For all of the carnival aspect of the Seattle protests, something very important has been stimulated by the World Trade Organization (WTO) sessions. For the first time, a coherent opposition program has begun to challenge the dominant consensus about global trade.
For more than a century, the world's ordinary citizens and their elected leaders have struggled to make market systems socially bearable. At the center of this project is elected government based on democratic citizenship. Govern ment has two basic instruments available to tame capitalism: the power to raise revenues for social purposes and the power to regulate. In the advanced countries, these have served to temper, stabilize, and even energize capitalism.
But now, parading under the banner of global trade, the world's banks, investors, and corporations want to revert to capitalism circa 1890the property rights minus the social standards and stabilizers. As Margaret Thatcher famously said, "There Is No Alternative." "Tina" became shorthand for the idea that the only possible recipe in a global economy was to let capital reign, free from government constraints and distortions, to produce the most efficient, dynamic and competitive economy. But now, perhaps, we can unveil TaraThere Are Real Alternatives. What they need now is more visibility and political support.
The agenda for the next round of trade liberalization, grandly called the Millennium Round, would build on the previous Uruguay Roundeliminating the remnants of tariffs, getting rid of agricultural support payments, abolishing what's left of obstacles to free flows of capital. The Round also has affirmative goals sought by business: harmonizing global intel lectual property rights and rights of investors, and standardizing accounting conventions for banks.
Simply put, this is an agenda for property rights. To be sure, property rights are one important pillar of a liberal, capitalist orderbut not the only pillar. What's missing from the WTO agenda are all of the other elements of a liberal society. What's missing is citizenship.
As citizens, we elect governments. Our governments, in turn, not only enforce property rights but devise the other instruments of public policy that balance market objectives with social ones. But through the onward march of "free trade," much that we achieve as citizens is being dismantled. National health and safety regulations can be attacked as "WTO-incompatible." Poli cies intended to stabilize the farming economy can be seen as distortions of trade. Environmental safeguards have been interpreted as discriminating against imports (produced with weaker safeguards). Even regional economic development policies can be illegal forms of subsidy.
In addition, global laissez-faire is undermining government's power to tax. Investors have been very adroit at playing national governments off against one another. Low taxes are synonymous with good business climate. But if governments can't tax or borrow, then the fiscal means to temper capitalism are also eroded. All of this suggests why the opposition to simple laissez-faire is not merely "protectionist." At issue is whether citizens can continue to opt for a mixed economy.
In effect, citizens can still vote for governments, but governments are being systematically stripped of their power to temper capitalism or to pursue public purposes. So citizenship has less meaning. Meanwhile, corporations, as "legal persons," are gaining the power that ordinary personscitizenshave lost. This operates via the stripping away of governments' regulatory powers, in the increasing role of money in politics, and in the dwindling rate at which citizens (no fools) bother to vote.
Moreover, the WTO is a stunningly undemocratic insti tu tion. It operates at several removes from popular sovereignty, much as the pre-democratic deliberative institutions of the seventeenth and eighteenth century operated. Nobody elects the WTO's officials. Its dispute-resolution panels are a far cry from democratic courts of law with refined rules of evidence and due process. Yet the official agenda of the world's governments, cheered on by the world's corporations and largely echoed by bien pensants of the quality press, would build on this model rather than challenge it.
In principle, one could imagine a very different global political/economic order where citizenship has an equal place with property rights. This is the contribution of the somewhat raucous opposition party at Seattle. Global standards would exist, but they would include labor, social, and environmental rights as well as property rights. Immigrants would have the same due-process rights in national courts as citi zens. Trade courts would be subject to rules of evidence. Banks would be regulated not only for the protection of investors but for public purposes.
However, this version of globalism is very difficult to achieve since the architects of the WTO imagine themselves constructing a series of rules for commerce, not a global democratic constitution. In the WTO vision, linkage of property rights with social citizenship is explicitly disavowed. Yet if we are to give away national sovereignty, we can reclaim elements of citizenship only in one of three waysby limiting foreign trade per se, by restricting membership in the free trade club to nations that share our own conception of democratic citizenship and the mixed economy, or by building a structure of citizenship rights into the structure of global property rights.
Since the WTO is mainly an organization of governments, the agenda for trade negotiation can only be revised by changing what national governments bring to the negotiating table. The global opposition party is beginning this process. It deserves our respect.
Posner Pill?
If trade tends to moot the role of government, so does technology. Celebrants of the Internet economy view it as the pure expression of free commerce. Any buyer can connect with any seller. Any entrepreneur is free to invent any new channel of distribution. Armed with infinite information, the consumer is king. So the whole affair produces the holy grail of the Chicago-style free-marketeertruly self-regulating capitalism. Gov ern ment's only job is to get out of the way and resist the temptation to tax, regulate, or otherwise meddle.
However, in this free market nirvana, there is little loyalty to producers, so prices and profits tend to get competed away. Hence, market powerthe power to dominate a product line, crush rivals, keep customers captive, and dictate pricesis even more highly prized than in a conventional economy. Consider Microsoft.
Judge Thomas Penfield Jackson certainly did. In his landmark finding of fact, the judge basically found for the Justice Department and the private complainants. Microsoft did indeed bundle its products in ways that forced consumers of Windows to "choose" other Microsoft products. This strategy also raised the price of the Windows operating system. The finding of fact left little doubt that, absent a consent agreement, Jackson would very likely rule for the government.
Then the judge threw a very peculiar curve. He appointed as a "mediator" one of the smartest opponents of aggressive antitrust enforcement, Fed eral Appeals Judge Richard Posner. Judge Posner is a brilliant and prolific leader of the Chicago School of Eco nomics. Over the years, his writings have suggested skepticism that market power could be much of a problem, except in crude cases of overt price- fixing. In a small number of cases, since his appointment to the appellate bench by President Reagan in 1981, Posner has nonetheless ruled that antitrust laws do apply, including a hospital merger case that would have given the combined company substantial control over prices and a case in which an oil refiner tried to cap retail prices. In general, however, Posner maintains a near religious belief that competition is self-correcting most of the time.
So what is Judge Jackson up to? Is he perhaps reluctant to take on the awesome responsibility single-handedly of a potential Microsoft breakup? Is this a clever double-carom shot, in which Jackson is so confident of his findings that he wants the added suasion of a Chicago economist and blue-ribbon conservative behind the eventual consent agreement?
It would be a shame if Posner's role were to let Microsoft off the hook. The issue in the Microsoft operating system monopoly is not just pricing power. Many Microsoft users experience Windows as a wretched operating system. Many people consider Microsoft Word an inferior and clunky word processing program, which they use only because non-Microsoft products don't work as well with Windows. These deficiencies, of course, are no accident. They have a common originMicro soft's control of both sets of products. Many of the annoying flaws of both Windows and Microsoft applications software result from the fact that Microsoft's main purpose is not to make the product as efficient as possible, but to deny the user the ability to efficiently integrate Microsoft and non-Microsoft applications.
So the best solution would be to require Microsoft to share its proprietary protocols and codes with competitors, and to break Microsoft into one company for operating systems, one for applications, and another for Internet services. That way, the successor companies would have to compete the way everybody else doesby offering consumers the most convenient product at the most attractive price, and not by coercing them into using undesired products via Windows.
There is ample precedent here, including the breakup of Standard Oil and of AT&T. In both cases, the result was a more dynamic industry and more choices for consumers. In the AT&T case, it required a whole new regime of regulated competition for a one-time monopoly to compete fairly on the basis of price and quality. The larger lesson here is that the Internet economy, just like the global economy, is not self-regulating after all. The rules of engagement that we choose through our democratic political institutions determine whether benefits accrue mainly to large corporations, or also to consumers and workers. The grail of a perfectly self regulating capitalism remains a fantasy. Judge Posner, take note.
Alien Justice
Globalization raises the question of citizenship in yet another respect. The global village, like the Greek city-state, has two classes of inhabitantscitizens with full legal rights and a growing class of subservient transients. The latter are often treated like indentured servants, and sometimes like presumed criminals. Elsewhere in this issue of the Prospect, you will find three rather chilling articles on different aspects of immigration.
With a global market for products, there is natural pressure to globalize the market for labor. Some of this operates through trade, which puts workers in, say, Bangladesh, into direct wage competition with workers in Los Angeles. But with more immigrants physically coming to America, both legally and illegally, there is also direct competition from foreign nationals who are often will ing to work at wages and conditions of labor that few Americans would tolerate. Whether this is good or bad for Americans depends on who you are. If you are the one hiring the carpenter (at sub-American wages), immigration is a good deal. If you are the American carpenter, it's not such a good deal. If you are the immigrant, it may be a good deal depending on what happens to you next.
Employers want more immigrant workers at both the high end and the low end of the job market. The government accommodates them with two special programs known as the H-2A and H-1B visa programs. The first of these provides foreign workers for agri-business. The second provides high-tech workers. Both have much in common. The workers come in as something close to indentured servants. Their existence tends to depress wages. If big growers had to pay wages sufficient to attract American workers, farm laborers would make a lot more income. Yet because direct harvesting labor is such a small fraction of the final price in the grocery store, the effect on food prices would be minimal. By the same token, the "shortage" of high-tech workers in part is just a shortage of workers who will work for the salary that high-tech companies wish to pay. Without the safety valve of H-1B visas, high-tech companies would be investing more money in the training of Americans.
The authors of these companion pieces, Alexander Aleinikoff, a law professor at Georgetown, and Prospect writing fellow Alexander Nguyen, argue that current policy has it backwards. It lets in too many immigrant-temps and then denies them the rights that permanent residents enjoy. Better to limit the numbers of such residents, but then give them full green cards.
If temporary foreign workers have it hard, immigrants accused of crimes, misdemeanors, and even innocent paperwork violations, exist outside normal due process. And immigrants accused of political crimes dwell in a pre-constitutional order reminiscent of totalitarian countries. Writer Eyal Press, in "The Strange Case of Hany K.," details the Kafkaesque experience of one such immigrant and the shadow world of America's political prisoners. It is another example of how citizenship rights clash with global flows of goods and individuals.
Democratic citizenship was the great invention of the democratic revolutions of the eighteenth and nineteenth centuries. The polity became sovereign within its borders; the sovereign was gradually rendered accountable to its people. In the twentieth century, the great challenge to the ideal of democratic citizenship was totalitarian fascism and communism. In the next century, the more subtle struggle will be to keep democratic citizenship alive and well in the face of a far more oblique and insidious challenge from its complement and rival organizing systemdemocratic commerce.
