never be cut so drastically that they can compete with low-wage countries.
Because a large section of the population in the West remains underqualified
(there are, by the way, huge differences between countries: the UK, for example,
is much worse off in this respect than Germany), we will ultimately be dealing
with increasingly greater differences in income and, possibly, the rise of a social
underclass.
Scenarios for the future
In this connection, Reich has sketched three scenarios for the future. He calls
the first zero-sum nationalism. The assumption is that there are only two out-
comes possible in economic warfare: either we win or they win, so we had
better make sure that we win. Countries therefore close their eyes to globalization
and try to protect and improve their own position. Government subsidies for
deteriorating industries and a renewed interest in protectionism are the hall-
marks of this scenario. Obviously it will be the routine production workers and
in-person service workers and their representatives (for example trade unions)
who will be particularly keen on this option. This course of action will, how-
ever, be of very little benefit to companies and investors, meaning that in the
long term this scenario will simply not be sustainable.
The second scenario is cosmopolitanism, in which the ideal of free trade is
championed. This is not a zero-sum game: the world as a whole can improve
through free trade. By making products where they can be made most cheaply,
we all benefit in the end. The major advocates of this scenario will often be
symbolic analysts. After all, they have nothing to lose in such a world order; in
fact, they will be the big winners. According to Reich, this is the attitude that
will most likely determine the future.
Neither of the scenarios described above is ideal, but according to Reich there
is yet another option: positive economic nationalism. The crux of this idea is that
‘each nation’s citizens take primary responsibility for enhancing the capacities of
their countrymen for full and productive lives, but also work with other nationals
to ensure that these improvements do not come at others’ expense’. Nationalism
as seen by the zero-sum nationalists and individualism as advocated by the cos-
mopolitans are traded in for globalism. This scenario combines a pious belief in the
benefits of free trade with arguments for some form of government intervention.
Governments should invest in education and infrastructure, and they should even
subsidize companies that offer high value-added production in their own country,
regardless of the nationality of the company owners. To prevent a situation in
which countries bid against one another to attract certain companies, they should
instead negotiate with one another on the appropriate subsidy levels and targets.
The result, according to Reich, would be a sort of GATT for FDI establishing guide-
lines for the way in which countries are allowed to grant such subsidies. Countries
with a large unskilled labour force, for example, would be allowed to offer bigger
subsidies than countries which already possess high-tech facilities and expertise.
Ultimately more people would be able to share in the prosperity.
The International Division of Labour 27