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Guest blog: Why globalization isn’t working

So it turns out that Columbus was right all along. The world isn’t flat. That’s essentially what the G-20 was trying to tell President Obama in Seoul last week. As I predicted it would, the meeting produced a communiqué in which tortured (even by G-20 standards) language proclaiming everlasting harmony, agreement, and success only proved ...

TIM SLOAN/AFP/Getty Images
TIM SLOAN/AFP/Getty Images

So it turns out that Columbus was right all along. The world isn’t flat. That’s essentially what the G-20 was trying to tell President Obama in Seoul last week.

As I predicted it would, the meeting produced a communiqué in which tortured (even by G-20 standards) language proclaiming everlasting harmony, agreement, and success only proved the underlying disarray and ultimate failure not only of the meeting, but also of our present form of globalization.

I know that all the big economists, pundits, CEOs, and political leaders have embraced former President Clinton’s view that globalization will make all countries rich and that being rich they’ll all become democratic and that being democratic they will all become peace loving and go to Nirvana together. In essence Clinton was saying the world would become like us and that globalization is really Americanization.

But it didn’t sound like that in Seoul. Instead of the old Washington Consensus, it was the new doctrine of the Beijing-Berlin Consensus that dominated the discussion. Of course, lip service was paid to the need for rebalancing the global economy’s enormous trade and current account imbalances. But when Obama suggested that the Germans might consider consuming more, they told him that would be impossible because, well, Germans just don’t do that. The Chinese said they believed in globalization so long as it meant that the United States did all the consuming while also refraining from stimulating its economy and simultaneously supplying global security.

Somehow, it just didn’t sound like the Beijing-Berlin Consensus was going to work for recovery of the U.S. economic dynamism, or for the re-election of Barack Obama.

So where did this globalization as Americanization and flat world stuff go wrong?

It was the stupid assumptions stupid! For example, how often have you heard big-name economists (and little-name economists for that matter) insist that "companies compete economically, but countries do not"? Tell that to the Chinese and the Germans, or for that matter to the Japanese, Koreans, Taiwanese, French, Singaporeans, and Swedes.

Or consider the fundamental assumptions of U.S. free-trade theory that capital, technology, and people do not cross borders and that economies are always at full employment. Or how about this: all markets are perfectly competitive with large numbers of suppliers no one of which has any influence on the final amount of production or on final prices and  that therefore industries like autos, steel, semiconductors, and aircraft don’t exist or don’t engage in international trade if they do exist.

I mean how unrealistic can you get. But that is what has been guiding U.S. international economic policy for many years. If he wants to create jobs, reassert U.S. economic leadership, and get re-elected, Obama had better rethink the assumptions and face up to the notion that there are different kinds of globalization and that the globalization of the Beijing-Berlin Consensus is not only not Americanization, but that it is actually anti-Americanization.

Clyde Prestowitz is president of the Economic Strategy Institute and author of The Betrayal of American Prosperity.

 Twitter: @clydeprestowitz

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