Summary:
Jagdish Bhagwati claims the US is again suffering from the Diminished Giant Syndrome. As a result, the altruistic hegemon has become a selfish hegemon. No longer practices what it preaches. Seeing free trade now as a costly giveaway to others at the expense of the US. Continuously asking What's in it for me? Cause for Doha talks collapse. Obama's agenda for change flawed: export protectionism. Agenda for institutional change needs to address the true causes of the anxiety in the US today: India and China exports growing; competition intensified ("kaleidoscopic comparative advantage"); ongoing technical change threatening assembly line jobs. (Published: 19/08/08)
Notes:
- Diminished Giant Syndrome
- perception of American decline
- e.g. 1980s, fear of Japan
- 19th century Britain, fear of US and Germany
- US become fearful giant
- typically accompanied by a switch from U.S. leadership to myopic and self-indulgent pursuit of "what's in it for us" economic policies in the world arena
- from "altruistic" hegemon to "selfish" hegemon (Charles Kindleberger)
- on back of economic anxiety in country
- many in both political parties see freer trade now as a costly giveaway to others at the expense of the US
- ask "what's in it for me?"
- Only an agenda for institutional change, one that addresses the true causes of the anxiety in the US today, has a chance of returning trade policy to sanity.
- failed Doha talks
- illustrates the collapse of American leadership
- US has been the central spoiler
- refusing to cut its trade-distorting subsidies significantly even though they are universally recognised as intolerable
- While making negligible concessions itself, the US was insisting on difficult concessions from India, made even more troublesome politically because of the insubstantial offer on US subsidies
- US has also muscled in to its bilateral preferential trade agreements (PTAs) conditions unrelated to trade at the expense of their partner nations
- does not practise what it preaches and demands
- because the labour lobbies believe that American wages have been stagnant because of competition from the developing nations
- export protectionism
- doubly offensive about this exercise of political muscle is that it is advanced in the language of altruism
- not: by saying frankly that it is because "our unions are worried about competition"
- but: by pretending that it is "in your workers' interests".
- An altruistic hegemon would not be playing these games; a selfish hegemon will do little else.
- Obama
- part of his agenda for change is that the US should now impose even more draconian labour requirements in future PTAs, and that the NAFTA should be revised to incorporate yet tougher labour requirements
- he is making export protectionism, and the reputation of the US as a selfish hegemon, worse, not better
- Different kind of change is in order
- must reflect a holistic view of the new reality that the US confronts
- in particular: the economic anxiety that overwhelms US workers today stems from the increased fragility of their jobs
- new reality
- India and China today are growing and exporting rapidly
- the Gullivers in a Lilliputian world economy
- create tsunamis for specific industries where their exports concentrate
- competition has intensified
- margins of competitive advantage have shrunk
- "kaleidoscopic comparative advantage"
- no chief executive or any of his workers in tradable industries leads a happy life any more
- always someone, from somewhere, breathing down his neck
- leads to volatility of jobs, as you have an advantage today and can lose it tomorrow.
- labour-saving technical change continuously threatens assembly-line jobs for the unskilled
- assembly lines continue but increasingly do not have workers on them;
- they are managed from a glass cage by skilled operators whose jobs increase instead.
- Obama needs a deeper understanding of the anxiety-causing "new epoch" to define his new agenda shorn of protectionism
- McCain admirably stands for free trade but shows no evidence whatsoever of comprehending that this needs to be situated in an institutional context that requires a serious overhaul
- Who will ultimately offer us the right New Deal?
