- Striking it Richer: The Evolution of Top Incomes in the United State
- Top one percent gains in Income
(Share of Income going to top 1 percent 1920-2007)
- Daily Kos: The Top 1 Percent got 93% of the Gains
- Noah, The One Percent Bounce Back
- It's the Inequality, Stupid | Mother Jones (See graphs) (in-class)
- Corporate Profits Up, Workers Income Lags
6. 21st-century Network of Global Corporate Control
- Financial World Dominated By A Few Deep Pockets - Science News:
Conventional wisdom says a few sticky, fat fingers control a disproportionate slice of the world economy’s pie. A new analysis suggests that the conventional wisdom is right on the money.
Diagramming the relationships between more than 43,000 corporations reveals a tightly connected core of top economic actors. In 2007, a mere 147 companies controlled nearly 40 percent of the monetary value of all transnational corporations, researchers report in a paper published online July 28 at arXiv.org.
- Power Ball Network of Global Corporations (See Image)
- The Network of Global Corporate Control (article)
- Who Runs the World ? – Network Analysis Reveals (in-class)
'Super Entity' of Global Corporations:
“We present the ﬁrst investigation of the architecture of the international ownership network, along with the computation of the control held by each global player. We ﬁnd that transnational corporations form a giant bow-tie structure* and that a large portion of control ﬂows to a small tightly-knit core of ﬁnancial institutions. This core can be seen as an economic “super-entity” that raises new important issues both for researchers and policy makers.” [emphasis added]
7, Wearing the Golden Straitjacket
The Growth of Corporate Globalization in the 1980s
In his essay, "Reagan's America: A Capital Offense," Kevin Phillips argues the President Reagan's policies in the 1980s
helped the wealthy and large corporations at the expense of the majority
of Americans. Phillips is right when he argues that "Reaganomics" caused declining standards of living for most Americans. However,
Phillips is wrong to argue that this was mainly a Republican economic
program designed to benefit the wealthy and large corporations. First
of all, both the Republicans and Democrats supported Reagan's economic
programs in the 1980s. In fact, even under a Democratic President,
President Clinton, these conservative economic policies are still
being carried out. I believe Phillips is wrong when he argues that
these conservative economic programs to help the wealthy in the 1980s
are just like those in the 1880s and 1920s. Unlike these earlier boom
eras, when the Republicans help the rich get richer at the expense
of the rest of America, in the 1980s and 1990s the United States increasingly
found itself participating in a global economy. I will argue many
of President Reagan's, Bush's, Clinton's and now George W. Bush's economic policies are
all designed to try to make America more competitive in this global
economy. Tragically, however, both Republicans and Democrats alike
since the 1980s have been supporting efforts to make America more
competitive in this global economy by working to lower Americans'
standard of living and quality of life. Needless to say, if the
majority of Americans understood what their political leaders were
doing they would feel betrayed and angry. So, of course, neither the
Republican or Democratic parties dare level with the American people
about their efforts to lower our standard of living and quality of
How did the growth of the global economy
in the 1970s and 1980s force American political leaders to conclude
that the only way for the American economy to be competitive was to
lower our standard of living? Beginning in the 1960s and 1970s,
American companies began to move some of their operations overseas
both in order to be closer to global markets they were serving and
to take advantage of lower wages in other countries. In addition,
beginning in the 1970s European and Japanese companies began to challenge
American companies for dominance both in the United States and throughout
the world. Throughout the 1970s, the industrial economies were burdened
with a massive increase in the price of oil. Faced with declining
profits because of increasing energy costs at all levels of production
and sales, American, European, and Japanese companies began to look
for ways to cut their costs and restore their huge profit margins. In the 1960s and 1970s, throughout the industrial world, but especially
in the United States and Europe, national and state government created
all sorts of strict laws protecting the environment, worker's safety,
and the consumer. Faced with the increasing costs of meeting these
environmental and safety regulations, the dominant industrial companies
began to look for ways to cut their costs and shore-up their sagging
profits. Finally, faced with increasing inflation in the 1970s, industrial
workers in the United States, Europe, and Japan demanded higher wages
just to keep up with inflation. Burdened with workers' increasing
demands for higher wages, these industrial companies were again faced
with increasing costs and lower profits. As a result of these economic
changes in the 1970s, many of the dominant industrial companies that
did business in the United States, Europe, and Japan were faced with
a growing crisis; their costs were increasing and their profits were
flat and even declining. What could these companies do to shore up
their profits and reduce their costs?
In the 1970s and 1980s, many of the
industrial giants in the United States, Europe, and Japan became global
companies; they no longer wanted to claim allegiance to any country
in the world. By becoming global companies they could force nations
to compete with each other to attract their companies to build factories
in their countries. By the 1980s, these global companies, now often
called Transnational corporations (TNCs) were aggressively using this
strategy of globalization to blackmail countries into reducing their
costs and increasing their profits. I believe that President Reagan's
economic program, which Phillips and others have called Reaganomics,
reflect the increasing reality of the global industrial economy
and the power of TNCs to blackmail even the biggest and strongest
countries and force them to create economic, political, and social
conditions that will reduce their companies' costs and increase their
profits. Let's now look at some of the major demands these TNCs imposed on industrial countries in the 1980s and
Global Economic Inequality
Friedman's TINA view of Globalization
Thomas Friedman aruges that there are is no alternative (TINA) to "free-market capitalism." For Friedman there is either state-controlled and planned economies such as socialist or communist countries and free-market controlled economies. Friedman believes that with the end of the Cold War, free-market capitalism proved that it could provide more economic growth and freedom than state-controlled and planned economies.
Friedman's Rules of The Golden Straitjacket:
To fit into the Golden Straitjacket a country
must either adopt, or be seen as moving toward, the following golden rules: making the private sector the primary engine of its economic growth; maintaining a low rate of inflation and price stability, shrinking the size of its state bureaucracy, malntaining as close to a balanced budget as possible, if not a surplus, eliminating and lowering tariffs on imported goods, removing restriction on foreign investment, getting rid of quotas and domestic monopolies, increasing exports, privtatizing state-owned industries and utilities, deregulating capital markets, making its currency convertible, opening its industries,
stock, and bond markets to direct foreign ownership and investment, deregulating its economy to promote as much domestic competition as possible, eliminating government corruption, subsidies and kickbacks as much as possible, opening its banking and telecommunications systems to private ownership and competition, and allowing its citizens to choose from an array of competing pension options and foreign-run pension and mutual funds. When you stitch all of these pieces together you have the Golden Straitjacket. Unfortunately, this Golden Straitjacket is pretty much "one size fits all.' (p. 105)
"As your country puts on the Golden Straitjacket, two things tends to happen: your economy grows and your politics shrink....Once your country puts it on, its political choices get reduced to Pepsi or Coke....The only way to get more room to maneuver in the Golden Straitjacket is by enlarging it, and the only way to enlarge it is by keeping it tight....The tighter you wear it, the more gold it produces and the more padding you can then put into it for your sociey." (p. 106)
"So to thrive in today's globalization system a country not only has to put on the Golden Straitjacket, it has to join the Electronic Herd. The Electronic Herd loves the Golden Straitjacket, because it embodies all the liberal, free-market rules the herd wants to see in a country." (p. 110)
"This interaction among the Electronic Herd, nation states, and the Golden Straitjacket is at the center of today's globalization system." (p. 110)
Korten's view of the Cloud Minders:
Global Corporations & Financial Elite
"...[J]et between continents high above the clouds, pampered with the finest wines by an attentive crew; and live in protected estates, affluent suburbs, and penthouse suites amid art, beauty, and a protected environment. They are as insulated from the lives of the ordinary people of our planet as those who lived on Stratos were insulated from the lives of the Troglytes. They too are living in a world of illusion, draining the world of its resources and so isolated from reality that they know not what they do, nor how else to live. "
"Far from encouraging delegates to see the world through the eyes of the poor, the organizers of World Bank-IMF meetings take great care to shield them from the specter of poverty.
The World Bank and IMF are leading proponents of economic rationalism and free-market, export-led growth strategies. They have for years been lauding South Korea , Taiwan , Singapore , and Hong Kong as examples of success. Thus when the directors met in Bangkok , Thailand , in October 1991, it was natural that the meeting served as a celebration of the recent "success" story of free-market, export-led growth in Thailand . "
"The World Bank-IMF meeting in Thailand was a fitting metaphor for the illusion within which the world's power holders live. The illusion is maintained in part through the construction of a life of luxury set apart in enclaves, and in part by self-justifying belief systems, such as corporate libertarianism, and by the adulation of wealth and the wealthy by the business press and a plethora of economic researchers and consultants. Most of all, it is maintained by the dys functions of an economic system that lavishes rich rewards on power holders for decisions that place terrible burdens on the rest of humanity."
"The simple truth that the Forbes editors and other Stratos dwellers are prone to ignore is that each time a major corporation announces a cut back of thousands of jobs, the Stratos families get richer and the incomes of the thousands of workers whose jobs have been eliminated decline. It is part of an ongoing process of shifting wealth and economic power from those who are engaged in the production of real value to those who already have large amounts of money and believe it is their right to see those amounts grow without limit, regardless of their own needs or productive contributions. "
"...A melding of the world's financial elites into a stateless community in the clouds, detached from the world in which the vast majority of ordinary mortals live....As globalzation progresses, we find growing islands of great wealth in poor countries and growing seas of poverty in rich countries. The North and South distinction is now most meaningfully used to acknowledge the reality of a world divided by class lines more than by geography." (p. 116)
"They have enjoyed great success in attacking social programs for the poor, providing tax breaks for the rich, and giving greater freedom to corporations.The consequence, however, is to shift still more power and wealth to the big and central--the corporate world of the cloud minders--at the expense of the small and local." (p. 120)
" The corporate libertarians tell us that the process of globalization is advancing in response to immutable historical forces and that we have no choice but adapt and learn to compete with our neighbors. It is a disingenuous claim that belies the well-organized, generously-funded, and purposeful efforts by the cloud minders to dismantle national economies and builid the institutions of a global market."(p. 120)
For an alternative vision of globalization see these websites
1. The International Forum on Globalization
2.The People-centered Development Forum
3. The Third World Network
Issak, The Revolt of the Rich
"A conservative revolt increases economic growth, speeds up the global economy, and exaggerates the
gap between the rich and poor. "
"Wealthy conservatives used this Anglo-American vision of capitalism to push the world economy and political system toward less regulation and more power for private corporations and individuals. The "revolt" led to the triumph of this liberal, freedom-first capitalism with the end of the Cold War and the emergence of the dot-corn boom of the late 1990s. The rich man replaced the mass man as the idol: The young, sovereign multibillionaire in the high-tech sector became the hottest role model. "
"Globalization encourages the well-positioned to use tools of economics and politics to exploit market opportunities, boost technological productivity, and maximize short-term material interests in the extreme. The result is a rapid increase in inequality between the affluent and the poor.
But in the process, the wealthy inadvertently undermine their own stability. The gaps between rich and poor have become so extreme in the twenty-first century and the aggressive competitive policies of the wealthy so transparent that the legitimacy of the post-World War II rules of the global economy has been undermined. The continuous decline of respect for the rules of the
Bretton Woods agreement, the International Monetary Fund, the World Bank, and the World Trade Organization come to mind. "
"At the national level, New York Times correspondent Thomas Friedman called this homogenous blueprint the "Golden Straight jacket," The private sector is its primary engine of economic growth, stimulated by low inflation and the privatization of stare-owned companies. It also demands efforts at achieving a balanced budget, minimal state bureaucracy, and a reduction of restrictions against foreign investment, trade, and capital flows . 9 In short, all nations that wanted to become competitive had to adapt to the stringent rules of this Anglo-American capitalist model of social reality. The countries that adapt get richer. The ones that don't become poorer."
"Wealthy states have the resources to adapt quickly, targeting emerging market niches with high-tech corporations and extensive financing. But even the rich do not have the time to focus on anything but the main chance of the moment-or they will risk losing the short-term competitive game. These few market-moving firms and investors help to increase the number of the poor through economic Darwinism, maximizing their own strength, technology, finance, information flows, and managerial skills to such an extent
that increasing numbers of people are thereby marginalized. The many in the shadows fall into poverty through unemployment and find it increasingly difficult in a complex, technological world to be able to satisfy their own basic needs by themselves."
"Disconnected from history by the speed of global competitiveness, the new rich tend to put too much faith in their technology, their organizational structures, and the taken-for-granted stability of their home countries. In a global village, without paying attention to the needs of the masses of poor people--who are having the most children--the wealthy face a looming socioeconomic disaster in terms of their own health and security. The emerging catastrophe could be nothing less than a collapse of the global system--the economic, political, and ecological world as we know it."
Demands Made by TNCs to do Business in a Country under the Global Economy
1. Greatly reduce Corporate taxes and
taxes on the rich.
2. Greatly reduce government spending
in order to cut taxes.
3. Increase taxes on the middle-class
and poor to pay for the necessary government services, such as support
4. Reduce environmental, work-safety,
and product-safety regulations.
5. Provide millions and millions of dollars
in tax incentives and subsidies to TNCs in order to convince them to
locate in your country.
6. Build and support modern industrial
factories for TNCs to use rent-free.
7. Create tax-free export processing
zones so that TNCs can produce products without paying any taxes
8. Reduce and lower worker's wages by
keeping the minimum wage low or eliminating the minimum wage altogether.
9. Reduce the costs of hiring workers
by reducing or
eliminating workers' compensation taxes, social security
taxes, and health insurance taxes.
10. Allow child-labor at almost any age
and under any conditions.
11. Do not enforce maximum work-day hours,
such as the eight hour day or the 40 hour week.
12. Use government power to crush and
weaken labor unions. Allow companies to hire security firms to harass
and intimidate workers and unions.
13. Allow TNCs to freely take their money
and profits out of your country.
14. Reduce government support for health-care,
education, and anti-poverty and anti-hunger programs, forcing workers
to work for any wage just to take care of and feed their families.
15. Support global free trade and work
to prevent countries from denying companies the right to sell their
products despite the brutal conditions, environmental destruction,
and exploitation of their workers.
16. Don't restrict or limit immigration.
Encourage high levels of unemployment in order to force workers to
compete by working for lower and lower wages.
17. Limit and restrict local and national
government control over their economies. Encourage global bodies to
set economic standards that will benefit TNCs.
18. Limit the ability of workers and
citizens to challenge the TNCs and their own government's economic
programs which help the TNCs at their expense.
19. Create massive national debts
in order to bankrupt governments and force them to be even more at
the mercy of the TNCs. Governments can thus say they have no choice
but to accept these conditions. See U.S. National Debt Clock
20. Force your citizens to accept
lower standards of living and quality of life in order to guarantee
higher profits for TNCs.
Economic Strategy to attract TNCs
If we look
at President Reagan's economic policies in terms of the above efforts
by the TNCs to blackmail countries in order to reduce their costs
and increase their profits, Reaganomics makes a whole lot of sense.
Let's look for a moment at some of Reagan's major economic policies:
1. To cut taxes on the wealthy and large
2. To reduce government regulations on the environment, worker-safety,
3. To provide billions of dollars in tax incentives and subsidies
4. To crush labor unions and keep the minimum wage low.
5. To support massive increases in immigration to the
6. To support American companies in moving their factories to Mexico
7. To bankrupt the government by creating a massive national debt.
8. To reduce government support for healthcare, children, the poor,
and the disabled.
9. To work closely with TNCs to create "global free trade" and weaken national governments' ability to manage their economies.
10. To reduce the standard of living and quality of life of most Americans.
But the larger conclusion isn't that
it was President Reagan or President Bush or the Republicans that
are responsible for these disastrous policies. Clearly, both the Democrats
and the Republicans have supported these policies that have caused
the standard of living and the quality of life for most Americans
to decline. We can't blame Reagan or the Republicans or even Clinton
and the Democrats for what both American political parties are responsible
for. As a result of these policies, as Phillips argues, the wealthy
and large corporations got richer. With this increasing wealth
and success, large corporations, the wealthy, and TNCs are in an even
stronger position to blackmail countries into supporting their continued
success and profits at the expense of their peoples' standard of living,
the health and safety of their environments, and their quality of
Many students after listening to this
depressing argument about the impact of the global economy on their
lives demanded an answer: What can we or should we do about the growing
power of TNCs and the wealthy to blackmail countries into reducing
their standards of living and quality of life? There are a number
of national and global movements that are attempting to directly address
this question. For a brief look at some of their proposals for reform,
see these internet sites:
Corporations Rule the World: An Economic System Out of Control
3. The Third World Network
4. People-Centered Development Forum
5. The International Forum on Globalization