Posted by Jim Lindgren:
Larry Summers for Treasury?
http://volokh.com/archives/archive_2008_11_02-2008_11_08.shtml#1225905109
It is rumored that [1]Larry Summers is at the top of Obama�s list of
possible appointees for Treasury. On the domestic front, I suspect he
would be at least as good as the current Treasury secretary, Henry
Paulson. On the international front, I am less certain.
Last spring, Summers wrote [2]two interesting op-eds on global trade
and regulation.
Here is [3]his view on globalization:
A strategy to promote healthy globalisation
Last week, in this column, I argued that making the case that trade
agreements improve economic welfare might no longer be sufficient
to maintain political support for economic internationalism in the
US and other countries. Instead, I suggested that opposition to
trade agreements, and economic internationalism more generally,
reflected a growing recognition by workers that what is good for
the global economy and its business champions was not necessarily
good for them, and that there were reasonable grounds for this
belief.
The most important reason for doubting that an increasingly
successful, integrated global economy will benefit US workers (and
those in other industrial countries) is the weakening of the link
between the success of a nation's workers and the success of both
its trading partners and its companies. This phenomenon was first
emphasised years ago by Robert Reich, the former US labour
secretary. The normal argument is that a more rapidly growing
global economy benefits workers and companies in an individual
country by expanding the market for exports. This is a valid
consideration. But it is also true that the success of other
countries, and greater global integration, places more competitive
pressure on an individual economy. Workers are likely
disproportionately to bear the brunt of this pressure.
Part of the reason why US workers (or those in Europe and Japan)
enjoy high wages is that they are more highly skilled than most
workers in the developing world. Yet they also earn higher wages
because they can be more productive - their effort is complemented
by capital, broadly defined to include equipment, managerial
expertise, corporate culture, infrastructure and the capacity for
innovation. In a closed economy anything that promotes investment
in productive capital necessarily raises workers' wages. In a
closed economy, corporations have a huge stake in the quality of
the national workforce and infrastructure.
The situation is very different in an open economy where
investments in innovation, brands, a strong corporate culture or
even in certain kinds of equipment can be combined with labour from
anywhere in the world. Workers no longer have the same stake in
productive investment by companies as it becomes easier for
corporations to combine their capital with lower priced labour
overseas. Companies, in turn, come to have less of a stake in the
quality of the workforce and infrastructure in their home country
when they can produce anywhere. Moreover businesses can use the
threat of relocating as a lever to extract concessions regarding
tax policy, regulations and specific subsidies. Inevitably the cost
of these concessions is borne by labour.
The public policy response of withdrawing from the global economy,
or reducing the pace of integration, is ultimately untenable. It
would generate resentment abroad on a dangerous scale, hurt the
economy as other countries retaliated, and make us less competitive
as companies in rival countries continue to integrate their
production lines with developing countries. As Bill Clinton said in
his first major international economic speech as president, "the
United States must compete not retreat". The domestic component of
a strategy to promote healthy globalisation must rely on
strengthening efforts to reduce inequality and insecurity. The
international component must focus on the interests of working
people in all countries, in addition to the current emphasis on the
priorities of global -corporations.
First, the US should take the lead in promoting global co-operation
in the international tax arena. . . .
Second, an increased focus of international economic diplomacy
should be to prevent harmful regulatory competition. . . . There
has not been enough serious consideration of the alternative -
global co-operation to raise standards. While labour standards
arguments have at times been invoked as a cover for protectionism,
and this must be avoided, it is entirely appropriate that US
policymakers seek to ensure that greater global integration does
not become an excuse for eroding labour rights.
Summers opposes countries competing by lowering tax rates. I agree
that, other things being equal, coordinated tax rates would be better
for the world. But, since tax coordination would likely tend to lead
to higher, rather than lower, rates, other things are not equal. It
would seem to be a good thing for Ireland to lower tax rates and, in
effect, put pressure on the rest of the EU to do the same. If you
restrict tax competition by forming a cartel (of countries), you get
higher (cartel) pricing.
On "labour rights," I would favor more international agreements to
ensure the right to work without employer or union coercion. But,
unfortunately, most proposed international labor agreements are
attempts to spread, not only worthwhile worker safety protections, but
also union power to the rest of the world. Unionization in the United
States tends to destroy overall wealth, productivity, and jobs, as any
glance at unionized airlines and auto companies illustrates. Unions
are thriving in the US mainly in the one area where there is little
competition and where low productivity is tolerated -- government
workers.
References
1. http://en.wikipedia.org/wiki/Lawrence_Summers
2.
http://www.ft.com/cms/s/0/c35d3d62-14ba-11dd-a741-0000779fd2ac.html?nclick_check=1
3. http://www.ft.com/cms/s/0/69a0b308-1a3c-11dd-ba02-0000779fd2ac.html
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