The United States in the World Economy Making Sense of Globalization Anthony Elson The United States in the World Economy P B T A revious ooks By his uThor Governing Global Finance: The Evolution and Reform of the International Financial Architecture (2011) Globalization and Development: Why East Asia Surged Ahead and Latin America Fell Behind (2014) The Global Financial Crisis in Retrospect: Evolution, Resolution and Lessons for Prevention (2017) Anthony Elson The United States in the World Economy Making Sense of Globalization Anthony Elson School of Advanced International Studies Johns Hopkins University Washington, DC, USA ISBN 978-3-030-20687-1 ISBN 978-3-030-20688-8 (eBook) https://doi.org/10.1007/978-3-030-20688-8 © The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer Nature Switzerland AG 2019 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland To Dolly, My Lifetime Love, Wise Counselor and Delightful Companion P refAce This is the fourth book on economic and financial globalization that I have written over the past decade. Each of these books has evolved in some way out of my professional training and experience as an interna- tional economist, a career official of the International Monetary Fund (IMF), an economic consultant with the World Bank and a lecturer at Duke, Johns Hopkins and Yale universities. The writing of my first book, Governing Global Finance: The Evolution and Reform of the International Financial Architecture, began when I was teaching as the AGIP Professor of International Economics at the European Center of the Johns Hopkins School of Advanced International Studies (SAIS) during the period of the global financial crisis (2008–09). It reflected my attempt to understand the origins and evolution of the crisis and the defects in the international financial architecture that made it possible. That book tried to explain the financial crisis in the context of the evolution of financial globalization and the weaknesses in the interna- tional institutional arrangements (or “architecture”) of the post-World War 2 era that were designed to promote global financial stability. It was also intimately related to my experience at the IMF and the focus of teach- ing that I undertook at the Center for International Development of the Duke University School of Public Policy. My last book, The Global Financial Crisis in Retrospect: Its Evolution, Resolution and Lessons for Prevention, in many respects was an extension of my first book and provided a more in-depth analysis of the causes, effects and resolution of the crisis with the benefit of hindsight and the extensive analytical work that had been conducted in the decade since the crisis vii viii PrEFACE erupted. One of the outgrowths of that crisis has been a critical evaluation in the United States and other countries of the costs and benefits of glo- balization at the level of both analytical and political discourse that culmi- nated in the election of Donald Trump as President of the United States in 2016. This current book represents an attempt to identify and evaluate those costs and benefits for the United States, which has been a central force in the global economy and in the creation and evolution of the lib- eral economic international order that has underpinned globalization in the post-WW2 era. It is my view that the benefits of globalization for the United States have not been well understood and that its costs have been overstated in public debate, which has led to an anti-globalist stance in the current foreign economic policy of the US government that will impose long-term economic costs on the country. In the preparation of this book, I have drawn on and extended my thinking on topics of financial global- ization that I had developed in my two earlier books. The one book that does not fit within the sequence of books on global- ization that I have just described is my second book, Globalization and Development: Why East Asia Surged Ahead and Latin America Fell Behind. While related to the general topic of globalization, it focuses primarily on the contrasting development experiences of East Asia and Latin America and how these can be understood, among other things, in terms of each region’s degree of integration and engagement with the global economy. East Asia, as a region of successful development, has been very aggressive in linking its rapid pace of development to the goal of export promotion and integration with the global economy, whereas Latin America, by contrast, has traditionally been far more inward-oriented and less successful in achieving sustained development through the growth of its export sector. My interest in these two regions relates directly to my experience at the IMF, where for many years I was responsible for the management of the Fund’s macroeconomic surveillance and financial assistance operations with a number of countries in East Asia and Latin America. I first tried to distill the lessons of that experience by teaching a course on comparative economic development at Johns Hopkins SAIS that culminated in the publication of that book. In many respects, these four books represent my professional biography in that they cover a range of topics and themes that I have been interested in since the time of my graduate training at Columbia University, first as a student at the School of International and Public Affairs and then in the Ph.D. program in Economics at the Graduate School of Arts and Sciences. PrEFACE ix It was at that time that I developed my interest in the economic develop- ment of Latin America and learned about the unique and essential global responsibilities of the IMF and World Bank. While at Columbia, I was fortunate to have been selected as one of the first three summer interns at the IMF, which led to my entry as a career official and over time a variety of assignments and positions up to the deputy director level in both its country and its functional activities. As both a mandarin-style interna- tional bureaucracy and a professional group of economists, the IMF is an exceptionally strong and influential organization, notwithstanding its rela- tively small size (less than 3000 staff members) and wide-ranging respon- sibilities in macroeconomic surveillance, financial assistance, research, statistics, technical assistance and training. In the final stage of the preparation of this book, I wish to acknowledge the excellent assistance I received from Yang Liu, a graduate student in the M.A. program of Johns Hopkins SAIS, in the finalization of tables and figures for the book and for the answers he provided to a number of que- ries on which I needed specific responses in my final review of the book chapters. Washington, DC, USA Anthony Elson c onTenTs 1 The Benefits and Perils of Globalization 1 2 K ey Markers in the Global Integration of the US Economy 19 3 Trade Globalization and the US Economy 43 4 The Special Role of the United States in the Global Financial System 75 5 The United States as a Major Destination for Migratory Flows 111 6 The Impact of Globalization on Income and Wealth Inequality in the United States 131 7 Current US Economic Policy and the Outlook for Globalization 151 8 The Governance of Globalization: National and International Dimensions 173 xi