Since the 2008 financial crisis, the international community has been mobilizing, especially during the G20 summits, to find solutions.
Ludovic Marin / AFP
Atlantico Oren Cass, senior fellow at the Manhattan Institute for Policy Research, management consultant at Bain & Company, and editor of the Harvard Law Review, envisions a trip to the center of neoliberal dogma.
Atlantico: To what extent is globalization seen as an extension of capitalism? Is it really his peak?
Ears Case: We associate capitalism with free markets, so we believe that bigger and freer markets are always better, and that globalization is the goal. The problem is that many markets in the world are not free at all. So if we remove the barriers between a free market in a liberal democracy like that of the United States and a state-controlled market like that of China, we have not furthered the cause of free markets or capitalism. We have only damaged the US market by introducing all the distortions from China into it.
How did you realize this error when it was widely shared?
China’s increasing use of economic power to achieve its political goals is the phenomenon that has made our mistakes most apparent. We assume that democratic values such as freedom of expression go hand in hand with a market economy in which profit-seeking capitalists behave in ways that benefit everyone. But what happens when capitalists see the greatest opportunity for profit in an authoritarian country? Suddenly they have to censor what they say to please the Chinese Communist Party. So what we thought we were doing to enable progress for “freedom” in economic terms was simultaneously reducing our political freedom.
What do Smith and Ricardo teach us about this confusion? Does it stem from a fragmented reading by the two authors?
Capitalism is in crisis, but globalization is not the main culprit
The question is what Smith and Ricardo don’t teach us. Many people use classical economists to promote globalization, thinking that principles like “the invisible hand” and “comparative advantage” teach that globalization will generate wealth. It’s just wrong. Smith and Ricardo had no idea about modern globalization and did not write about it. They previously made it clear that their analysis only applied to situations where countries exchanged goods for goods in a balanced way. If you think Adam Smith advocated for the UK to run up huge trade deficits by practicing “free trade” with a mercantilist communist dictatorship that stole its technology, you probably haven’t read Adam Smith.
Is it still possible to save capitalism from globalization? What are the key points to save?
Yes, I think so. A nation that wants to operate a capitalist economy must isolate its own market from other countries in the world that do not practice capitalism themselves. This does not mean that trade should be avoided – trade is clearly an important part of capitalism. But trading must be done in a balanced and controlled manner. If you are in Los Angeles, a transaction with someone in New York in the US market under US law is not the same as a transaction with someone in Shanghai who operates in the Chinese market under Chinese law. If Chinese goods are to circulate in US markets, they must be produced under conditions compatible with the US capitalist system, and they must be exchanged for US goods that return to China in equal quantities.
No, the last crisis of capitalism has not yet arrived
Is it important to do it quickly? What would be the implications for the global economy if we continued to confuse capitalism with globalization?
It is not possible to do it quickly. We have spent decades deploying investment, creating multinational enterprises and building supply chains that participate in globalization. In any case, it will take years to repair the damage. But all the more important is to start now, immediately address the worst abuses and present a clear and credible strategy for the transition to a new balanced trading system so that investors and companies know what to expect and can start trading accordingly. A country like America has several policy options — such as a tariff, a market access tax, or an import license — that can gradually eliminate its trade deficit by reducing imports and boosting exports. We should pick one and implement it, strengthening its provisions in a progressive and predictable way, so that after ten years we are in a situation where America only imports what it cannot produce locally, and where these imports comparable demand for exports to other countries.
Do we need to save the capitalist soldier of globalization (and therefore there would be an urgent need to deal with it)?