The Foreign Service Journal, April 2007

In addition to these initiatives, the public sector should follow sound economic policies to enhance com- petitiveness and productivity in sup- port of a high standard of living. With- out these things, sustained future pros- perity is unlikely. Other vital mea- sures include controlling corruption, which is an especially onerous tax on the poor, improving infrastructure and finding a balanced approach to regulation. Creative Construction The New Globalization approach recognizes the essential link between open economies and social supports for families dealing with a dynamic 21st-century economy. Open trade without these protections risks creat- ing a race to the bottom, increases fear of change, and can increase inequality. This can have negative consequences socially, economically and politically. The goal of the New Globalization is to maintain the benefits of an open and dynamic economy while giving people a way to cope with and pre- pare for change — to keep the pie expanding while ensuring as many as possible benefit from it. Under this paradigm, government is a partner that strives to maximize opportunity and lifetime employability. It is not a nanny state. While the size of the state should shrink (in terms of public-sector ownership, unnecessary subsidies, etc.), small government is not always the best answer. In fact, small gov- ernment can be detrimental, both politically and economically. The New Globalization recognizes the need to maintain economic growth and create a system that distributes its benefits widely to maintain politi- cal peace, economic competitiveness and support for globalization. In practice, this probably means a sig- nificantly larger future role for gov- ernment because the educational, health and infrastructural demands of a modern economy are much big- ger and more dynamic than in the past. Meeting those demands means more than just implementing good macroeconomic policy or having a competent “night watchman” state. It is capitalism with a human face. In order to win the arguments against opponents of free trade and open economies, supporters of glob- alization must address the concerns of those who fear losing from inter- national trade. If we do not, resis- tance to trade and openness could gain further strength, causing the Doha Round and subsequent negoti- ations to fail. This could lead to an unraveling of the trading system into a confusing snarl of bilateral agree- ments — or worse. If that happens, we risk losing much of what we have built over the last half-century. 56 F O R E I G N S E R V I C E J O U R N A L / A P R I L 2 0 0 7