LABR 601: Labor & Globalization

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LABR 601: Labor & Globalization

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9/19: Free Trade, Full Employment, and the Global Division of Labor

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    Post a roughly 200-word reaction to this week’s readings (available as links on syllabus) by the end of Monday before class. Your post need not be a synthesis of all the readings, though it certainly can be. Other options include writing a critical response to just one or a couple of the readings, a reflection about something that the readings made you think about more deeply, several discussion points or questions that you’d like us to take up in class, or some other way of organizing your thoughts more before we meet.


    In Path Persistence, Isabella Weber explains how the neoclassical “convergence theory” has not born out empirically in the development of global capitalism; rather, a pattern of “path-dependence” is more likely to explain the development, or lack thereof, of a country. The former would have us believe that unimpeded movement of capital across national borders will enable the specialization of national markets and subsequent development of national industries. Instead, the author’s research has shown that a country’s ability to develop industry beyond the cultivation of agricultural commodities is correlated with whether or not that country was industrializing at the beginning of the modern expansion of capitalism at the beginning of the 20th century. 


    This is honestly not surprising, given the history of the IMF and World Bank in forcing “developing” countries to bend to advance of liberal democracy. Any notion of development of national industry that would enable diversification of exports, through the use of tariffs, or nationalization of industries, including what we think of as “utilities” in the United States, has been challenged by international financial institutions. Essentially, underdeveloped countries need foreign currency, or historically Dollars, Pounds, Francs, to purchase industrial production goods from “developed” countries. To get foreign currency, they have to sell raw materials, at a bargain price, to industrialized countries, i.e the global north, imperial core, whatever you want to call it. Following WW1, the United States was in a prime seat to lend dollars to Europe, just for them to spend it back into the US economy by purchasing capital goods. Following WW2, the newly industrialized USSR was also in a position to sell capital goods to the underdeveloped world, hence the Cold War.


    This week’s reading reflect on the challenges, advantages and disadvantages countries face when trading and producing goods. Anwar Shaikh’s critique talk about free trade and the theory of neoliberalism with the advantage for some countries versus the disadvantages that can cause job loss in one country but another job gains. Shaikh also talks about imbalances that can arise from competition from imports and exports from two nations in price range. Shaikh uses the analysis of a trade deficit of goods sold abroad by its exporters having less value than golds sold domestically by its importers. For the imbalance to be corrected, foreigners will buy exporter cheaper and more and domestic imports be more expensive and purchased less.

    Stephanie Luce’s article discusses free trade and issues if tariffs are imposed along with the benefits. Free trade allows countries to trade with barriers or tariffs. Donald Trump wanted to impose tariffs to create jobs and have more economic development; however, Luce state that it can backfire and impose countries to have retaliatory measure. She states there are better options like raising the taxes on the rich, public investment in education, reform labor laws, instituting universal health care, free education and real investment in bridges and tunnels. Luce argues that solidarity instead of competition between countries can build creation of jobs and growth of all economies. If all countries can come together with agreements without competition and wanting power then the world may become more economically stable.


    The Economic Mythology of Neoliberalism appears to be a critique of neoliberalism, which advocates unrestricted global trade as a solution to global poverty and economic development. It presents the Neoliberal theory that free markets are optimal and self-regulating, and they can efficiently fulfill economic needs and create full employment if allowed to function without restraint. It also points out that Neoliberalism attributes poverty, unemployment, and economic crises to constraints placed on markets by factors like labor unions, government intervention, and cultural and historical practices. The text also mentions that proponents of neoliberalism argue that expanding global markets is the key to alleviating poverty worldwide. This argument has been shown as flawed, yet neoliberalism continues to hold significant influence in social sciences, popular understanding, and policy circles. Neoliberalism keeps suggesting that, with the help of international institutions, competition can be extended globally, and free trade will eventually deliver its promised benefits. Shaikh’s challenge to the economic mythology of neoliberalism is fascinating, the emphasis of the flawed assumptions that international trade leads to global development and poverty alleviation, and that instead a more comprehensive social agenda is needed to address the complex issues of global inequality and economic development.

    Stephanie Luce, “What’s the Deal with Tariffs?” is a critical perspective on Trump’s approach to tariffs and trade, suggesting that while some of his policies may resonate with workers and address certain concerns, they may not comprehensively address the broader issues affecting the American workforce and the global economy. It raises doubts about the effectiveness of tariffs alone in saving jobs and calls for a more comprehensive and internationalist approach to economic development and worker well-being. The passage questions whether Trump is genuinely focused on worker rights or whether his push for tariffs and improved labor terms in trade deals is primarily driven by political considerations. The passage highlights that the promised large infrastructure programs to create jobs have not materialized and highlights the idea that tariffs need to be accompanied by domestic investment. Tariffs also do not address unregulated cross-border financial flows and the erosion of environmental and labor protections.


    I thought a helpful framing in Path Persistence of the two waves of globalization — the first is tied with colonialism and the second with neoliberalism. The first wave was categorized by literal slavery and the creation of economic dependency on the world market. The rhetoric of neoliberalism, addressed in Shaikh’s critique, is about the “equalizing” nature of free trade. He clearly walks us through how free trade doesn’t equalize, but gives the strong even more of an advantage. The theory of path dependence traces that advantage back to the first expansion. Luce’s reading on tariffs also raise the question — what do we do now? Unions have lobbied for tariffs on certain goods, but has that created jobs? Luce presents that a small tariff is basically free trade. She also shows how tariffs can be used as retaliation, like for “enemy” countries like Cuba. Where does this leave us? How do workers have good lives across the world when the globalized economy puts even more downward pressure on wages, especially in poorer countries?

    Matthew Brunner

    Neoliberal theory is built on unconfronted assumptions, many of which Anwar Shaikh is able to draw out. There is the assumption that countries will always have competitive industries, the assumption that there will be job-creation to offset job-loss, and most fundamentally, the assumption that weaker countries will benefit from international markets even though weaker businesses do not win within domestic markets.

    Although the theory of neoliberalism emerged in the 1980’s, what Isabella Weber calls the start of the second era of globalization, the better-position of rich countries began a century earlier in the first era of globalization.

    In this era, better positioning was created through the export of manufactured goods from industrial nations, and the cheap export of raw materials from developing nations controlled by colonial powers.

    It appears then that neoliberalism is not a way to level off the imbalance of jobs, technology, and raw materials throughout the international market among different nations, bur rather it is a way to maintain a better economic positioning by earlier industrial nations, and to strengthen their stance against and control over weaker nations.

    Shaikh demonstrates that market-surplus leads to more available credit and lower interest rates, and market-deficit leads to tighter credit and higher interest rates—this sets the stage for poor countries to become persistent debtors and for rich countries to become their lenders, a powerful and controlling position to be in.

    Stephanie Luce adds to the idea that neoliberalism maintains the power of rich countries by showing how tariffs have been used by the early industrial nations to protect and grow their infant industries, but how the same protection was withheld from developing nations during the second era of globalization. Further, tariffs become used politically rather than economically.

    It appears, then, that the colonial-imperialism of Weber’s first era of globalization becomes a neoliberal-imperialism within the second era of globalization. Both are forms of power to subjugate and control one group to another. Whereas colonialism was bound by national borders, neoliberalism binds itself to class structure.


    Neoliberalism has developed a literal cult following. Any conversation regarding libertarian ideology often soon leads to the mistaken reverence in the divine nature of markets. I can see the appeal; it is oddly optimistic. All we need to do is get the authority out of the way and the market will behave in everyone’s best interest. And as a mediocre white man, it provides cover for the privilege we receive due to our cultural stature. We just made good decisions and were rewarded. It is not because our socio-economic status has shielded us from any real consequences.

    The readings this week really drive home the relatively weak footing the neoliberal ideology was always built. I find it odd that it always seems to be overlooked that free and open markets of the world always seem to be built through violence (i.e. Chile, Argentina, and Iraq to name a few). From Isabella Weber essentially proving national dynastic wealth, Stephanie Luce elucidating on the hypocrisy of American foreign trade regarding the economic tools used to advantage US corporations, to Anwar Shaikh enumerating the myriad of ways those with power manipulate “fair competition” and open markets, the compassionate façade created for the justification of neoliberalism crumbles away. All we’re left with is the reality of a world that coerces those without means to exploit themselves for sustenance.

    Rebecca Ramnarine

    In Anwar Shaikh’s, “The Economic Mythology of Neoliberalism,”  the author criticizes the economic principles and policies associated with neoliberalism. Shaikh’s essay critiques the economic myths associated with the theory of neoliberalism, emphasizing that these myths often do not align with the realities of economic and social outcomes, which we can see depicted in the real world economy in the US today. Shaikh argues for a more balanced approach to economic policy that considers the complexities of the real world.

    In Stephanie Luce’s, “What’s the Deal with Tariffs?”, the author discusses the concept of tariffs and their implications. Luce begins by explaining what tariffs are and how tariffs are used in international trade which was very informative. Luce expresses concern about the potential for tariffs to escalate into trade wars. When countries impose tariffs on each other’s goods, it can lead to retaliatory measures and disrupt global trade.

    In Isabella Weber’s, “Path Persistence”, the author discusses the two periods of globalization and presents a comparison of important factors in both, including countries productivity. The author makes a comparison between the type of slavery that existed in both periods of globalization and its impact/relationship with capitalism.


    One of the main threads between the three readings is the idea that in a free market global economy, rich countries will consistently have the advantage of profit and power, whereas poor countries will be the least competitive. Shaik clearly explains how this oposes the neoclassical theory of comparative cost advantage, which argues that neoliberalism will inevitably bring balance to the market. However, Shaik argues that this has not been the case, and that there are factors that ensure that international hierarchy persists in a free market. For instance, Shaik refers to the theory of real competition when he argues that international trade will benefit the countries with the lowest real costs, which means that they have the lowest cost in wages and high levels of technology and easily available natural resources lower costs. Shaik continues to outline how rich countries have historically achieved these lower costs. Similarly, Weber highlights the importance of understanding the path-dependence of productive capabilities to understand that the countries that have more productive capabilities to begin with, the more productive capabilities it can develop, providing them with a historical advantage. Lastly, it was very interesting to read Luce’s article in that context, especially as she presents the alternatives to tariffs that can be demanded by the labor movement and/or proposed by the left in the United States. Ultimately, talking about tariffs in the Global North has a very particular nationalist connotation that neglects the struggles of workers impacted by neoliberalism in the Global South. This makes me think that it is important to be aware of the internationalist perspective and dynamic in all of our aspects of out organizing and social movement work, because our struggles are globally interconnected.

    Katie Levitt

    This week’s readings present three different but complementary angles of the development of the global economy. Weber compares what she defines as the two periods of globalization to show the correlation between highly developed economies in the colonial era with the continued dominance of these nations in the post-industrial age. Luce explains how tariffs, now anathema to neoliberal free trade, were policies once used by European and North American countries as a tool for economic development. And Shaikh argues against neoclassical and neoliberal theories of free trade – that market competition does not regulate itself and instead is the cause of global poverty.


    These arguments all complement one another. Luce points out that the export and sale of raw materials has a lower profit margin than the export and sale of manufactured goods. A country with diverse productive capabilities is able to diversify its exports, growing its economy, and its productive capabilities increase exponentially. Economic complexity today is a result of historical productive capabilities and how countries have been situated in the global economy, and other commonly referenced drivers like economic liberalization, human capital, and the quality of institutions (i.e. strong property rights and liberal representative democracy) are less important. Neoclassical and neoliberal economists alike embrace competition, which definitionally requires the elimination of weaker firms (often those with higher costs,) but refuse to acknowledge the ill effects of this market function.


    Shaikh also illustrates how the theory of real competition explains the cumulative effect of colonizer/developed nations’ continued domination over the global economy. A trade surplus in a nation creates a greater availability of credit, which pushes down interest rates. Profit-seeking capital is attracted by the low interest rates, which creates further investment in a nation with a trade surplus, while capital avoids nations with a trade deficit and high interest rates. The surplus country becomes a lender in the global economy, while the deficit country becomes a debtor.


    So far I synthesized one article (Shaikh) but read all three. However, I compiled a question for each of the three articles.

    1. Can we visually break down the logic of standard free trade theory and real competition on an international scale in class? I struggled to see them in my mind’s eye. (Shaikh)
    2. Can we discuss the convergence hypothesis? (Weber)
    3. Can we please discuss the general idea of tariffs to develop infant industries until they grow large enough to compete on the global market? (Luce)

    Below is my collage of Shaikh’s most authoritative claims, except for those made in two sections mentioned in question 1. This collage uses Shaikh’s own words so I do not consider it my own.

    Neoliberalism dominates modern globalization. The conception has enormous authority and continues to be a major influence in the social sciences, in popular understanding, and most of all, in policy circles.

    Its practice is justified by a set of theoretical claims rooted in standard economic theory. The theoretical claims has two axioms. The first claim is that if markets were allowed to function without restraint, they would optimally serve all economic needs, efficiently utilize all economic resources and automatically generate full employment for all persons who truly wish to work.

    The second axiom of neoliberalism claims that successful globalization requires the creation of ‘market-friendly’ social structures throughout the world: by curtailing union strength so that employers can hire and fire whom they choose; by privatizing state enterprises so that their workers will fall under the purview of domestic capital; and by opening up domestic markets to foreign capital and foreign goods.

    Free trade is the rationale for neoliberalism. The rationale for neoliberalism rests on the orthodox theory of free trade, whose central claim is that competitive free trade will automatically benefit all nations.

    Neoliberalism proponents claim that in sufficiently competitive conditions free trade would work as promised (benefit all nations). They claim that free trade has never been enacted in true form because markets have always been restrained and the reason that some states are undeveloped is because free trade has not been able to truly function. Shaikh argues that competition itself produces underdevelopment alongside development, poverty alongside wealth, unemployment alongside employment.

    Trouble in paradise. When economists discuss competition within a nation, they are clear that it rewards the strong over the weak. Yet when these same economists discuss competition between nations, i.e. international trade, they abandon their previous theory and substitute a different one. Whereas competition within a country is said to punish the weak and reward the strong, competition between countries is said to fortify the weak and debilitate the strong. On another note, a significant number of economists argue that capitalism produces no automatic tendency towards full employment, even in the advanced world. This has long been the foundation of Keynesian and Kaleckian analysis.

    Neoliberalism claims that free trade is the best way to foster economic development. But its doctrine is premised on the faulty notion that international competition levels the mighty and raises up the weak. Real competition operates quite differently: it rewards the strong and punishes the weak. From this perspective, the neoliberal push for unfettered free trade can be viewed as a strategy that is most beneficial to the advanced firms of the rich countries.

    Kevin Wilson

    This weeks readings highlighted the fact that any economic development whether for an individual or a country is a complicated subject and comes at a cost. It is a fact that we live in a world which is characterised by enormous wealth and widespread poverty for both individuals and countries.

    Hence, in order to achieve the so-call win, we need to create a platform where the individual or the country is expending less than they take in. For example, Dr. Stephanie Luce in her article, “What’s the deal with Tariffs?”, pointed out what is known as the concept of socially-necessary labor time, or the average amount of labor time needed for a worker to produce a good for exchange. Should the worker spend more time manufacturing a product where their return is less? Common sense would say no.

    Should countries striving to achieve more productive capabilities in the world market pay attention to their export and import as it relates to their prosperity? Isabella Weber in the article, Path Persistence pointed out that “the more productive capabilities a country has, the more things it can produce competitively and hence the more diverse its exports.”

    All three articles points to the fact that in order to address the widespread disparities between the ‘have’ and the ‘have nots’, whether it be an individual or a country, we must exercise what Shaikh in Neoliberalism stated we needed to collectively do, ‘the object should not be to level the playing field, but to bring up the levels of the disadvantaged players.’

    How else can we achieve the improvement of these players up the economic ladder? Competition via a free market or no free market?



    Shaikh defines successful globalization as the establishment of a “market-friendly” around the world in social systems by way of weakening unions, privatizing state-owned enterprises and by opening domestic markets to foreign capital and goods. It was interesting to see how Shaikh put into words how free trade and the unrestricted global trade between nations will always favor the richer countries over the poor countries. Forced competition is what creates poverty, unemployment, and underdevelopment in developing nations that didn’t have the productive capabilities in their rates of economic growth as opposed to the Western countries. Weber showcases that Europe and North America had held their dominance in their rates of economic growth even after decades of deindustrialization. In Figure 1, countries like Venezuela and Cuba, it shows a decrease in export diversification. It also shows that countries that were colonies in the 20th century had actually fallen behind in the 21st century. I think ti could be explained by colonial powers like the United States enforcing not only blockades but also imposing neoliberalism in the Global South by coups and toppling over democratically elected governments (such as in the case of Chile).

    Ryan M

    I really liked the article written by Stephanie Luce on tariffs and free trade. I have had this idea that policies like the North American Free Trade Agreement (NAFTA) were bad because they were often talked about in articles I have read before that discuss the period of neoliberalism in the US and ways in which working-class power has been undermined. However, I never understood much about how free trade policy worked. It seems like free trade is another policy that uses deceiving and virtuous-sounding language to appear fair when in reality it creates barriers and specifications to trade, to benefit the business class, rather than reducing them.


    The large variation in tariffs on products that are super similar to each other is telling. However, beyond this, free trade can be used to stop countries from developing their own industries, thus making them more reliant on American products. This undercuts foreign workers, and in the case of Mexico, American free trade policies limited the options of Mexican agricultural workers to the point that they were incentivized to immigrate to America. This is an interesting dynamic to me because the article talks about how tariffs and free trade agreements are often policies that politicians use to drum up support from domestic workers who were severely affected by job insecurity due to the rise of globalization, immigration, and the offshoring of jobs, especially autoworkers. But seeing as these agreements do not seem to be bringing many domestic jobs, it is interesting to see how some domestic workers are being misled into supporting very similar policies to the ones that put them in a desperate financial position in the first place.

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