Every economic system develops a politics around the institutions and rules that govern it. The economic system now being created by the relentless merging of the world's markets will be no exception. But what global politics will emerge to match the new global economy?
The World Trade Organization finally found a safe place to hold a meeting. Doha, a city in the tiny Persian Gulf sheikhdom of Qatar, is only 1,000 miles from Afghanistan. It is a 9,000-mile flight from Seattle, where two years ago street protestors frustrated the WTO's attempt to set an agenda for another "round" of negotiations over rules for global trading and investment. But this time, on November 14, protected by a detachment of plainclothes U.S. marines in a desert theocracy sealed tight against outsiders, U.S. Trade Representative Robert Zoellick engineered an agreement on an agenda over which 142 countries will negotiate during the next three years.
Mexican President-elect Vicente Fox, fresh from a historic victory that ended 71 years of one-party rule in his country, dropped in on U.S. lameduck President Bill Clinton just before Labor Day. He was brimming with ideas for further integrating their economies, including a proposal to open the border to more Mexicans seeking work in the United States.
The financial elites that favor the "American" model -- deregulation, weak unions, and a minimalist welfare state -- ask the wrong question: how to compete against countries with lower wages and living standards.
Not too many years ago, the conventional wisdom was that Europe and Japan did it all right, and the United States did it all wrong. And everything that could be learned, we could learn from them, and indeed, they had nothing to learn from us. Now, the new conventional wisdom is just the opposite; we're doing everything right, and Europe and Japan are doing everything wrong. Neither of those positions is correct.
-- Secretary of Labor Robert Reich, Detroit Jobs Conference, March 14, 1994.
A decade of prosperity has convinced a fair portion of the punditry that the new hi-tech service economy has lifted us into an economic orbit beyond boom and bust, where recessions are history. Unfortunately, there is little evidence that the laws of economic gravity no longer apply. Indeed, sensible people should now be preparing for the possibility that Alan Greenspan's effort to slow down the economy will overshoot and that we will soon face rising unemployment and a sinking stock market.