The Wind of the Hundred Days: How Washington Mismanaged Globalization by Jagdish Bhagwati

From the Publisher

In The Wind of the Hundred Days, a new collection of public policy essays, Jagdish Bhagwati applies his characteristic wit and accessible style to the subject of globalization. Notably, he argues that the true Clinton scandal lay in the administration's mismanagement of globalization—resulting in the paradox of immense domestic policy success combined with dramatic failure on the external front. Bhagwati assigns the bulk of the blame for the East Asian financial and economic crisis—a disaster that prompts him to use as his title the poet Octavio Paz's image of devastation "I met the wind of the hundred days"—to the administration's hasty push for financial liberalization in the region.

The administration, Bhagwati claims, has also mishandled the freeing of trade. The administration-hosted WTO meeting in Seattle ended in chaos and the launch of a new round of multilateral trade negotiations was dashed. Bhagwati shows how the administration's failure to get Congress to renew fast-track authority can be attributed to an unimaginative response to the demands of a growing civil society. In several essays, he shows how free trade and social agendas both could have been pursued successfully if the concerns of human rights, environmental, cultural, and labor activists had been met through creative programs at appropriate international agencies such as the International Labour Organization instead of the WTO and via trade treaties. Bhagwati also criticizes the claim that "globalization needs a human face," arguing that it already has one. He faults the administration for embracing unsubstantiated anti-globalization rhetoric that has made itsown preferred option of pursuing globalization that much more difficult.

Product Details

• Table of Contents
• Interviews & Essays

Table of Contents

Interviews & Essays

Jagdish Bhagwati is the Arthur Lehman Professor of Economics and of Political Science at Columbia University and the Andre Meyer Senior Fellow in International Economics at the Council on Foreign Relations. Professor Bhagwati graciously provided time to Barnes & Noble.com's Academic & Scholarly editor, Gregory Tietjen, for an interview conducted via email in the second week of January 2001.

Barnes & Noble.com: Professor Bhagwati, you studied with brilliant teachers, among them Joan Robinson, Paul Samuelson, and Robert Solow. You in turn have helped prepare students who today are renowned international economists, Paul Krugman being only the most prominent among them. Could you describe a few of your treasured memories as a student and a teacher? When teaching, do you think of yourself as belonging to a tradition of economic teaching?

Jagdish Bhagwati: I had the great fortune to be a student at Cambridge (England) and Cambridge (MIT) when both universities had some of the greatest economists of their time on their faculties. Joan Robinson, Nicky Kaldor (later Lord Kaldor), and Harry Johnson (who moved to Chicago) were the superstars in Cambridge, England; and the mercurial Paul Samuelson, Robert Solow, and Franco Modigliani, all later Nobel Laureates, were at MIT. You could not have asked for more as an economics student: just to have had one lot would have been a great fortune indeed!

I turned to economics even though I came from a family of distinguished judges -- my father was on the Indian Supreme Court, and my eldest brother went on to become India's chief justice -- and was persuaded to keep term at Lincoln's Inn to possibly become a lawyer. I was saved from that cruel fate because I was seduced into economics by the great economists in Cambridge instead. That was the reason I abandoned the study of law, though I often say that I chose economics because the food at St. John's College, Cambridge, was less atrocious than that at Lincoln's Inn (where one had to keep term by eating dinner a certain number of nights a term)!

As a teacher, my joy has been that I have brought up a most remarkable generation of young international economists today. Paul Krugman, Gene Grossman (who holds the Viner Chair at Princeton), Robert Feenstra (who oversees trade research at NBER, the premier research body in the world) are among my best MIT students; Douglas Irwin and Donald Davis are among my best-known and world-class students from Columbia. They and many others turned up at a festschrift held on my 60th birthday at Columbia: I was overwhelmed by their attendance and their affection.

Yes, it was a reflection of nearly 40 years of teaching where I had given of myself to nearly all of the best international economists of the generations that followed my own, entirely in keeping with the affection and stimulus I had been given by my own galaxy of teachers.

B&N.com: Is it fair to describe disputes among economists of different schools as disagreements over concepts that are, by nature, essentially contestable? To curious observers on the sidelines, it can sometimes seem that the professional disputes of economists engage questions as basic as what economists will acknowledge as economic activity. That's to say, economists often appear to be divided not only by rival interpretations of a given body of evidence but -- even more fundamentally -- by disagreements over what's to count as economic activity or as relevant economic evidence. Just how deep do disagreements among, say, Keynesians and Marxists and monetarists go?

JB: It has been aptly said that politicians arrive at consensus by obfuscating differences, economists by sharpening them. We arrive at mutual understanding of our differences by analyzing and observing that we (implicitly or explicitly) use different models and, when using the same models, we use different parameters. Often, the model/paradigm differences can be the most important: Witness the differences among monetarists and Keynesians, for instance. As for differences in parametric assumptions, consider the differences that arise concerning the efficacy of income tax cuts in raising revenue because of different views as to the size of response of work and also of evasion, to better tax incentives. Again, economists divide over policy prescriptions because of the differences in their assumptions concerning governments: conservatives believe that while the invisible hand of markets fails sometimes, the visible hand of intervention will make things worse, whereas liberals allow far more for the possibility of welfare-enhancing intervention.

B&N.com: In the recent national election, Ralph Nader and Pat Buchanan ran challenges -- from the left and from the right -- to the Democrats and Republicans. Both men, despite their obvious political differences, share an antipathy to capitalism and free trade. You have debated Nader. What alternatives, supportive of capitalist economies and free trade, can you suggest to Nader's progressive supporters that speak to their desires and fears?

JB: I have debated Ralph Nader twice, once at Cornell before several hundred students, and once at Seattle at the Town Hall during the Seattle debacle of the WTO in late 1999.

I believe that Nader is a great man who alerted us to the dangers of unregulated corporate behavior in his famous book, Unsafe at Any Speed. But, while he raises some good questions about free trade and the WTO, he is fundamentally misguided about both, the fault lying more with his chief lieutenant on trade, Lori Wallach, whose writings on the WTO and trade are astonishingly misinformed, whether wittingly or unwittingly, and intellectually weak. Just as presidents and prime ministers are often as good or bad as the advisers they pick, so are NGO leaders like Ralph Nader.

I have written in my new book, The Wind of the Hundred Days: How Washington Mismanaged Globalization, that the Clinton administration and Democrats generally have surrendered themselves to the destructive and populist anticapitalist and antiglobalization rhetoric, repeating mindlessly the phrase that "Globalization Lacks a Human Face" when there is a lot of evidence that it indeed has one. Economic globalization in the form of increased openness to trade and to direct foreign investment -- gung-ho opening of countries to globalization in form of short-term capital flows is a different matter and has been very problematic, as I have argued for decades now and which became plausible after the East Asian financial crisis -- has helped many poor countries to achieve prosperity and thus to attack poverty more effectively than the decades of stagnation that afflicted many of them while they were wedded to autarkic attitudes of the kind that afflict many young agitators today. Successful integration into the world economy on those dimensions has been helpful, not harmful, for prosperity and for advancing the welfare of the poor in the poor countries. One can only wish that the Clinton administration had forcefully argued this, based on plausible evidence, instead of rolling along with the antiglobalization critics and then moaning and whining about the failure to get globalization going at Seattle, etc.

I also argue in my book that, indeed, it is possible to share the enthusiasm of several NGOs to advance moral and social agendas, but without buying into the untenable thesis that economic globalization is the problem rather than a principal component of the many-faceted solutions required. In short, globalization is itself a moral and social agenda, to go alongside the others.

So, I argue that we must push these other agendas through appropriate means. These agendas have come to the forefront because of the growth of civil society; that in turn must be the appropriate solution. We must use moral suasion, working with NGOs and CNN and appropriate international agencies, to get at the accelerated implementation of these agendas. So, I argue that we must go to the ILO and reform and strengthen it to get to the advancement of workers' well-being alongside what freer trade (pursued appropriately at the WTO) and equity investments promote as well. This case has never been properly argued by the Clinton administration; and in my view, it is generally unanswerable. Many intellectuals and economists, several in the Third World, accept it; but you would not know that by reading our own media or listening to many of our politicians.

B&N.com: Your writings in recent years have argued that Americans are deluded when we press "fair trade" claims on our trading partners, a claim pressed, of course, with particular frequency and vehemence against Japan back in the 1980s. Will you explain what you believe is at stake in the Free Trade vs. Fair Trade debate?

JB: The trouble is that fairness lies in the eyes of the beholder. Literally anything can be called unfair trade, thus encouraging trade restrictions, and has been by our lobbies. Thus, when many of our industries could not compete with Japan in the 1980s and saw it as a great threat, what I have called the "diminished giant syndrome," we started bashing Japan as an "unfair trader." We even objected to their high savings rates, to their domestic retail distribution systems, indeed to over 200 domestic practices and institutions we deemed instances of "unfair trade," and demanded that Japan be reorganized along our economic and social lines or else we would slap on retaliatory tariffs. Many demanded, on the other hand, import targets to be accepted by Japan, a demand that the otherwise insightful journalist James Fallows embraced and which was widely canvassed by the MIT economist Rudi Dornbusch and, in his footsteps, by Patrick Buchanan (in a milder version!).

The Clinton administration bought into this dangerous rubbish in the first term, leading to the failed Hosokawa-Clinton summit and the fiasco over our war with the Japanese over autos where we had to settle for virtually nothing while pretending that we had won. I have detailed all this in my earlier essays, A Stream of Widows: Unsettling Reflections on Trade, Immigration and Democracy.

B&N.com: Back at the end of 1997, when the Thai baht was in freefall and trouble was spreading across East Asia, Secretary of Treasury Robert Rubin characterized the East Asian crisis of 1997-98 as the severest challenge the financial markets had faced in fifty years. More recently, you've written that the East Asian downturn was the "the worst man-made economic crisis" since the Great Crash of the late 1920s. You charge the Clinton administration specifically with botching the handling of trade issues and the international economy, precisely areas where Clinton's harshest critics have been grudgingly inclined to credit him with real accomplishments. What do you imagine the lasting legacy of Clinton's economic policies will be?

JB: The administration helped cause the crisis by pushing for hasty and imprudent financial liberalization. This is now widely accepted though it was a heatedly contested view when I wrote about it first, principally in Foreign Affairs (Chapter 1 of The Wind of the Hundred Days) but in many other places as well. That the Rubin-Summers team, with assistance from Greenspan, managed the crisis well is both true and beside the point: Magazines such as Time have forgotten in their handing out kudos to this team for able crisis management that they helped cause the crisis in the first place!

As for trade policy, can anyone seriously deny that the Clinton administration messed up the Seattle WTO meeting in 1999, and aborted the planned launch of WTO's first multilateral round trade negotiations? Get away from the apologists in Washington for the administration, travel around the U.S. and certainly around the world, and you will see that the compliments handed to the Clinton administration on trade policy are not shared widely.

History will judge the Clinton administration's foreign economic policy record, once distance has been gained from the partisan politics of the moment, as a dismal record. This is not to say that the administration was a total failure: It just fell terribly short of what it could have done and of what was necessary.

B&N.com: Last year in Seattle, critics of the IMF and the WTO virtually brought trade discussions to a standstill. Are foreign critics of globalization correct to suggest that globalization is really a code word for Americanization? What are the strongest arguments put forward by globalization's critics? During the later '90s, Tom Friedman of The New York Times became a prominent and ardent champion of globalization. You've criticized Friedman's book The Lexus and the Olive Tree. Would you agree with Friedman, however, that, on balance, globalization is a stabilizing force? Or do you believe that the energies of globalization are working to destabilize the world? Or is it still too soon to render a verdict?

JB: I believe that it is a mistake to think of "globalization" as being synonymous with "Americanization." You can integrate into the world economy and still have domestic policies which are different from those of your trading partners: The EU nations have retained far more of their welfare state apparatus despite postwar globalization than you might think.

True, as I note in my book when discussing trade and culture, other nations often think of American culture as a threat, whereas we do not think of their cultures as a threat. Partly this is because we are a country of immigrants, and like India, which has over its long history assimilated many cultures, we take in other cultures freely. At the same time, we produce the ideas, economic and political, that spread throughout the world, in terms of both low culture (e.g., McDonald's) and high culture (women's rights, for instance). The former is assimilated more readily than many think, and the burning of a McDonald's in France by Monsieur Bove is nothing but a cynical attempt at exploiting rampant anti-Americanism in France to effectively set up new roadblocks against agricultural liberalization. As for high culture, it does produce intense reactions from feudal and hierarchical societies: So much the better!

In my view, little of this diffusion, at least of high culture, depends critically on economic globalization: Thanks to CNN, movies, education etc., our ideas, with their inherent appeal because of their being based on egalitarianism and dignity of the individual, spread readily.

I did object to Tom Friedman's exuberance about the technological determinism that would make everyone bend to the winds of economic globalization. Economic globalization has been slowed down by an outbreak of protectionism, for example, in the past. Friedman was not allowing for the possibility that antiglobalization forces could throw sand into the gears, perhaps even the tank, of the globomobile. If we believe (economic) globalization is a powerful force for well-being, then we will have to work hard at it: there is no easy ride here.

And that is exactly what I have been doing, and what my writings in favor of it have been about, as you can see particularly from the last section of my book where I take on the fallacies of the antiglobalizers as toughly as I can and as is necessary.

B&N.com: It seems curious that over the last generation economic historians and economic theorists appear to have run in opposed packs. Why is it that the critics of capitalism and free trade are usually found in the ranks of the economic historians and journalists? And why is it that it's the economic theorists who insist on the merits of free trade and capitalist economies? Is there a methodological split at work that separates the "literary" journalists from the "number-crunching" scholars? Can men and women who haven't mastered their algebra do solid work in economics?

JB: I do not think it is true that economic historians are protectionist or antiglobalizers. The best young ones in the U.S. today, Doug Irwin and Barry Eichengreen, are in fact staunch defenders of free trade; just read Irwin's highly successful Princeton book Against the Tide.

Journalists are another matter. The Economist and the Financial Times do not tilt in favor of antiglobalization, for instance. Nor do The New York Times and The Wall Street Journal. The only ambivalence in the U.S., especially in the liberal press, comes from indulgence towards street theater against globalization. Interestingly, you see this indulgence when the street theater is against the WTO or the Bretton Woods institutions: The newspapers and TV are then full of it. But when it came to the chaos sought by similar groups at the political conventions in this election, much of it was shut out from the media, relegated to obscure C-Span showings and inside pages of the leading newspapers. Why this asymmetric treatment? It reminded me of the story of the Israeli who was asked during the Soviet days: How many children do you have? Three sons, he answered. What do they do? Oh, the first one is in Moscow, building socialism. The second one is in Warsaw, building socialism. What does the third son do? He is in Israel. Building socialism? The Israeli exclaims: What the hell do you mean? That is our own country!

So, glorifying the "battle of Seattle" is wonderful; but glorifying the chaos and protests at the conventions: Why, that is simply not kosher, it is our own politics!