market spawns efficiency, and efficiency means the elimination of waste. Waste is
pollution, so in a true free-market economy you would eliminate, as nearly as you
can, pollution. In a true free-market economy you can't make yourself rich without
making your neighbors rich and without enriching your community. Polluters make
themselves rich by making everybody else poor. They raise standards of living for
themselves by lowering the quality of life for everybody else, and they do that by
escaping the discipline of the free market and forcing the public to pay their
production cost. You show me a polluter, I'll show you a subsidy. Corporations are
externalizing machines; they are constantly trying to figure out a way to avoid their
own costs and foist it out on the public." -- RFK Jr.
===================================================
Hollywood’s Favorite Villains.
Kenneth Rogoff
Once upon a time, Cold War enemies, white supremacists, and evil geniuses
reigned supreme as Hollywood’s favorite bad guys. No more. Today, it is
multinational corporations that are increasingly being cast as the über-villains of
our globalized world. For all their subliminal paid promotions and subtle product
placements, corporations are getting drubbed in the main story lines of our
popular culture.
This treatment goes far beyond documentaries like Michael Moore’s polemical
Fahrenheit 9/11 or The Corporation, an earnest if somewhat paranoid portrayal of
multinational companies’ role in globalization. It extends to mainstream hits like
The Constant Gardener, in which the idealistic protagonists do battle with a
malicious global pharmaceutical company that is bent on exploiting Africa’s misery
to test experimental drugs.
To be sure, sociopathic corporations have populated books and films for more than
a century. But corporate villains, typically multinational companies, have never been
so ubiquitous as today.
Is it unfair? Most corporations, after all, are merely convenient mechanisms for
ensuring that scarce global capital is used at maximum efficiency, to the benefit of
all. Are famously liberal Hollywood film directors spending too much time going to
anti-globalization rallies? Perhaps. But I would submit that Hollywood’s misgivings,
however untutored, represent only the tip of a growing iceberg of resentment
against the perceived injustices of globalization.
The simple truth is that corporations represent capital, and capital – in the form of
factories, equipment, machines, money, and even houses – has been the single
biggest winner in the modern era of globalization. Corporate profits are bursting at
the seams of investors’ expectations in virtually every corner of the world. Even in
moribund economies like Germany and Italy, where employment security is
vanishing, corporations are swimming in cash.
This phenomenon comes as no surprise to economists. Add two billion Indian and
Chinese workers to the global labor force, and the value of other means of
production – particularly capital and commodities (for example, gold and oil) – is
bound to go up. And so it has, with capitalists everywhere gaining an ever larger
share of the economic pie. (In theory, capitalists in labor-abundant China and India
could end up as losers, but in practice they, too, have benefited thanks to their
governments’ success in simultaneously liberalizing and globalizing.)
Many policymakers seem to be under the impression that surging profits are a
purely cyclical phenomenon, as economies continue to grow out from the depths of
the 2001 recession. Wait a bit, they predict, and wages will fully catch up later in
the cycle.
Not likely. Capital’s piece of the pie has been getting bigger for more than 20
years, and the trend looks set to continue. Indeed, corporations’ growing share of
income has been a major driver behind the long, if uneven, bull market in stocks
that began in the early 1990’s. At the same time, inflation-adjusted wages for rich-
country unskilled workers have barely budged over the last two decades.
Some of these trends also have to do with the nature of modern technological
change, which seems to favor capital and skilled workers disproportionately. But,
regardless of their cause, rapidly growing inequalities are a powerful force for
instability everywhere, from wealthy America to rapidly growing China to reform-
challenged Europe. “A rising tide lifts all boats,” conservatives like to say. Fine, but
what happens to people, like the poor of hurricane-struck New Orleans, who don’t
own boats?
Growing inequality would not be such a problem if governments could simply raise
taxes on the rich and strengthen subsidies to the poor. Unfortunately, any country
that taxes capital too aggressively will only succeed in chasing it to regions where
the tax burden is lighter. In a globalized world, national governments’ ability to tax
potentially mobile factors of production is sharply circumscribed. The same
mechanism that pours profits into the pockets of global corporations also prevents
governments from claiming a larger share of the spoils.
Unfortunately, the long-term trend towards ever-lower income shares for unskilled
workers is likely to continue over the coming decades, as modern technology
permeates the globe, and as emerging markets like China, India, Brazil, and
Eastern Europe continue to integrate into global production. This is not to say that
unskilled workers are actually being made worse off by globalization in absolute
terms; the vast majority are actually breaking even or better. But unskilled
workers’ incomes are not keeping pace with overall economic growth, and the
resulting social strains are a ticking bomb.
If so, then Hollywood’s cartoon-like caricatures of evil multinational corporations
may some day seize mainstream consciousness, leading to political upheavals that
shatter today’s social contract. That won’t be good for profits, or for the poor.
Governments – and corporations – must find better ways to provide equal
opportunity through improved education, broader financial markets, and other
channels. Otherwise, globalization’s storyline may not proceed according to the
script.
Kenneth Rogoff, a former chief economist of the IMF, is Professor of Economics at
Harvard University.
Copyright: Project Syndicate, 2005.
www.project-syndicate.org
