Creating a New World Economy

Creating a New World Economy: Forces of Change and Plans for Action

GERALD EPSTEIN
JULIE GRAHAM
JESSICA NEMBHARD
Copyright Date: 1993
Published by: Temple University Press
https://www.jstor.org/stable/j.ctt14btbmt
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  • Book Info
    Creating a New World Economy
    Book Description:

    How is the global economy affected by increased militarization, inequality between nations and classes, environmental degradation, and U.S. economic decline? What are the current debates and issues? Can free enterprise and government deregulation solve global economic problems? As the world's attention is focused on the global economy, 25 activist economists address these and many other questions. Essays in Creating a New World Economy describe in accessible language such complex topics as the international debt, Keynesianism, trade policy, immigration, and drug trade. In addition to analyzing current topics and debates, contributors also offer alternative strategies on topics frequently neglected in traditional economics curricula. Essays explain development strategies and markets in Latin America, Eastern Europe, Africa, and Japan. For students, activists, and general readers, this timely collection explains national and international economic dilemmas that will increasingly challenge us in the next century.

    eISBN: 978-1-4399-0094-9
    Subjects: Business

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-x)
  3. Figures and Tables
    (pp. xi-xiv)
  4. Foreword
    (pp. xv-xx)
    SAMUEL BOWLES

    In November 1990 the apparel business’s trade journalBobbinran an ad featuring a photo of a woman sewing a man’s shirt, with the caption in bold type: “Rosa Martinez Produces Apparel for United States Markets on Her Sewing Machine in El Salvador.YouCan Hire Her for 57 Cents an Hour.” And then, in smaller type: “Rosa is more than just colorful. She and her coworkers are known for their industriousness, reliability, and quick learning. They make El Salvador one of the best buys.” The ad urged United States textile companies to “find out more about sourcing in El...

  5. Acknowledgments
    (pp. xxi-xxii)
  6. Acronyms and Abbreviations
    (pp. xxiii-xxvi)
  7. Introduction
    (pp. 1-16)
    GERALD EPSTEIN, JULIE GRAHAM and JESSICA NEMBHARD

    With the end of the cold war and the elimination of economic and political barriers in Westlern Europe, it sometimes seems that we are on the verge of a new world, a global community where dreams of harmony are suddenly made real. But just as our dreams have become globalized, we are reminded that many of our problems and fears are global as well. The fall of the Berlin Wall and transformations in the Soviet Union and Eastern Europe are generating poverty, violence, and chaos along with the possibility of greater political freedom. The destruction and the deadly aftermath of...

  8. PART I THE GLOBAL ECONOMY:: INTERNATIONAL FLOWS AND NATIONAL DILEMMAS
    • 1 Power, Profits, and Cooperation in the Global Economy
      (pp. 19-46)
      GERALD EPSTEIN

      Sometimes it seems that we are on the verge of a new era. Around the globe, millions of people are moved by the power of two ascendant ideas: capitalism and globalization. Politicians and businesspersons from the United States have declared victory in the cold war: capitalism won, they shout. The coUapse of communism and the rush to create private property and “free” markets in previously Communist countries are compelling testimony to this claim of capitalist victory.

      If capitalism seems on the rise, it is of a particular brand. The same politicians, economists, and business consultants who tout the victory of...

    • 2 Trade Policy: Who Wins, Who Loses?
      (pp. 47-63)
      MEHRENE LARUDEE

      If we ask, what is the best trade policy for the United States to adopt? we must then ask, “for whom?” A trade policy, such as free trade or protectionism, does not benefit all groups equally. Labor may be hurt by free trade, while stockholders in multinational corporations may benefit. Consumers, domestic business, and politicians may be affected differently by trade policy, as may business and labor in other countries. In this essay we ask who wins and who loses from a variety of trade policies, and we seek the policy that is best for the large majority of the...

    • 3 Crossing Borders: A Case for Cooperation in International Financial Markets
      (pp. 64-83)
      ILENE GRABEL

      By the end of the 1980s, many people, from academics to government officials to progressive activists, had begun to recognize the need for bold action to rein in international fmancial markets. The flight of capital from the United States to low-wage centers (and paradoxically, from these same centers to the relative security of U.S. bank accounts), unpredictable gyrations in currency exchange rates, and the meddling of the International Monetary Fund in the affairs of developing nations—all signaled an international financial system out of the control of domestic policymakers worldwide.

      But the same evidence that gave rise to these concerns...

    • 4 Immigration and the World Economy
      (pp. 84-107)
      BOB SUTCLIFFE

      The majority of the inhabitants of most of the developed countries can trace their ancestry back to inhabitants of the same or nearby areas in the epoch before modern economic development took place. A few developed countries, however, are now inhabited by people whose ancestors migrated from elsewhere during the epoch of modern capitalist development.

      Thinking about development, however, is dominated—albeit often unconsciously—by the first (European) and not the second (American) model. Insofar as people imagine the future elimination of world poverty, it is usually through the progressive development of all countries of the world and not, at...

    • 5 U.S. Militarism and the Global Economy
      (pp. 108-122)
      TOM RIDDELL

      Military activities—weapons, armed services, arms transfers, the proliferation of increasingly lethal technologies, and wars—are one of the dominating and often disturbing public priorities of the world. Vast amounts of global resources are allocated by governments and other actors to the pursuit of national defense and military power, be it global or regional.

      At the beginning of the 1990s, global military expenditures exceeded $1 trillion. More than 5% of world economic output is devoted to national military budgets; regular armed forces include in excess of 25 million people; and annual arms exports total about $50 billion. (Sivard 1989)

      From...

    • 6 Cocaine Capitalism
      (pp. 123-139)
      KIARAN HONDERICH

      Half of all Americans say they have had a relative or close friend who has had a problem with illegal drugs (U.S. Senate 1989:8).

      Cocaine-related hospital emergencies in the United States rose nearly 600 percent between 1983 and 1987 (U.S. Senate 1989:8).

      An estimated 70 percent of all violent crime in the United States is drugrelated (U.S. Senate 1989:8).

      The prison population in the United States rose from 329,821 in 1980 to 627,402 in 1988; the United States is now ranked first in the world in the proportion of its population kept behind bars (Trebach 1989:40).

      In Bolivia, illegal exports...

    • 7 Can Markets Work in Eastern Europe?
      (pp. 140-162)
      DIANE FLAHERTY

      The democratic movements of Eastern Europe came to power recently with broad popular mandates for sweeping change. But change has deteriorated into chaos, and the new governments find themselves fighting off political opposition and presiding over accelerating economic decline. There are now two choices: quicken the pace of reform and suppress dissent or retreat to more gradual dismantling of the old systems.

      In deciding which choice to make, perceptions about what went wrong with earlier, more modest reforms play an important role. Previous moves toward markets are often seen to have failed because they did not go far enough in...

    • 8 The Rise and Fall of the Keynesian Revolution in the Age of the Global Marketplace
      (pp. 163-180)
      JAMES CROTY

      The United States emerged from World War II as-the unchallenged leader of world capitalism, in virtually complete control of its own economic destiny and with the power to establish a new economic order, both domestically and internationally. By the early 1950s, the new economic order was solidly in place. Domestically, we had a Keynesian welfare-warfare state in which fiscal and monetary tools were to be used to guide our capitalist economy toward stable economic growth with full employment. Internationally, we had U. S. hegemony, a degree of military, political, and economic dominance in world affairs that would assure relative stability,...

  9. PART II CHANGES IN THE INDUSTRIALIZED WORLD:: NATIONS AND MULTINATIONALS
    • 9 Global Equity and Environmental Crisis: An Argument for Reducing Working Hours in the North
      (pp. 183-198)
      JULIET B. SCHOR

      For economists, a salient feature of global relations is the wide disparity in standards of living and standards of well-being between the North and the South. The North is rich; the South poor. Estimates of per capita income for 1987 show that the average income in the OECD stood at $14,670, with the U.S. figure even higher at $18,530. By contrast, in the World Bank’s low-income countries (comprising 60 percent of the world’s population), the average person earned only $290. Middle-income countries were much closer to the bottom end of the scale, with an average figure of $1,810 (World Bank...

    • 10 The United States as a Debtor Country
      (pp. 199-220)
      GERALD EPSTEIN

      The United States, once the world’s largest creditor nation, is now the world’s largest. creditor, owing more money to foreigners than it is owed by them. This turnabout has come swiftly. As recently as 1985 the United States was in the black; four years later U.S. foreign debt stood at more than $650 billion-roughly 12 percent of its gross national product (GNP). And in the next few years, most economists agree, U.S. foreign indebtedness could reach $1 trillion.

      Although no one disputes America's increased dependence on foreign capital, what all of this borrowing means for the United States and the...

    • 11 Multinational Corporations and the Internationalization of Production: An Industry Perspective
      (pp. 221-241)
      JULIE GRAHAM

      For several decades now, leftists have understood the activities of multinational corporations (MNCs) as part of a process called the “internationalization of productive capital” or the “globalization of production.” This refers to the extension of (industrial) production to previously nonindustrialized parts of the world and, more commonly perhaps, to individual firms engaging in production in more than one nation. On the home front, the internationalization of production and the multinational corporations that carry it out are viewed as major causes of plant closings and industrial decay, as operations that were formerly performed in the United States are moved overseas. Workers...

    • 12 The Japanese Model of Production: Cooperation or Coercion?
      (pp. 242-257)
      EMILY KAWANO

      Over the last ten years there has been an explosion of interest in Japanese management and production strategies. This interest has been fueled by the success of the Japanese economy and by concern over the competitiveness of American industry.

      The Japanese success story is well known. Emerging from postwar devastation, the Japanese economy grew at a rate that far outpaced that of other industrialized countries (see Table 12.1). Japanese rates of productivity growth have also led the world since the early 1960s (see Table 12.2). At the same time, unemployment has remained remarkably low and stable relative to other industrialized...

    • 13 From Junior Partner To . . . ? Japan in the World Economy
      (pp. 258-273)
      LYUBA ZARSKY

      Japan’s meteoric rise to global economic power is one of the most significant developments of the late twentieth century. The first non-Western country to become an economic superpower, Japan remains the only non-Western member of the Group of Seven (G7) of the world’s most powerful nations.¹

      Militarily subordinate to the United States since the end of World War II, Japan catapulted in the 1980s from the status of U.S. junior partner to that of economic equal and rival. Japan has become a major exporter of capital, overtaking the global role of U.S. banks, and a source oftechnological leadership, challenging many...

    • 14 The Great Trade Debates
      (pp. 274-286)
      JULIET B. SCHOR

      International trade is proving to be a vexing issue for the U.S. Left. In contrast to the certainty with which leftists approach most political questions, this one brings forth confusion and intellectual insecurity. There is an almost total absence of anything that could be called a left, or radical, position. We have some tired platitudes—“Neither free trade nor protectionism is the answer”—but beyond them lurks an intellectual void.

      The inevitable consequence is that the Left has splintered. Some have joined the ranks of the liberals and neoliberals, or the “neomercantilists,” as I call them. Neomercantilists are concerned with...

  10. PART III THE THIRD WORLD IN THE GLOBAL ECONOMY:: FAILED MODELS AND NEW APPROACHES
    • 15 Managing the Latin American Debt Crisis: The International Monetary Fund and Beyond
      (pp. 289-313)
      MANUEL PASTOR JR.

      Throughout the 1980s, the International Monetary Fund (IMF) played a major role in managing the international and intranational conflicts caused by the nearly half-trillion dollars of Latin American debt. Fund missions shuttled from country to country, recommending austerity programs that opened the door to debt rescheduling. Under IMF direction, a much-feared international financial calamity was avoided. At the same time, Latin American growth rates and living standards fell dramatically.

      By the middle of decade, the IMF’s approach to the Latin American crisis was increasingly viewed as misplaced. Wayward debtors, such as Argentina and Brazil, adopted stabilization programs not in keeping...

    • 16 Foreign Aid and Dependent Development
      (pp. 314-334)
      JESSICA NEMBHARD

      Countries use external finance (foreign loans, direct foreign investment, foreign aid) for a variety of reasons—particularly if their domestic resources are not enough to finance economic expansion, social programs, necessary imports, defense, or debt servicing. In none of its forms, however, does external fmancing come without cost. In the 1970s, low-interest foreign loans seemed ideal, but by the 1980s, interest rates skyrocketed and debt servicing became unbearable for most borrowers. The debt crisis brought stabilization conditions and austerity measures directed by the International Monetary Fund (IMF). Direct foreign investment also has its downside, most notably that decision and profit...

    • 17 The Crisis of Plenty: Africa
      (pp. 335-350)
      ANTHONY GUGLIELMI

      The decade of the 1960s seemed to assure a bright future for Africa. With the advent of political freedom, many Africans anticipated a golden age of wealth and social improvement, not for just the few but for the entire continent. The long centuries under European domination were coming to an end and many expected that the advent of political freedom would enable Africans to clainl full partnership and recognition among the nations of the world. With time and determination Africa would harness its natural resources, create a fully functioning industrial economy, and establish itself on an equal footing with the...

    • 18 The International Economy and the Environment in Latin America
      (pp. 351-359)
      HÉCTOR SÁEZ

      This chapter explores the ways in which government economic policies, multinational corporations, and international development institutions shape the environment in Latin America. Most conclusions can readily be extended to other countries in the Third World.

      In particular, I argue that the benefits and costs of the exploitation of natural resources are distributed unequally among classes, countries, and generations: poor countries (and people) and future generations bear the greatest costs of environmental degradation, while those who today wield wealth and power reap the greater benefits.

      Latin American countries are highly dependent on foreign trade to satisfy their consumption needs. Their exports...

    • 19 The Internationalization of the U.S. Military Industry: A Caribbean Case Study
      (pp. 360-375)
      MARIBEL APONTE-GARCÍA

      Traditionally, radical economic analyses of U.S. militarism at the international level have focused on the functions that militarism serves for capital accumulation: securing sea lanes of communication, contributing to U.S. capitalist hegemony, and limiting the spread of socialism in the international arena. These functions are taken to promote capital accumulation by increasing profits and by reproducing the conditions necessary to preserve the capital accumulation process (Riddell 1986; O’Connor 1978; Baran and Sweezy 1968; Smith and Smith 1983).

      Radicals associate Third World militarization with military intervention, war, and military assistance funding and training. In their view, the role militarism plays at...

    • 20 No More NICs
      (pp. 376-390)
      ROBIN BROAD and JOHN CAVANAGH

      For more than a decade the most common policy advice to developing countries the world over has been a simple formula: copy the export-oriented path of the newly industrializing countries, the celebrated NICs. These economies—Brazil, Hong Kong, Mexico, Singapore, South Korea, and Taiwan—burst onto world manufactures markets in the late 1960s and the 1970s. By 1978 these six economies plus India accounted for fully 70 percent of the developing world’s manufactured exports. Their growth rates for gross national product (GNP) and exports were unequaled.

      No wonder the call was sounded for others to follow. Dozens have tried. But...

    • 21 Development Strategies in Latin America: Which Way Now?
      (pp. 391-404)
      JOSÉ TÁVARA

      It has been fashionable to refer to the 1980s as the “lost decade” for many countries in the Third World. In fact, most of the economic and social indicators show a dismal picture for the decade. In the case of Latin America, real per capita gross domestic product fell by 7 percent between 1980 and 1988, after an almost 40 percent increase between 1970 and 1980 (IADB 1989:1).

      The termlost decademight be misleading, however, if it is taken to mean that nothing substantial happened in the Latin American region. In fact, one of the rnost significant features of...

    • 22 Third World Socialism and the Demise of COMECON
      (pp. 405-420)
      CARMEN DIANA DEERE and STAN MALINOWITZ

      During the 1970s there was a virtual explosion in the number of successful revolutions across the Third World, bringing with them the hope that more egalitarian societies could solve the endemic problems of poverty and underdevelopment. Radical, revolutionary regimes came to power during that decade in Mrica (Ethiopia, Guinea Bissau, Angola, Mozambique, Somalia, Zimbabwe), Asia (South Vietnam, Laos, Cambodia, Mghanistan), the Middle East (South Yemen, Syria, Libya), and even in the United States’ backyard, the Caribbean Basin (Nicaragua and Grenada). They joined the earlier socialist regimes of North Vietnam, North Korea, and Cuba, as well as the progressive experiments of...

    • 23 Making Connections: Women in the International Economy
      (pp. 421-436)
      BRENDA WYSS and RADHIKA BALAKRISHNAN

      This chapter discusses experiences of women in the changing world economy. One of tble reasons that the current international economy looks the way it does is that it builds on hierarchical gender relations. Likewise, gender relations can partly be explained by the dictates and dynamics of the world economic system. Gender divisions are continually decomposed, recomposed, or sometimes reinforced by changes in the global economy. By looking at women and the role of gender in economies, we gain critical insight into the workings of the international economy.

      Gender is central to how every economy is structured. Feminists commonly distinguish between...

  11. Glossary
    (pp. 439-449)
  12. The Contributors
    (pp. 450-454)
  13. Index
    (pp. 455-461)