Greider's analysis falls prey to the classic protectionist fallacy (it's no surprise that Clyde Prestowitz is warmly praised in the acknowledgments): the assumption that work is an end in itself. In this view, a nation is rich because it has profitable businesses that pay high wages. Anything that imperils those businesses, or those jobs, imperils the nation's standard of living.
In fact, however, the whole genius of capitalist wealth creation runs in the opposite direction. Adam Smith stated the principle in The Wealth of Nations: Consumption is the end of production, not vice versa. We don't drive cars to give people in Detroit something to do; people in Detroit build cars because they think we want to drive them. Effort for its own sake, or just to keep busy, is economically meaningless. A producer is a producer only if there are willing consumers; otherwise he is a hobbyist.
Capitalism -- whether it operates on a national scale or internationally -- creates abundance by encouraging people to maximize the value to other people of their efforts. We grow richer because we are constantly both adding new value and reducing effort. Wealth creation, then, is an ongoing process of doing more with less. A Chinese peasant works to exhaustion just to feed himself and his family; an American farmer feeds thousands. The productivity of the American farmer liberates those thousands from the necessity of growing their own food, and allows them to spend their time building computers, selling insurance, making movies, and so forth.
Accordingly, economic progress is made possible by eliminating work, thus freeing up resources to do other things. This can happen by building machines that save effort, or by trading with people who can make things more cheaply than we can ourselves.
In reality, then, Greider's "oversupply" is not a problem, but a magnificent windfall. The enormous pool of new labor now available for productive use, the new low-cost producers in developing countries, are the functional equivalent of some fantastic new piece of labor- saving machinery that will allow people in rich countries to spend their time on other things. Both rich and poor stand to get richer.
Of course, this process is painful for some. People who lose their jobs and savings when businesses fail or shrink suffer real hardship. Predictably, Greider focuses on the capacity and employment reductions experienced by U.S. smokestack industries, such as the integrated steel mills. But he ignores the rise of mini-mills like Nucor -- not to mention the ferment of wealth creation in other industries, from microchips to software to discount retailing to entertainment. To look at creative destruction and see only destruction is to miss the main point of economic life.
Greider trots out the usual claims of declining wages to support his claim that wealth creation abroad is a threat to living standards at home. Among others, W. Michael Cox and Richard Alm have shown these claims to be bogus. (See "The Good Old Days Are Now," December 1995.) And recently, the Boskin Commission's findings that the inflation rate is being systematically exaggerated knocked the props out from under the Chicken Little crowd.
Greider argues that the proper response to the oversupply "problem" is to stimulate demand: "An aggressive effort aimed at rapidly bringing up the bottom of the global wage ladder would directly contribute to the greater purchasing power needed worldwide to consume the world's surpluses of goods and thus narrow the supply gap." In particular, he advocates unionizing the work force in the developing world, thus "freeing workers to demand a larger share of the returns from their burgeoning economies."
Here again, Greider betrays his complete lack of understanding of how capitalist wealth creation works. The fundamental reason for low wages in poor countries is not the absence of collective bargaining, but rather the low average productivity of labor in those countries. A quick look at gross domestic product per head shows that the developing world still generates relatively meager wealth. Only continued growth and investment can raise productivity, and consequently overall wages.
Meanwhile, the policies Greider advocates to encourage unionization abroad would throttle poorer nation's prospects for such continued growth. Specifically, Greider urges rich countries to impose a "social tariff" against countries that do not observe what he considers to be appropriate labor standards -- this on top of an "emergency tariff" of 10 percent to 15 percent to reduce the U.S. trade deficit. It is hard to imagine a policy better designed to keep the developing world impoverished -- not to mention start a trade war that could send the whole world into an economic meltdown.
According to Greider, the malignant effects of global capitalism are registered not only in declining living standards but also in a fraying of the social safety net. Once again he sees catastrophe where in fact there is cause for optimism.
Greider correctly observes that increased foreign competition, along with loosened restrictions on the mobility of capital, have put pressure on governments to reduce tax and spending burdens. From Greider's perspective, a real achievement is now under attack from short-sighted penny-pinchers. "Rich nations," he says, "are all confronted in different ways by the same assault, the same question: Must they now undo what the twentieth century created -- the strong social presence of the state?"
In other words, Greider remains an unreconstructed welfare statist: "The welfare state was, in fact, an attempt to devise a fundamental compromise between society and free-market capitalism. The aid programs and labor laws were intended to compensate for the social consequences of unfettered enterprise -- the poverty and unemployment and family dissolution -- without destroying the energies of the capitalist process."
Greider is living in a time warp. There is absolutely no acknowledgment in his book that any government policies have failed, or that there are any better ways to pursue agreed- upon policy goals than through existing programs. In the United States, the war on poverty created or at least exacerbated horrible social dysfunctions, while Social Security is a demographic time bomb. In Europe, labor laws and unemployment/disability benefits conspire to produce double-digit unemployment year in and year out. Greider doesn't say a word about any of this: By his account, attempts to address these serious policy failures are just callous and mean-spirited Scroogism.
The inability of domestic firms to compete with less encumbered foreign rivals, and the decisions of domestic firms to pack up and move, are merely signals that present policies are in need of change. Greider blames the alarm bell for starting the fire and seems to think everything would be fine if it just stopped its infernal ringing: He proposes to lock capital in place with taxes and other controls.
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