Andrew Glyn Responds

Perhaps I was pushing at an open door when arguing, to an American audience, that the extent of economic globalization is frequently exaggerated and that the constraints to egalitarian policies in advanced economies are primarily domestic and political in origin. Only William Greider appears to disagree with this broad conclusion. He disputes the distinction between domestic and international constraints and attributes veto power over economic policies to an "international fraternity of wealth holders, investors, firms, and markets" (which sounds suspiciously like the capitalist class). His disheartening conclusion is that little can be done until we can reach agreements for progressive policies at a global level. I believe, by contrast, that there is space at the national level for egalitarian policies, provided the very important domestic constraints are tackled. As Dani Rodrik and Geoffrey Garrett point out, the variety of employment and distributive outcomes in European countries illustrate this very point.

Most of the comments center on what egalitarian policies should consist of and what constraints they face. Rachel McCulloch takes me to task for emphasizing equality of outcomes. Just this debate is now rumbling in Britain between Old Labour (left and right), which favors redistribution, and New Labour, which emphasizes equality of opportunity. But for the latter to have real substance it must surely extend beyond excellent schools for all (itself a formidable objective) to include measures that ensure all children grow up in material circumstances that facilitate their full development. If "welfare-to-work" policies really were successful in encouraging or forcing large numbers of welfare recipients into the labor market, this would exacerbate the problems at the bottom end of the wage distribution and further increase in-work poverty. I cannot see labor-market and welfare reform, plus some expansion of in-work benefits, as a convincing route to genuine equality of opportunity.

Thomas Palley offers an alternative, progressive form of "supply-side policies," arguing that government intervention in the fields of corporate governance, finance, and labor markets should be the prime focus. All these aspects of the economy are deserving of scrutiny and reform. But I am not convinced that if only capital could be constrained to behave properly, then other problems would look after themselves. Neglect of public services and increasing income inequality demands increased public budgets. A sustained period of high demand for labor, reducing hidden as well as open unemployment, would begin to tip the balance of power back toward labor and rekindle conflicts over distribution. Securing support for higher taxation and for real wage restraint are basic problems; I entirely agree with Geoffrey Garrett's argument that the major challenge is to devise a new and sustainable corporatism.

A number of the comments also criticize my proposals as based on old-fashioned Keynesianism. I do believe that demand has to be expanded and that public expenditure has to play an important role. But I ruled out large-scale deficit financing and advocated an expansion of public expenditure financed by progressive taxation. This can provide both additional work, aimed at communities where jobs are most needed, and improve the public services on which poor people particularly depend. I agree with Dani Rodrik that structural policies are also needed, but expanding demand surely provides the best context in which they can work.

The debate over European Monetary Union (EMU), to which a number of the comments refer, illustrates the themes of my article. The European economy as a whole will be less open to trade (with third countries) than individual countries were in the "golden years" of the 1960s. Some 70 percent of European Union trade is within the Union; more than half of all foreign-investment flows are to other EU countries. The Euro exchange rate with the dollar and yen will still matter, and multinational companies will still force concessions from workers or national governments by threatening to shift production. Nevertheless, the European economy as a whole will be significantly less internationally vulnerable than an individual country acting on its own. This underlines the benefits from a coordinated demand-management policy and a common approach to tax concessions for investment and regional grants.

On the other hand, EMU is likely to be created with the Maastrict criteria cemented into a "stability pact" severely constraining even the temporary use of budget deficits. Moreover, the new European Central Bank is likely to try to establish its credentials as a worthy successor to the Bundesbank by stamping on the least threat of an inflationary expansion. So the starting point within EMU is inauspicious for expanding employment. But where exactly does this excessive Euro-caution come from? Evidently not from fear about the international impacts of expansionary policies, which will be much reduced within EMU. The explanation is the same as that for the Bundesbank's present stance--namely, fear that expansion would founder on the fundamental domestic constraints, including above all distributional conflict. Overcoming these constraints at the European level poses a formidable challenge. But it will not be credible to blame failure primarily on globalization.