How we got into this mess


James Goldsmith on the Charlie Rose show, Nov. 15, 1994

The devastation to our economies caused by globalization and Wall Street gaming was predictable. It also was predicted. Those of us who, in the 1990s, failed to anticipate where globalization would lead now have an obligation to look back and try to understand why we got it wrong. The video I’m going to link to is a huge help in this process.

It is easy to see why so many people embrace ideology as a way of making sense of the world. The world is extremely complicated and hard to model, so ideology simplifies things and provides some comfort.

Those of us who disdain ideologies and try to understand the world as it actually is take on a huge work load. Not only must we absorb huge amounts of information, we must try to figure out who we can trust and who has disguised motives and seeks to hoodoo us.

In the 1990s, I subscribed to The Economist, which is considered to be ever so authoritative. I fell for The Economist’s predictions about globalization, which was that globalization would lead to increased prosperity for all. The Economist, like the governments of the United States and Europe, was catastrophically wrong. As I began to understand this, I dropped my subscription to The Economist, and I will never trust them again.

So who got it right? Very few people got it right. Among those few was James Goldsmith, a European tycoon and politician who prophesied all this with a book named The Trap. Goldsmith died in 1997.

On YouTube you can find the video of an hour-long interview with Goldsmith by Charlie Rose. Goldsmith predicts it all — the offshoring of jobs and devastating unemployment, the loss of our manufacturing base, the severe neglect of our infrastructure, the flight of hundreds of millions of people in China and other poor countries from farms to the cities, a crisis in agriculture, a massive transfer of wealth from working people to the rich. Goldsmith, we can see in retrospect, was able to make these predictions because he understood and modeled the real world, and he was not thrown off by an ideology. He had principles, though. And one of those principles, despite his great wealth, was that the welfare of the people is far more important than markets and their profits.

We also can learn a lot from this video about how the media and politicians lie to us and mislead us. Charlie Rose was almost combative with Goldsmith and kept interrupting Goldsmith to spout the establishment point of view. Rose also brought on Laura Tyson, then the chair of President Clinton’s Council of Economic Advisers. She also kept interrupting Goldsmith and shouting the establishment point of view.

At the time, I think that I too would have discounted Goldsmith’s ideas, largely because of his record as a tycoon. It is incredibly difficult to identify experts who we can trust. But one thing is very clear: We can’t trust the media, because they speak for the establishment. And if there is anyone in Washington who can be trusted, I’m not aware of it, because corporations own Washington.

This process of checking ourselves and understanding why we were wrong when we are wrong is extremely important. That is one of the major failures of our media and our punditry. They rarely admit their failures or revisit their mistakes. It is up to us to catch their errors when they are dangerously wrong and to simply never pay them any more attention. They have agendas, or they are blinded by an ideology.

Principles, of course, are a good thing, and Enlightenment principles have stood the test of time. But ideologies only guarantee that we will be wrong and that we will neglect or belittle the hard work of trying to understand the world as it is.

We got it wrong about globalization, and now we are paying the price for our wrongness. And those who pushed for globalization (while we were asleep at the switch) are richer and more powerful than ever. As a friend of mine who is a law professor said, “It’s over. We lost.”

Update: From DCS (the law professor), who also has commented on this post, is a link to the entire, unsegmented video, Google video, here. The YouTube link above is in six segments. The YouTube version will play on iPads; the Google video version requires Flash and will not play on iPads.

10 thoughts on “How we got into this mess”

  1. David,

    A very powerful post, not least because you kept it succinct and helped us see through the complexity to a clear and simple observation: The goal of “globalization” was and still is and will always be labor arbitrage. Period.

    The evidence is all around us. For example, in statistics:

    According to the American Prospect, since 2000, the U.S. has lost 5.5 million manufacturing jobs, with 2.1 million jobs lost in the past two years.

    The American Prospect also estimates that, since 2001, 42,400 American factories have closed their doors, and roughly three-fourths of those employed over 500 people while they were in operation.

    Also, for example, in the daily newspaper:

    In the last decade, Apple has become one of the mightiest, richest and most successful companies in the world, in part by mastering global manufacturing. Apple and its high-technology peers — as well as dozens of other American industries — have achieved a pace of innovation nearly unmatched in modern history.

    However, the workers assembling iPhones, iPads and other devices often labor in harsh conditions, according to employees inside those plants, worker advocates and documents published by companies themselves. Problems are as varied as onerous work environments and serious — sometimes deadly — safety problems.

    Reply

  2. (continued)

    I hope your readers will click on the video and watch it. I had only intended to check out a few minutes and found myself mesmerized, and I watched the entire thing.

    I felt like I was watching a fortune-teller. With uncanny detail, Goldsmith predicted everything that would unfold over the next decade. As I observed to you:

    You know how the story ended, of course. The opponents of the GATT were defeated. With the final GATT round, the World Trade Organization was born. Globalization — including the off-shoring Goldsmith decried — took off like a rocket. Central to that was the U.S.-led effort to get China accepted into the WTO in 2000. And, well, here we are.

    Every word out of Goldsmith’s mouth was prophetic. Too bad the forces of evil were too powerful for him to prevail.

    I found Charlie Rose’s performance particularly appalling. As I noted to you:

    I’ve seen the Rose show plenty of times. I certainly never thought of his talk show as adversarial journalism. Quite to the contrary, I always found him to be a somewhat fawning Yes Man.

    I’ve never seen him take an opposing view and then sustain an argument with his guest for the duration. That went far beyond simply playing devil’s advocate to spur discussion. And his bringing in the Clinton administration official to help him refute Goldsmith was exceptional, to say the least.

    His show became an extension of the administration. They might as well have put him on the payroll.

    The disturbing conclusion that one must come away with is that this is not a case of “mistakes were made.” This was not a mistake. The architects of the plan knew exactly what they were up to: Slashing labor costs by off-shoring American jobs to destitute third-word countries in order to balloon profit margins and, thereby, executive pay and shareholder dividends.

    This is the very definition of labor arbitrage, and that’s all this was ever about. Period.

    Read the New York Times article above about how Apple boosts its profits — by employing near-slave labor in China under prison-like conditions — and convince me otherwise. Good luck.

    DCS

    Reply

  3. David,

    As if ordered on cue, here is today’s Chart of the Day.

    Notice in the first chart the marked divergence from historical trends starting in 2001.

    Notice in the second chart how far below the mean we are today — a divergence not seen in this entire sequence starting in 1960.

    If people can’t work, how can they spend money? If they can’t spend money, how can they sustain a consumer economy? If they can’t sustain a consumer economy, what kind of economy comes next?

    I shudder to think.

    DCS

    Reply

  5. That was a stunning interview, thanks for posting this. I remember Goldsmith’s foreys into British politics in the ninties, and also dismissing him as some delusional right-winger. But there was obviously a lot more to him than that.

    One interesting footnote: he built a vaste estate in a remote part of the Mexican coast, Cuixmala. It was architectural masterpiece, an fantasy place of palaces, rainforests, beaches and logoons. Much of it is now a nature reserve. Still, I think your creating your own piece of paradise in NC 🙂

    Anyway, love your blog!

    Reply

  6. Hi Chenda… From your IP address, it appears that you are in Britain. I’m flattered to have Europeans reading the blog. Thanks for your comment and for letting me know you’re here.

    I did not know about Cuixmala. I will do some Googling on that…

    Reply

  7. Hi DCS… Much is being made of today’s fairly decent employment report. But of course I wonder what kind of jobs those are, how much they pay, how secure they are, and what kind of benefits are offered. I seriously doubt that we’re creating many jobs of the type that can support a secure middle class lifestyle. And as Paul Krugman points out today in his blog, at this rate of growth it would take seven years to reach full employment.

    Reply

  8. Well, I know you dismiss Karl Denninger as a gasbag, but at least he had a reality-based blog post about the recent employment numbers — which were not good. It doesn’t matter how much the government tries to frame the picture. The numbers speak for themselves.

    So disregard Denninger’s text if you want. The charts in this post speak for themselves:

    Here it is.

    DCS

    Reply

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