hillsdale paper rev 02 by 271vY03

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									         Globalization and the Common Good: A Frontline Perspective

                                     J. David Richardson
                      Professor of Economics and International Relations
                       Maxwell School of Citizenship and Public Affairs
                          Syracuse University, Syracuse, NY 13244
             Senior Fellow Emeritus, Peterson Institute for International Economics
                                    Washington, DC 20036

 Written version, remarks, and commentary for panel on Globalization and the Common Good

                        Hillsdale College 9/27-29 Free Market Forum

          The Role of Markets and Governments in Pursuing the Common Good



Preliminaries

My Own Intent. In my remarks, I would like to emphasize

     economic globalization, though without neglecting the part played by not-for-profit
      (NFP) firms, and with some attention to political, institutional, and ideological
      globalization;

     the multiplicity of conceptions of, and horizons for, the common good -- doing so
       highlights the inevitable tradeoff between openness and family (“our” family)
       preference, which are both good things;

     a “frontline perspective” that for several decades has placed me by grace in the heart of
      the Washington policy community – no common consensus there about the goodness of
      globalization! -- and at the interface of mainline economics, development studies,
      politics, and international relations.

Markets and Globalization Properly Conceived. The "market system" is a distinctive mix of
competition and cooperation, a complex, vertical, and social network of purchases and sales,
contracts and conventions among firms – that are themselves social units, and that include firms
motivated by service, not profit, such as schools, hospitals, mutual insurance companies, credit
unions, and labor unions.

The quality of the social network’s competition and cooperation determines how effectively and
efficiently it combines fundamental inputs such as worker services to produce intermediate and


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then final goods for those very workers. In other words, the quality of this social market system
determines the standard of living of its workers.

A government’s economic regulations can contribute (or not) to the quality of this competitive-
cooperative market system -- internally within a firm and externally across them -- most
obviously in maintaining clear property rights and the rule of law, including rights and laws
concerning shareholders and labor relations, and concerning the sanctity of contracts (every
contract is a voluntary agreement to be coerced by judicially enforceable provisions).

That long sentence contains the reasons why the market system must rest on and feature a
fundamental role for government. The market system is made up of commercial societies
interacting with and within political societies.

In this light, the essence of globalization is openness at sovereign-government borders. For
example, free trade has always been carefully defined as non-discrimination between “our”
commercial society and “theirs” at borders. Or, for another example, free investment, including
mergers and acquisitions, has always been carefully defined as “national treatment” for foreign
firms.

Neither free trade nor free investment require or necessarily promote “free” markets, defined as
markets with minimal government intrusion. Free trade and investment do require that exactly
the same government regulations apply to our goods and theirs, our firms and theirs.

In brief, globalization is about markets being even-handedly open to foreigners, “contestable” in
the technical language used by economists (e.g., Robert Barro at this forum).

Globalization is not about markets being closed to government meddling.

Normative Clarifications/Reservations. There are two fundamental reservations to register.

Indiscriminate openness to any goods is not necessarily beneficial. Among goods are “bads,”
such as human trafficking, viruses, fraud, corruption (treated in the Stapleford paper), and
financial instability.

Nor is maximum even-handed openness to all foreigners an unmixed blessing (though Saunders
seems to think so, in his paper’s interpretation of Jesus’ parables). Family ties, community ties,
patriotism, and distinctive citizen rights and obligations remind us that there are often benefits
from not being completely and indiscriminately “open.” Few of us seriously endorse a “market”
in which we could sell off our difficult children and buy more promising substitutes! No serious
commentator endorses openness toward mortal enemies. And “doing good to all people” is
modulated in Galatians 6:10 by “especially to those who belong to the family of believers.”



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These considerations lead directly to our need to think carefully about the many ways we
conceive the word “us” and “our” common good, in distinction to “them,” our “neighbors,” and
their common good.



Our Many Conceptions of Common Good. Unlike markets and globalization, there is no
“proper” conception of “common good.”

There are obviously different normative conceptions of fundamental “good,” but not enough
space for me to review them here. There is no lack of scholarship, from ethics and elsewhere,
devoted to conceptions of the “good.” The conceptions of good at the heart of our papers include
visionary leadership (Adjibolosoo), utter probity (incorruptibility, Stapleford), and concern for
the poor wherever they live (Saunders).

Different conceptions of “common” good are in need of more discussion, and especially needy
for deep scholarship. The conception of “common” that is most useful for deliberations about
globalization is based on social groupings, because globalization is properly conceived as “our”
non-discriminatory openness to “them.” “We” then could be blood family, extended family,
blended family, local community, denomination, religion, affinity group, race, class, gender, city,
province, nation-state, region (global “North, South”) and even broader conceptions (humankind,
“planet-earth”). Corresponding common good would, of course, be captured by “good for our
marriage” right down (up?) to “good for the animate earth’s ecological harmony.”

I find it unhelpful to narrow “us” to mere nation-states. Some of the most contentious openness
issues are and have been about “us’s” smaller than national citizenry. For example, the United
States has contended within itself for centuries over the meaning and scope of the Constitution’s
inter-state commerce clause, dictating openness among states. Similar contentions exist across
every federal union and within the European Union. Or for example, North-South contentions
over globalization’s rules and representation in international institutions concern what is good for
an “us” much larger than nation-states.



Conceiving the Nexus of Globalization and the Common Good

With clear conceptions in mind, the diagnostic question is whether globalization (openness) is
good for the common good. There are several more clarifications necessary before moving on to
the more prescriptive question of “how really?” it is or is not good.

The first clarification is that answers to the “globalization-good?”question might easily differ
across groups – bad for those who prize tribal culture, self-sufficiency, Gandhi’s swaraj, and the
“small-as-beautiful”; good for the world’s highly educated, but bad for its illiterates; good for
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men, but especially good for women; good for all nation-states but especially good for middle-
income nation-states with strong socio-political institutions.

The second clarification is that scholars are beginning to see that economic globalization has
profound effects within groups as well as among them. It almost always enlarges the
opportunities of the most capable and contracts the opportunities of those who seem comparable,
but are less capable. For example, among “twin” firms of similar size age, activity, and national
origin, economic globalization raises the market shares of those that are most productive by luck
or management wisdom, and shrinks or kills off those that are not. Economic globalization is,
frankly, Darwinian. Its “blessing” to the favored twin at the expense of the less-favored twin is
redolent with Scripture and is the main reason for globalization’s acknowledged effect on
volatility and anxiety, discussed below. The dark implication of this point for our purposes is
that no matter how we define “we,” globalization seems to propel some of us up and some down
within the same “we”! How then, can it possibly be serving “our” common good?

The third clarification is that if the Darwinian process just described leads to growing “best
practice” around the globalizing world, or other benefits, then it might be serving the various
“common goods” anyway. Among the most important examples are the opportunities that
openness gives for institutional refinement – globally better (“good”-er) government
bureaucracies, quasi-commercial institutions, and purpose-driven NFPs, such as cooperatives,
mutual associations, labor unions, educational and health-related institutions, charities and
philanthropies. Among the institutional beneficiaries of most interest to this forum would be the
nascent “business-as-mission” movement.



Getting Real

Clear conception is a vitally good thing, but there is no need to stay abstract.

The real-life questions concern facets of economic globalization and what, if anything, that
groups concerned with their common good can do about them. I will not expand on the many
prescriptive policy questions here, but I do want to convey my sense of the down-to-earth
frontier issues that are scarcely touched in our session’s three papers.

Issue #1. The nexus between globalization and development. Many facets of globalization
contribute to development (in any of its many conceptions), but not all (e.g., corruption, financial
instability). So is the over-arching conclusion mostly good nexus or mostly “bad nexus”?

Issue #2. Offshoring and the “global business model.” Offshoring is not a distinctively
American issue. Around the world, for-profit and NFP firms are discovering that they can
improve the quality and lower the cost of their supplier-distributor relationships by engaging

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foreign partners. Technological change has already fragmented the integrated firm (and its
conglomerate family) through outsourcing; globalization allows the outsourcing to include
foreigners (offshore outsourcing) on a non-discriminatory basis. Whose good exactly is served
by offshoring, beyond the obvious? Workers could as easily gain as lose, likewise communities.
The practice is ubiquitous; there is no obvious imbalance in it. The one clear conclusion is that
offshoring firms lose their national origins – they are increasingly not American or French or any
other national “us” anywhere in the world. Or, in a more sinister rendering, they are everywhere
an “us-unto-themselves,” an affinity group called global business, with a corporate flag but no
national flag. Much research and policy refinement lie ahead on these issues.

Issue #3. Migration and global services trade, including “Mode 4.” Most commentators believe
that the next frontier of economic globalization is for services. Merchandise trade, including
agriculture, is yesterday’s globalization. But services trade includes trade in corporate control
(cross-border mergers and acquisition) and in so-called “public” utilities that are vaguely thought
to serve the common good. Services trade also, for the past decade, has involved an explicit
bargain between rich and poor members of the World Trade Organization to include time-limited
cross-border movements of workers as the fourth “mode” of trading services (e.g., poor-country
nurses filling guest-worker jobs in rich-country medical facilities). “Mode 4” worker-services
trade currently accounts for less than 2 percent of overall world services trade. It is almost
certain that, in the future, rich countries will have to make concessions that allow mid-skill poor
workers market access in order for their own retailers, banks, insurers, and consultants to
increase their access to poor-country service markets. If no such concessions materialize,
globalization of services will stagnate indefinitely at its present miniscule intensity. How will
rich countries respond?

Issue #4. Migration and offshoring together. The second and third issues have their own subtle
nexus. Importing guest workers is often a close substitute for sourcing a firm’s operations
abroad. Decelerating offshoring in the name of some common good will heighten the
attractiveness of time-limited worker immigration. Just saying no to the latter will accelerate the
former. Choking off both will choke off further globalization.

Issue #5. Volatility and Insurance. For the reasons discussed above, volatility of many kinds
goes hand-in-hand with economic globalization. But insurance and reinsurance markets that
normally deal with volatility (by pooling people into common-good risk groups!) have many
familiar shortcomings (e.g., adverse selection and moral hazard). These shortcomings are due to
unavoidably asymmetric information between the would-be insured and the insurer.
Governments, NFP mutual associations, or charities are absolutely necessary for coping with
some of these shortcomings, such as “insuring the un-insurable -- but governments and NFPs are
also some of the most notoriously wasteful, ineffective, and corrupt providers of insurance
themselves. The frontier of globalization will remain elusive without progress at the frontier of

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insurance-market innovation, and at spreading insurance services among classes and countries
where they are rare and exotic and expensive.

Issue #6. “Legitimization” of economic globalization and the death of political support when the
median is the margin. Whatever its other benefits, globalization rewards twins who have-what-
it-takes at the expense of twins who “have not,” as discussed above. When we focus only on
that, and then place the twins in a democratic population, the result is almost certainly nearly as
many “losers” as gainers, with the typical citizen (median voter?) as likely to win as to lose.
Why will voters in a democracy then continue to support a process that is perceived as beneficial
to “twins” – someone with most traits in common with “me” -- who are lucky or hyper-
successful at the expense of the unlucky and modestly successful? Indeed why should the
typical voter-in-the-middle continue to endorse deeper globalization? And this legitimization
issue is ubiquitous; it is not merely for rich-country voters.

Issue #7. Global institutional and regulatory reform. Inter-governmental institutions are at
present sorry mediators of common goods across nation states. They are anachronistic dinosaurs
from a war-racked, ideology-warped 20th century. If they cannot mediate among the common-
goods of the nations, and if there are few if any successful cross-border mediator institutions for
other conceptions of common good (Interpol? The International Labor Organization? The
International Standards Organization?), then one can only use the word “anarchy” to describe the
nexus among the various common goods. Surely the design of organizations that enfold the
smaller common-good groups into a larger conception of the good they hold in common is a
noble enterprise – and one for which religion is eminently qualified!




Sizing Up the Papers, Summing Up the Panel

If these are indeed the conceptual and practical frontiers and horizons of globalization for the
common good, then what do we learn from our three papers about them?

My answer is -- just a little.

Senyo Adjibolosoo’s paper reflects a lifetime’s work and promotion of the “positive human
factor” as the key to spreading globalization’s “good” widely. Maybe. But it’s not clear to me
what we can learn from so long a march in so particularistic a direction, unhinged from related
scholarship. Nor is it clear how the human factor ties into more familiar concepts from 20 years
of deep and extensive scholarly and practical discussion of the relative importance of
“institutions” and culture, of geography and history, and of global integration and urbanization in
Adjibolosoo’s cause. Of course “quality-people” make a huge difference, but neither Jesus nor

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Plato (as philosopher-king) has yet returned to rule. And until they do, religion that aims at
personal renewal needs supplementation by scholarship and practical experimentation that aim at
structural renewal.

John Stapleford sets out to examine corruption, a commendably central topic for this forum,
because corruption’s essence is private appropriation of some common (social) good, including
stealing by “agents” from their “principals” within the private sphere. Economic globalization
has almost certainly facilitated corruption -- it’s one of the most pernicious “bads” referenced
above. So no particularism here; Stapleford’s right on-theme. And I hope we see him continue
this work, expanding and refining it. The current draft is only a start – regrettably, to my taste --
tentative, opaque, under-documented, and unpersuasive. John’s statistical conclusions are not as
robust or as persuasive as he claims; he needs a young, econometrically-hot co-author.

Kent Saunders sandwiches a tour d’horizon of selected issues from the forum between opening
and closing exhortations from Jesus’ teaching on our “neighbor” and “the least among these, my
siblings.” I was heartened to see this emphasis, because it is absolutely central to how “open,”
normatively, the world and our horizon should be – see my preliminary discussion above of how
big “our” family should be. But I was disappointed that the issues that Saunders inserts between
the exhortations are fragmented and unblended, so the sandwich – at least in this draft -- is not
very tasty, much less digestible.

Serious scholarship on the themes of this forum and in these three papers is extremely scarce.
Serious scholarship on the 6 issues I have isolated is even rarer.

None of it will be taken up in the secular, skeptical, pre-occupied research and think-tank
communities -- except by happenstance

It is, by contrast, the ideal mandate for CCCU and other sectarian scholars, especially those with
monotheistic theological sophistication and seminary training on top of their discipline (yes,
scholars from yeshivas and madrasahs too!) . May their tribe increase!
File: Hillsdale-paper-rev-02




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