On Saturday evening in my native New York City, I attended a dinner party at which the topic of globalization dominated the cocktail period.
The consensus among the couples in attendance was that globalization -- the adoption of free markets around the world, the expansion of international trade, and the transfer of jobs to lower-cost production centers -- has been a net-negative for the United States, at least through its recently concluded first two decades.
Yes, globalization has had its upsides for the U.S.: strong international sales for U.S. corporations, especially in emerging markets; adequate-to-good quarterly earnings growth; and lower prices for many products for U.S. consumers.
The downsides for the United States, though, have been more profound: massive job losses to overseas markets, especially in manufacturing; and stagnant incomes.
And now, we're experiencing a third negative side effect, one that had been predicted for certain product categories, but that wasn't supposed to permeate the whole economy: rising prices and costs. Globalization's decree of lower wages for many job segments was supposed to be more than offset by lower prices and costs. In the United States, it hasn't worked out that way.
While some products now sell at lower prices, for others, prices and costs have actually increased. Oil, the world's most vital commodity, as well as food commodities and any number of raw materials are prime examples. Believers in supply-side economics and other conservatives blame the federal government's fiscal and monetary stimulus for the price increases, but the bigger driver of costs is the rising demand for these commodities in emerging markets -- a rise triggered by globalization.
As the era of globalization enters its third decade, its result for many Americans has been reduced earning power, a lower standard of living, and an enormous shortage of jobs.
Social Safety Net: Necessary or Irrelevant?
Problems like these are the sort that citizens of a democracy expect their politicians to address. And today, the most energetic political movement in the United States is the Tea Party. So it's worth asking what solutions the Tea Party has to offer for the painful side effects of globalization.
Unfortunately, the Tea Party platform, instead of mitigating the economic and social problems triggered by globalization, is more likely to magnify them. The consensus of my fellow dinner guests was that in troubled times like these, the United States needs to bolster its new universal health care program, offer more generous unemployment insurance, and expand worker retraining programs for those whose jobs have been lost to globalization. The Tea Party-led Republicans and other conservatives propose the reverse.
Tea Partiers argue that decreased government spending, and lower income taxes, especially on upper-income groups and the mega-rich, will lead to job growth. And they suggest that by shrinking the social safety net, both the U.S. economic system and society will be strengthened. But there seems to be little logic to this argument: High unemployment, plus a smaller social safety net, plus reduced government spending (and therefore still more layoffs) leads to ... a healthy economy? It doesn't add up.
Whichever policy path the United States takes -- either addressing globalization's downside or magnifying it -- one thing is certain: If the U.S. economy is to recover, strong job growth must resume. The fundamental underpinnings of the American economic system -- the two main reasons many people tolerate its relative harshness -- are profits and jobs. Take either one away and a systemic adjustment usually follows. A lack of job growth for a long period puts major pressure on our society -- and in the past, those periods have been when the biggest economic reforms have occurred.
It goes without saying that the country is experiencing those pressures at critical levels now, just as it did in the early 1930s. And, just as the reforms President Franklin D. Roosevelt implemented under the New Deal provided a safety valve then, President Obama and the Democrats, guided by Keynesian economics, are attempting to relieve that pressure now.
The Tea Party's far-right ideology is hot right now. They'd better hope that the U.S. unemployment rate declines sharply after their policies are enacted. If it doesn't, the period of reforms that began in 2009 will resume. And those additional reforms will not be coming from the conservative movement.