What Globalization Has Wrought

A Low-Rent America Can't Be a Strong Friend of Israel

By J.J. Goldberg

Published November 10, 2011, issue of November 18, 2011.
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Germany and Scandinavia, for example, pursue social-democratic industrial policies to keep high-wage jobs at home. Corporate tax policies encourage in-country rather than off-shore production. Government invests in promising new industries like biotech and green energy, recognizing that occasional Solyndra-type failures will come with the territory. Firms are subsidized to keep workers on during downturns, with robust unemployment insurance and extensive job retraining to soften layoffs. Health care is covered by government instead of burdening employers.

Doing all that requires two things that America currently lacks: the will and the means. The means takes the form of taxes high enough and progressive enough to fund a decently functioning government and pay for those investments. The will come from a strong labor movement. America has the lowest union membership as a share of the workforce in the industrialized world. We also have one of the lowest tax rates, considering all taxes (federal, state, property, corporate, payroll), as a share of GDP. Lacking both the will and the means to do better, it’s no surprise that we have one of smallest manufacturing sectors and the second most unequal income distribution profiles. It makes for an angry, volatile, unstable electorate.

A few years after the Krugman-Greider dust-up, I heard Greider speak about the economy and the coming debt crisis. It was 2004. Among other things, he predicted that the hollowing out of the American economy would inevitably hollow out America’s power on the world stage. As an over-leveraged nation of financiers and burger-flippers, we would grow increasingly dependent on our creditors.

We chatted briefly afterwards about how the potential weakening of America’s global stature would affect Israel. Empires fall when they’re overextended, he said. A hollowed-out, low-wage, low-tax, angry, unstable America can’t be relied on as Israel’s friend and protector, he said. You should write about it.

The way I figure it is, he’s been right so far.

Contact J.J. Goldberg at goldberg@forward.com


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