Redoing Globalization - by Sherle R. Schwenninger
The great financial bubble of the Clinton-Bush years has ended in tears--in home foreclosures, bank failures and what promises to be the most severe global economic recession since the Great Depression. As President-elect Obama puts together his economic recovery program, he needs to understand that the economic crisis is the result not just of unscrupulous mortgage lenders and unregulated investment bankers on Wall Street but of the globalization of finance and trade that key members of his economic team set in motion when they were in the Clinton administration. The uncomfortable truth is that the current system of global commerce and transnational finance is inherently prone to crisis and is incompatible with Obama's goal of rebuilding the American middle class. Any sustainable recovery on the domestic front, therefore, will depend on his success in getting other countries to agree to fundamental changes in that global system.
Globalization is not necessarily bad if properly regulated among similar economies. But the globalization of the Clinton-Bush era not only lacked safeguards for labor but rested on two mutually reinforcing, flawed models of growth: debt-financed consumption in the United States and other Anglo-Saxon economies and over saving and under consumption in the production-oriented export economies of Asia. Not surprisingly, the global integration of these radically different economies produced an unhealthy pattern of growth characterized by asset bubbles and large global trade imbalances, with the United States running large deficits and China and Japan running large surpluses.
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