Against The Dead Hand: The Uncertain Struggle for Global Capitalism
Soviet-style Communism has fallen. The dream of centralized, top-down control over the course of economic development. That dream has now expired in universal failure. It died in the United States and Western Europe during the stagflation of the 1970s. It died in China when Deng Xiaoping declared that "it doesn't matter if the cat is black or white, so long as it catches mice." It died in Latin America during the debt crisis and lost decade of the 1980s.
It died in the Soviet Empire with the collapse of the Berlin Wall. And it died in East Asia with the bursting of the Japanese bubble and the ...view middle of the document...
It is an understandable preoccupation: The world economy today is buzzing with the new and unprecedented. Companies scatter their production facilities around the globe: research and development here, components manufacturing there and there, and final assembly and testing somewhere else entirely.
"Hot money" sloshes around the world at the click of a mouse. Mind-boggling sums flicker on the computer screens of foreign exchange traders.
It is true that international economic integration has reduced the freedom of action available to national policymakers, and that the Internet and other technological marvels have sped that integration. Even the most cursory glance at world events, however, suffices to show that much of the rhetoric from both sides has been ludicrously overblown. Governments continue to assume a massive and enormously influential presence in economic life. Throughout much of Western Europe, government spending as a percentage of national income still exceeds 50 percent. Federal taxes in the United States have claimed a higher share of gross output in recent years than at any time since World War II. Chinese state-owned enterprises continue to employ some 80 million people. Government subsidies in India amount to 14 percent of gross domestic product. The state oil monopoly remains en- shrined in the Mexican constitution.4
The plain fact is that market pressures—even speedup, Internet- driven market pressures—exert only modest and occasional discipline on national policies. To borrow Friedman's metaphor, the "golden straitjacket" is a loose-fitting garment indeed: In other words, the past remains very much with us. The defunct ideas of centralized control exert a waning but still-formidable influence on the shape of the world economy.
By exaggerating the triumph of markets over government, the friends of globalization play into the hands of their opponents. If the present world situation represents the unchallenged reign of market forces, then that reign has much to answer for. After all, the world today is a very messy place. Those hostile to markets pursue this opening with gusto. However appealing the notion that the two great trends of recent times—the information revolution and globalization—really boil down to the same thing, the spread...