Friday, February 3, 2012

Friedman's "Made in the World" - Domestic politics vs. International economics

Thomas Friedman in this edit in the NYT titled "Made in the World" highlights the importance of international supply chains, the need for understanding and integrating into these supply chains and the future of globalisation.He makes an important point of the "disconnect" between domestic political leaders and global corporate, business leaders.
"There is today an enormous gap between the way many C.E.O.’s in America — not Wall Street-types, but the people who lead premier companies that make things and create real jobs — look at the world and how the average congressmen, senator or president looks at the world. They are literally looking at two different worlds — and this applies to both parties.

Politicians see the world as blocs of voters living in specific geographies — and they see their job as maximizing the economic benefits for the voters in their geography. Many C.E.O.’s, though, increasingly see the world as a place where their products can be made anywhere through global supply chains (often assembled with nonunion-protected labor) and sold everywhere."

This disconnect is seen across the globe. While the reason for the different approaches offered in the edit seem to be the compulsions of electoral politics vis a vis reality of trade and business, the relationship is far more complex. The domestic politician has to face the "local" impacts of globalisation which the corporate CEO need not bother about. A local industry, due to reduction of barriers in international trade may face intense competition and wither away. This has an impact on the local employees of the industry and general living conditions of the community itself. The domestic politician cannot ignore this since he/she represents the interests of the local community and has to deal with the devastating impact of the new trade reality on local communites. To argue to them the benefits of a globalised world in this context would be rather futile. This dichotomy was articulated by the USTR Ambassador Ron Kirk here,
"Mr Kirk said compromise at those talks - where developed and developing countries are arguing over the levels of trade tariffs - would only be possible if the public supported world trade.
"The principles on which the statement 'trade is good for the world' have not been visited for some time," he told a session at the World Economic Forum gathering in Switzerland.
Unless politicians around the world explained why they thought trade would bring jobs and help consumers fight rising prices, then a global agreement could not be reached, he said.
"Than it becomes easier, frankly, to just do something practical [and make bilateral agreements]... rather than continue adding to our balance of trade by signing onto agreements to which the American public believes there's no benefits for us."
It is also interesting to note that not all CEOs (Friedman has rightly referred to as "many") would take the position that is opposed to the stand taken by local political stakeholders. Their response, at times is dependent on the impact globalisation is having on their particular industry. It would be interesting to analyse top CEO's reaction to globalised trade in raw materials that benefit their industry vis a vis their final products. The reaction may oscillate from being a "free trade" proponent to a 'protectionist". Nevertheless this dichotomy of reactions of "local democratic politics" as against "corporate  trade interests" is a reality that signifies the complexity of globalisation as well its impact on domestic economies. It would get shriller if the benefits of a global, multilateral trade regime do not percolate or seem to be percolating to all segments of society.


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