Half the Story

I am sorry to do this, but a close reading of Friedman's essay is warranted.

First, note the admitted groundwork of Ireland's success: other countries, institutions and people sent money, lots of it. That was after Ireland had 'taxed and spent' to create a public school system and a modern infrastructure. None of that was the result of capitalist investment, or pulling oneself up by the bootstraps. All of that initial phase was pure and simple socialism. Friedman denounces that work as "fiscal mismanagement," while showing that it was the condition of what followed.

Second, Friedman says, on account of the foregoing, and because Ireland reduced taxes and regulations, capitalists became interested in the country and invested there. Meanwhile, the EU and the U.S. were easy, large markets for Irish products. What Friedman doesn't say is that much of the Irish product was purchased by the same foreign companies that built facilities in Ireland. In other words, the product was not sold in the free market, but was delivered to an "internal" corporate market. Foreign corporations sold the eventual products made from Irish parts in foreign markets.

This second point describes the classical "Race to the Bottom" scenario. Essentially, the Irish were hired to produce things at lower wages and benefits than what was paid elsewhere in the First World. INTEL and DELL, for example, make parts and assemblies in Ireland that were previously made in the United States. Because these companies purchase the product for internal use, they avoid taxes and regulations that would apply if the same products were sold on the open market. The net effect is lowering of corporate costs by exporting labor and some capital to a backward country. This cost-cutting increases profits, because prices are not reduced where the product is sold.

Note the comment by the INTEL person, that now they even do a little research in Ireland. This reveals the typical situation: what the Irish do is boring grunt work. Now and then, they throw a fish to the whale. While Charlie Chaplin's Modern Times is exported to somewhere, higher management and technical expertise remain ensconced at the center. This assures the profits and benefits stay at the center, to be distributed among the elite classes.

This strategy works as long as the poor country keeps its wages and costs low, and a high price market exists somewhere else. It is important to notice that all of the financial heavy lifting is done by foreigners at every stage of development. Essentially foreign aid, foreign investment, and foreign management create everything. Friedman's Irish do very little for themselves. They are just the latest low cost proletariat for hire. And, now there are problems in Ireland because some of the production is being sent elsewhere, to even lower cost regions. (It was fun while it lasted.)

Notice the numbers: 2 million jobs in Ireland. By comparison, there are twice as many jobs within 30 miles of downtown San Francisco (all within walking distance of BARTD). Total employment in Ireland does compare favorably with some of our lesser populated Western States, such as New Mexico and Nevada. The Irish example may be a wonderful story, it might even last for a while longer, but how does that apply to places like Indonesia and South Africa? The difference of scale (quantity) indicates a difference of strategy (quality). Ireland might have benefitted from the outsourcing of a million jobs and a few billion dollars from the First World. But, that's not a large sacrifice in the First World (although it has caused a lot of screaming). I believe it unlikely that the First World will willingly tolerate the export of the 50 or 100 million jobs, and the tens of trillions of dollars, it would take to bring about a similar "miracle" in Asia (not including China and India).

While Friedman sneers at Old Europe, he overlooks the fact that Old Europe contributed mightily to Ireland's well being. The United States has a Rust Belt because of outsourcing. The flight of capital has already caused major problems for the lowest classes of First World countries. So, is globalization a la Friedman the answer for Poland, Romania, Burma, Kenya, etc? Maybe, for a time. But, as I pointed out in "Econolitics," outsourcing may be creating a bunch of Potemkin villages which are unsustainable when the tourists go home.

There can be no doubt that people in Ireland and Bangalore are doing better than ever. Probably a lot of people in Eastern Europe are doing better as well. I don't begrudge Friedman's celebration of that success. However, those stories cannot be models for every poor country, as the particulars show that globalization only works on restricted populations in regions with high education and other desirable features. I haven't heard of it helping anyone in Uganda, Rwanda or Burundi. And, globalization isn't helping the millions of Americans, Old Europeans and Japanese who lost their jobs and their way of life, maybe forever. While globalization has helped millions of Chinese, most of what drives China is the strong, nationalist government in Beijing. Beijing's socialist policies have helped hundreds of millions, even if there are hundreds of millions still left in the lurch. In the vastness of China, globalization is a summer's grasshopper.

Tom Friedman tells us heart-warming anecdotes about a few Horatio Algers, but anecdotes do not prove cases or serve dinner for Oliver Twist. They are just anecdotes.

I am particularly offended by Friedman's advice in the penultimate paragraph, putting it in the mouth of "Ireland." It amounts to the Bandit program, the program of the ultra-capitalists: "Don't Worry, Be Happy;" just do what you are told. I think it is pretty clear that Tom Friedman is not a liberal, even if he still believes that of himself. He is aligned with the Bandit on Iraq, the Middle East and globalization, the gigantic issues of our time, even if he thinks differently on some domestic issues. Most of what Friedman writes these days puts him squarely in the neo-con camp. I wouldn't worry about any of it, if only Friedman would confess his true allegiance. It's the masquerade that irritates and infuriates.

So, how about it Thomas L Friedman? How about a simple declaration of your standing? For example, you could just register Republican. Then, we would all know where your sympathies lie. But, then, I and others would dismiss you, and probably your book sales would drop off a cliff.

From the New York Times ...