11 February 2009

Less globalization? More self-reliance? More Keynes?

John Maynard Keynes, commenting on internationalism, once said, “Ideas, knowledge, art, hospitality, travel — these are the things which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible; and, above all, let finance be primarily national.” Keynes was talking about the conservative value of self-reliance. Let us be open to the world, but let us take care of our own needs. Self-reliance now seems almost quaint in light of international currency trading, global corporations, the NAFTA and the WTO.

We are, however, paying a price for the globalization of goods and finance. Some gross irresponsibility takes place in the United States -- the lending of money to people who can't afford to pay it back -- and the world economy topples into free fall. If Keynes advice had been heeded, and finance kept national, a global collapse would have been unlikely.

More and more, it seems, we must call on Keynes to understand our economic problems and to seek out solutions. Countries around the world have abandoned reliance on unrestricted free markets and adopted Keynes advice for governments to spend their economies out of recession. Now perhaps we should also consider his advice to "let goods be homespun" and "let finance be national," at least as best we can in an increasingly connected world.

This must not mean throwing up walls between nations. We are all aware that when the U.S. passed the protectionist Smoot-Hawley Tariff Act in June, 1930, the world was plunged into an international tariff war that dramatically reduced trade, contributing to the Great Depression. The last thing we want to do is completely crash the current system, dysfunctional as it may be. The first order of business is to restore it to working order. Then we can begin to work toward a more humane, more sustainable system.

We might start by entrenching in our collective minds the lesson that unfettered capitalism is a recipe for economic disaster. Alan Greenspan, Chairman of the U.S. Federal Reserve Board from 1987 to 2006, believed we could let a bunch of aggressive males run loose in the economy without binding them to strict rules and they would behave responsibly. The American government allowed him to guide their economy on that gravely flawed assumption. This sort of naivete we cannot afford to repeat.

Letting finance be primarily national, as Keynes suggested, is difficult in an electronic world, but we need at least to develop a system of international regulations that prevent currency speculation and irresponsible financial behaviour from wreaking havoc throughout the world. In short, we need to rethink the global financial infrastructure.

Letting goods be homespun involves a variety of issues. We should insist that homespun be at least able to compete fairly. This means building labour rights into trade agreements so that countries such as China can't profit from coerced labour. It means building environmental responsibility in as well to prevent nations using lax environmental laws to provide a trade advantage. Trade must be fair as well as free. Governments must be allowed to encourage local products and industry, including co-operatives. Trade agreements as we know them have been designed to advantage global corporations, particularly to provide them with cheap labour; trade agreements in the future should be designed to favour local and co-operative enterprise. And distributing the wealth fairly must be at least as important as creating it. The goal should be to create self-reliant communities within an open, tolerant and equitable global society. It means changing our emphasis.

We are social animals and we achieve things as societies, as communities. But we also want each member of the community to achieve a reasonable degree of self-reliance. This makes the community stronger because it has greater flexibility, greater resilience. A society that is too interdependent, too communal, is brittle. If one part breaks down, the whole community is threatened. This is what has happened with our global system. It has become too interdependent. One part, the American financial system, breaks down, and the entire global economy is in serious trouble. We have strayed too far from the optimum balance of interdependence and self-reliance.

Now is the opportune time to redress the balance. Strong, independent local communities are no more inimical to a healthy global society than strong, independent citizens are to a healthy local community. Independence and self-reliance won't weaken global society, they will strengthen it. They will create a more flexible, resilient, stable world, and we will all be better off.

1 comment:

  1. Great post, Bill. Although attributing the global meltdown to "the lending of money to people who can't afford to pay it back" is a tad too narrow in explanation, I concur with your proposals.

    Free trade is not fair trade when corporations can game the unrestricted flow of capital to relentlessly chase the weakest labour laws and environmental regulations.