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Question for Discussion: What is the "Winner Take All" Economy?
Readings: Friedman, pp. 306-311, 318-324;
Dobbs, "The Myths of Free Trade" ;

Video: "The Big One: Centralia Workers";
"The Big One: Interview with Phil Knight";


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American as Third World Country

‘‘Will America be a Third World country in 20 years?" That provocative question concluded a recent column by Paul Craig Roberts. It is a question that demands serious and immediate pondering by every American. One may quibble with the time line or the definition of "Third World," but the answer to Dr. Roberts' question is: "Yes. If we do not reverse our present course, that is precisely where we are headed."
William Jasper, Why the Race to the Bottom?

Is Globalization Bankrupting the United States?

The Winner-take- all Economy

Globalization from Below

Global Economic Institutions


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The Winner Take-All Economy and the Race to the Bottom


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The Winner Take All Society

"The "Winner take All" society is a society in which the winners in any field today can really cash in because they can sell into this massive global marketplace, while those you are just a little less talented, or not skilled at all, are limited to selling in just their jocal market and therefore tend to make a lot, lot less."
(Friedman, p. 307-8)

"The more that different markets get globalized and become winner-take-all markets, the more inequality expands within countries and, for that matter, between countries."
(Friedman, 309)

Tracking Individual Stocks in this Global Economy:
go to CNBC.com and type "C" in the stock name or
symbol. "C" is for Citigroup, a global bank and
investment concern. Select "print report" and choose
the categories of information you want to receive
about Citigroup.

If you have financial capital to invest and play this
global market, you can make millions and billions of
dollars by playing the swings, by buying low and
selling high before the stock shifts back from its
high to its low. The great majority of Americans
and people throughout the world do not have
the capital and the financial resources to really
play this global stock market.
"According to the 1999 UN report, the fifth of the
world's people living in the highest-income countries
has 86 percent of world gross domestic product,
82 percent of world export markets, 68 percent
of foreign direct investments and 74 percent of
the world's telephone lines. The bottom fifth, in
the poorest countries, has about one percent in
each of these sectors. The wealthiest fifth consume
45 percent of all meat and fish, while the poorest
fifth consume less than 5 percent. And the gap
has been widening. In 1960 the 20 percent of the
world's people who live in the richest countries
had 30 times the income of the poorest 20
percent. By 1995, the richest 20 percent had
82 times as much income. "
(Friedman, 319-320)

"The interests of all nations ought to be fairly
straightforward--quality jobs, a rising living
standard, technological and industrial
development, ensured rights of workers and
consumers, and a high-quality environment
at home and globally."
(Korten, 128)

The Race to the Bottom

Increasing Global Economic Inequality

Dobbs, The Myths of Free Trade

"...Mankiw said, "Outsourcing is just a new way of doing international trade. We are very used to goods being produced abroad and being shipped here on ships or planes. What we 're not used to is services being produced abroad and being sent here over the Internet or telephone wires ... I think outsourcing is a growing phenomenon, but it' s something that we should realize is probably a plus for the economy in the long run."

"The White House is not only making statements like "outsourcing is good for the American worker" but is defending its free trade policies by insisting that all of us who are concerned about chronic, bulging trade deficits and the outsourcing of American jobs are "economic isolationists."

"We do know that workers who have lost their jobs to overseas outsourcing are finding new jobs that pay only about 80 percent of their original wages. And we do know that there are tremendous costs to the government to provide unemployment benefits and retrain these laid-off workers. Outsourcing may be good for the profits of U.S. multinationals, but that isn't really the issue, is it? "

"But the reality is that with our chronic trade deficits we are approaching $4 trillion in accumulated trade debt and must borrow foreign capital to buy foreign goods. As a result, our massive chronic trade deficits are clear evidence that our economy is not producing enough goods for domestic consumption and not producing enough goods that the world wants to buy or can afford. If that's not weakness, I don't know what is, "

See U.S. Foreign Trade Deficit

"Americans are not losing their jobs to a dynamic, rapidly changing economy. Americans are losing jobs because we permit U.S. multinationals to force American workers to compete with cheap foreign labor. "

"Outsourcing proponents claim that it 's all about productivity, not price. Almost everyone agrees that the American worker is the most highly productive worker in the world-and among the costliest. But for reasons of public relations, U.S. multinationals are loath to say they're exporting American jobs simply to cut their labor costs. No, instead they or their consultants say they're shipping jobs to cheap foreign labor markets to achieve "efficiency " or "higher productivity" or to raise their competitiveness. "

"But the simple truth is that our multinationals and our elected officials who support them without reservation are callously and shamelessly selling out the American worker. "

"Knowledge and expertise are moving from the United States to the cheap foreign labor markets along with our jobs. We 're not only exporting American jobs, we 're exporting our technology advantage."

"Certainly we must aid other countries, but that doesn't mean we need to send our jobs to them at the expense of our own prosperity. The elitist one-worlders surely won't continue to demand that we consign our workers to an ongoing labor competition with China , the Philippines , India , Haiti , and Mexico . Those who claim that we have a higher responsibility to the world economy than to American workers might consider a visit to their local unemployment office to talk with a few of the people in the lines. Our highest responsibility is to preserve the American Dream for all Americans. "

"As we know, Microsoft pledged $400 million last year to create resources in India , on top of some $750 million it had already promised to China . That's more than a billion dollars that Microsoft has put into other countries while thousands of software programmers in the United States-still home to Microsoft-go looking for work."

"But of course, that's the real point: Corporate America doesn't want the public to know the real numbers, or the real impact, and the last thing it wants is-God forbid-a national policy on the issue."

"Despite the extraordinary efforts of the multinationals, their lobbyists, and the politicians they support to distort the debate on the critical issue of outsourcing, I believe that nearly all working Americans understand that not only truth is being assaulted but also our economic future and our way of life."

Bryron Dorgan, Prairie Populist

Do people ask you how you can run on these issues coming from a "red state?"

I'm obviously in front of a lot of groups in North Dakota, and I get asked a lot about these issues. Most people agree with me, that we ought to stand up for this country's economic interests, we ought to demand fairness, we ought to stand up for workers, farmers, and America ' s small businesses.

Does anybody really think that after a century of what we went through to define what kind of standards we want in this country—work standards, environmental standards—that now all bets are off and we should say to the American worker, "You compete with people who will work 7 days a week, 14 hours a day and are paid 25 cents an hour"? Does anybody really believe we should compete with that or if we were forced to, could compete successfully? The answer is "hell no"

What will happen in 20 years if we keep our trade policy on autopilot right now?

We'll continue to sell pieces of our country off everyday with the trade deficit. But more importantly, we'll see the American worker, the American family with diminished opportunities, downward pressure on their wages, fewer health benefits, fewer retirement benefits, children having more difficulty in coming out of school and getting a job.

Now go 20 years ahead, and tell me what you see if we reform our trade policy.

If we make some changes and decide that we're going to be a world leader and we're going to retain our strength as a world-class economy, we're going to hopefully expand trade, but it has to be fair trade. We're going to create standards that require others to lift themselves up as they do business with us. We're going to take the steps that will be necessary to make sure that American people will have good jobs that pay well and that when productivity increases they will see opportunities to increase their incomes. If we do all of that, I think we' ll have a better future and reason for hope.

Globalization, Yes -- But Globalization from Below

"Like the protests in Seattle last November over the World Trade Organization or the one in Washington, D.C., in April against the IMF and the World Bank, the Prague protests took aim at "globalization from above." This is a model of economic growth, in their view, that favors corporations, investors and the wealthy.

In opposition, the protesters called for "globalization from below." People at the grassroots level around the world are linking up to make sure their own needs, the needs of the poor and of the environment are taken into consideration in the process of globalization. Beyond just saying "no," they are developing an alternative vision of globalization.

The advocates of "globalization from above" told workers, communities and countries that the benefits of globalization would bless them if they accepted the free-market policies promulgated by the IMF, World Bank and the WTO.

Instead, for many around the world, globalization has become a race to the bottom. As corporations move their operations around the world, they pit workers, communities and entire countries against each other to see who will provide the lowest wages and least environmental protections. According to the 1999 U.N. Human Development Report, 89 countries are worse off than they were 10 years ago. A recent article in the Atlantic Monthly states that Africa's per capita income, which grew by 34.3 percent from 1960 to 1980, has fallen by about 20 percent from 1980 to 1997 — the era of globalization....

Global poverty is getting worse. Some 1.2 billion people now live in extreme poverty," said James Wolfensohn, president of the World Bank. At the same time, the world's 200 richest people doubled their wealth from 1994 to 1998, according to the Human Development Report.....

"Globalization from below" provides a more appealing alternative.

That vision includes raising the level of labor, environmental, social and human rights upward, not downward; democratizing institutions at every level from the local to the global; reducing the disparities in global wealth and power; insisting on environmental sustainability, and creating prosperity by meeting human and environmental needs.

Most of the demonstrators in Prague are not isolationists trying to withdraw from the challenges of the wider world. They are true world citizens, demanding an end to global poverty and global warming and standing up for international human rights."

Korten argues against Globalization from Above

"Morita went on to make clear that, in his view, it is time for all local interests, including local cultures and other symbols of local identity, to give way to the larger good that the free-market system makes possible." (Korten, 124)

"The underlying message is clear. Local people, acting through their governments, should no longer have the right to govern their own economies in the local interest. Government should respond instead to the needs of the global corporation." (Korten, 125)

"The game of global competition is rigged. It puts companies against people in a contest that the people almost always lose.[The Corporate Globalizers] believe that 1) The world's money, technology, and markets are controlled and managed by gigantic global corporations, 2) Corporations are free to act solely on the basis of profitability without regard to national or local consequences. 3) Relationships, both individual and corporate, are defined entirely by the market, and 4) There are no loyalties to place and community." (Korten, 133)

In her essay, "The Pressure to Modernise," Helena Norberg-Hodge argues that the "most important reason for the breakdown of traditional cultures is the psychological pressure to modernise." Through media images of a glamourous, wealthy, carefree, exciting life in modern, industrial society, Third World peoples like the Ladakh of India experience of sense of their relative poverty, inferiority, and backwardness. Along with these media images come tourists who seem to have infinite amounts of money to spend. Finally, First World development experts and national governments try to convince these Third World peoples that their traditional cultures are backward, and they should work hard to become developed, so they too can have the same wealth, civilization, and success as peoples in developed countries. The images of wealth and success, contact with First World tourists, and development agencies such as the World Bank and the United Nations work to convince many Third World peoples that they too can become modern and developed.

It is the younger generation that feels this psychological pressure to modernise most. With the development of Western style schools and education, the young are trained to live and work in modern, industrial society, not in the small villages and traditional communities they have come from. As a result of efforts to educate their children, traditional societies find that their children no longer want to live in the traditional way, don't recognize the knowledge and value of their parents', and even forget how to speak the language of their parents. Their children even become ashamed of them. The psychological pressure to develop has begun to break down ties between children and their parents, between the younger generation and the cultures and traditions of these Third World traditional societies.

As a direct result of development efforts in Ladakh, the traditional village economy has broken down. Instead of families cooperating with each other to grow crops, build houses, share water and natural resources, we now see the growth of individual competition for land and resources that the community once shared. This competition and conflict soon leads to the growth of poverty and economic inequality between those who are able to more quickly master the rules of the modern, industrial economy and those people who insist on hanging on to their traditional ways. Families and communities no longer cooperate, and ethnic and religious differences soon lead to ethnic conflict over now scarce resources.

Having lived In Ladakh before the coming of development and modernization, Norberg-Hodge concludes that the Ladakh were better off living in their traditional societies rather than in the emerging modern society that is encroaching on their lives. The security, the cooperation, the mutual support of families and villages, and the support of their traditional culture made the Ladakh a lot happier than they are now. If we judge traditional Ladakh society against modern, industrial society, clearly people were better fed, clothed, housed, and supported throughout their lives in the traditional society. But her argument now raises a difficult dilemma: Why do the Ladakh and other Third World people continue to choose to adopt the culture and economy of modern, industrial society?

It is at this point that Norberg-Hodge's argument about the psychological pressure to modernize helps us understand why Third World peoples would continue to choose the modern, industrial way of life over their traditional cultures and societies. She argues that the images of wealth, success, power, and freedom that Third World peoples see creates a hunger for this modern life. They see all the images of modern success and happiness but don't see the problems and difficulties that come with modern way of life. Norberg-Hodge argues that these peoples are confronted "the psychological pressures that create a sense of cultural inferiority" which leads them to accept modern life without understanding "what is happening to them as they stand in the middle of the development process." In effect, she is arguing that the allure of modern life is so powerful, and makes their own lives and cultures seem so inferior, that they are caught up in it and do not fully understand where they are going and what are the consequences of choosing the modern over their traditional way of life. But is this necessarily true?

Norberg-Hodge doesn't take into account that these people could be freely choosing this modern way of life, believing that if First World peoples can have such wealthy, abundant, free ways of life so should they. There is also tremendous psychological pressure exerted by the sheer power of the First World way of life. How can we expect Third World peoples to reject the modern, while First World people are increasing their wealth, their consumption, and their freedom--or are at least perceived to be doing so by Third World peoples? Even though their traditional way of life provides more security, protects the environment, and provides a place for every one, why should Third World individuals choose it over the possibility of obtaining First World success and wealth? The tragedy of Third World development is that individuals, even after looking at the risks and costs of the modern way of life, will often choose to reject their traditional cultures, believing that they can as "individuals" succeed where others have failed. Of course, this is the same dynamic that lead First World peoples to accept the growing problems their societies are creating: poverty, homeless, violence, disease, pollution, lack of opportunity. The larger tragedy Norberg-Hodge tends to overlook is that individuals are making these choices to become modern not in terms of what is good for their societies, their families, or their communities, but what is good for them. This individualism is at the heart of the modern, industrial culture and way of life.

In his essay, "The Third World: A Crisis of Development," S. M. Mohamed Irdris looks at the social and moral affects of Third World peoples adopting the modern way of life. He argues that modern, industrial society has created a consumer culture in which individuals have become "slaves of products." We consume to give us a sense of identity and value that we no longer get from our family, communities, and societies. This culture of consumption, Irdris argues, "generates egoism, individualism, and rivalry between individuals." This consumer culture has caused the breakdown of families, communities, and personal relationships. Moreover, this consumer culture has led to the destruction of the environment. In order to feed this addiction to consumption, modern societies have rapidly exploited and depleted their natural resources. The growing destruction of the environment and natural resources, Irdris argues, will soon undermine this consumer culture. By concentrating on exploiting its natural resources, especially in the form of export crops, Malaysia has increasingly undermined its environment and economic future.

Recognizing that modern way of life is quickly undermining itself, Irdris argues that Malaysia should "emphasize appropriate products which first of all meet society's basic needs of food, health, housing, and education, as well as healthy recreational, spiritual, and artistic pursuits." By developing appropriate technology, supporting the growth of local cultures and traditions, and developing their local economy and resources to support local needs, Malaysia can escape the deadly trap of modern industrial consumer culture. Instead of destroying nature and competing with each other to see who can consume the most, Irdris argues, "a human being is a noble being, in possession of mental and spiritual faculties, who is made to live in harmony with nature, in friendship, love, and cooperation with his other fellow human beings." But can Irdris convince the younger generation in the Third World using this argument to reject the allure of individual success, wealth, and freedom? Why should they return to "a simple way of living, to a harmonious relationship of humans to nature, to our fellow humans, and to ourselves"?

I am afraid that only if First World peoples begin to question the modern consumer culture and begin to demand environmental protection, begin to conserve natural resources and reduce their consumption, and recognize limits to individual wealth, success, and freedom will Third World young people begin to question the allure of modern, industrial society. The example that the First World sets will, in part, determine the choices that Third World peoples, communities, and societies make about whether they too should adopt the modern way of life. It is the First World example of consumption, wealth, freedom, and style that creates this "psychological pressure to modernise" and "cultural inferiority" in Third World peoples. If we can't expect Third World young people to reject the modern way of life, can we expect First World people to reject it? Even with the moral, cultural, and environmental arguments demonstrating that this modern, industrial culture is not sustainable, the majority of First and Third World peoples still refuse to question it. They continue to believe that even though there are growing economic, cultural, and social problems created by this modern culture, they as individuals will succeed where other will fail and achieve the wealth, success, and happiness promised by modern, industrial consumer culture.


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Sewall Academic Program; University of Colorado at Boulder
Created 1 June 2000:  Last Modified: 7 October, 2009
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