SYNOPSIS: Ideologues mustn't blame domestic policy problems on international trade

It is a truth universally acknowledged that the growing international mobility of goods, capital and technology has completely changed the economic game. Nations, conventional wisdom tells us, no longer have the power to control their own destinies; governments are at the mercy of international markets.

Some celebrate this development, saying that both rich and poor nations benefit. At the same time, a growing number of journalists, union leaders, politicians of both parties and even businessmen deplore it, blaming globalization for instability, unemployment and declining wages. But both sides have it wrong. They take the omnipotence of global markets for granted -- not realizing that reports of the death of national autonomy are greatly exaggerated.

A certain fascination with the march of globalization is understandable. For half a century, world trade has grown faster than world output, and international capital now moves more quickly than ever before. The rapidly expanding exports of newly industrializing economies have put pressure on less-skilled workers in advanced countries even as they offer unprecedented opportunities to tens of millions in the third world. (The wages of those workers are shockingly low but nonetheless represent a vast improvement on their previous, less visible rural poverty.)

But while global economic integration is increasing, its growth has been far outpaced by that of "global economy" rhetoric. Two recent books by economic journalists, William Greider's "One World, Ready or Not" and Robert Kuttner's "Everything for Sale," are jeremiads about the evils of unfettered economic globalism. Politicians like Patrick J. Buchanan and Ross Perot have made careers out of assailing open markets. Even the financier George Soros warns, in the current issue of The Atlantic Monthly, that global capitalism is now a greater threat than totalitarianism to "open society."

Such oratory has become so pervasive that many observers seem determined to blame global markets for a host of economic and social ills in their countries, even when the facts point unmistakably to mainly domestic -- and usually political -- causes.

For example, critics of globalization often cite France, whose Government has taken no serious action to reduce its double-digit unemployment rate, as the perfect example of how states have become powerless in the face of impersonal world markets. France cannot act, according to a recent New York Times article, because of the demands of "European economic integration -- itself partly a response to the competitive demands of the global marketplace."

French policy is indeed paralyzed -- not, however, by impersonal market forces but by the determination of its prestige-conscious politicians not to let the franc decline against the German mark. Britain, which has been willing to let the pound sink relative to the mark, has steadily reduced its unemployment rate with no visible adverse consequences.

The cause of France's paralysis, in other words, is political rather than economic. True, the country must meet the conditions laid down by the Maastricht treaty of 1991, which is supposed to lead to a unified European currency. But creating this currency is more a political than an economic project. Its main purpose is to serve as a symbol of European unity, and many economists think that the costs of the common currency will exceed its benefits. It would actually be more accurate to say that French politics has battered markets rather than the other way around.

And what about the United States, where the continuing power of the Government -- or at any rate that of the Federal Reserve -- to push the economy around can hardly be questioned? Critics of the global economy invariably reply that America may be creating lots of jobs but that they are tenuous because of the prevalence of downsizing, which is a reaction to international competition (a line of reasoning that also provides a good excuse for companies undertaking layoffs).

Come again? Newsweek ran a story last year, titled "The Hit Men," about executives responsible for massive layoffs. The chief executives of AT&T, Nynex, Sears, Philip Morris and Delta Air Lines were high on the list. Of course, international competition plays a role in some downsizings, but as Newsweek's list makes clear, it is hardly the most important cause of the phenomenon. To my knowledge there are no Japanese keiretsu competing to carry my long-distance calls or South Korean conglomerates offering me local service. Nor have many Americans started buying their home appliances at Mexican stores or smoking French cigarettes. I cannot fly Cathay Pacific from Boston to New York.

What explains this propensity to overstate the importance of global markets? In part, it sounds sophisticated. Pontificating about globalization is an easy way to get attention at events like the World Economic Forum in Davos, Switzerland, and Renaissance Weekends in Hilton Head, S.C.

But there is also a deeper cause -- an odd sort of tacit agreement between the left and the right to pretend that exotic global forces are at work even when the real action is prosaically domestic.

Many on the left dislike the global marketplace because it epitomizes what they dislike about markets in general: the fact that nobody is in charge. The truth is that the invisible hand rules most domestic markets, too, a reality that most Americans seem to accept as a fact of life. But those who would like to see us revert to a more managed society in all ways hope that popular unease over the economic influence of people who live in far-off places and have funny-sounding names can be used as the thin end of an ideological wedge.

Meanwhile, many on the right use the rhetoric of globalization to argue that business can no longer be expected to meet any social obligations. For example, it has become standard for opponents of environmental regulations to raise the banner of "competitiveness" and to warn that anything that raises costs for American businesses will price our goods out of world markets.

But even if the global economy matters less than the sweeping assertions would have us believe, does this "globaloney," as the cognoscenti call it, do any real harm? Yes, in part because the public, misguided into believing that international trade is the source of all our problems, might turn protectionist -- undermining the real good that globalization has done for most people here and abroad.

But the overheated oratory poses a more subtle risk. It encourages fatalism, a sense that we cannot come to grips with our problems because they are bigger than we are. Such fatalism is already well advanced in Western Europe, where the public speaks vaguely of the "economic horror" inflicted by world markets instead of turning a critical eye on the domestic leaders whose policies have failed.

None of the important constraints on American economic and social policy come from abroad. We have the resources to take far better care of our poor and unlucky than we do; if our policies have become increasingly mean-spirited, that is a political choice, not something imposed on us by anonymous forces. We cannot evade responsibility for our actions by claiming that global markets made us do it.

Originally published in The New York Times, 2.13.97