STOCKHOLM — The looming global recession has brought government intervention to save failing companies to the forefront of economic policy. British Prime Minister Gordon Brown recently warned U.S. President-elect Barack Obama against bailing out America's automakers, arguing that global competition has made their decline irreversible. A bailout, then, would simply delay the inevitable at a huge cost to taxpayers.
Such advice is always tough to sell — all the more so in the face of the worst economic outlook in 70 years. After all, according to conventional wisdom, global competition moves jobs to low-cost countries and puts downward pressure on wages everywhere else. As globalization intensifies and accelerates economic change, it affects the lives of ordinary citizens like never before, stoking popular fear. Little wonder, then, that French president Nicolas Sarkozy succumbed to the allure of protectionism during last year's election campaign, as did both presidential candidates in the United States.
But protectionism need not be the only alternative to fear of global competition. In the Scandinavian countries, as in the U.S., foreign competition intensified sharply during the past decade. China and India gained considerable economic power, and close neighbors in previously isolated communist states were rapidly integrated in the European economy.