Arnold Kling  

Case for Globalization

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One of our comment threads discussed this essay by Kyle Markley that makes the economic case for globalization.


All significant economic change creates a disaffected group of people, people whose economic situation is threatened by economic change. Such people bear the cost of adjusting themselves to the new realities of doing business. These people see that they have something to lose, and naturally have a desire to preserve the existing order of things.

...A person who advocates free economic competition domestically must advocate free economic competition internationally, or be a hypocrite. A person who advocates protectionism in international affairs must for the same reasons advocate protectionism domestically, or be a hypocrite.

...In my judgment, American labor will see a net shift away from computer-related fields into all others (where there will now be a relative underproduction) but particularly into the biomedical fields.


One of the Internet entrepreneurs that I interviewed three years ago for my book was in the process of studying bioinformatics. Like Markley, he saw the wind blowing in that direction and wanted to catch the trend. Even though he was a computer programmer and not a biologist, he felt that he could adapt. He said, "It's just code, right?"

For Discussion. In the past, economic progress has created more winners than losers in the United States. Are there factors that could make things different today?


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CATEGORIES: International Trade



COMMENTS (10 to date)
mcwop writes:

>>For Discussion. In the past, economic progress has created more winners than losers in the United States. Are there factors that could make things different today?

Steve writes:

Yes:

Bad income distribution
Fewer chances at upward income mobility
No more motivation to work harder and learn more if you're just going to get knocked down again 1-2 years later.

Steve writes:

And we (AGAIN) are back at the intrastate vs intracountry trade protectionism argument.

How can you say they are the same when intra-country does not cause weakness in ones' currency, while inter-country does? How can you say they are the same when intra-country does not cause loss of tax revenue, while inter-country does?

JJ writes:

DPRK on Globalization:
http://www.kcna.co.jp/index-e.htm

Frustration of Imperialists' "Globalization" Strategy Urged

Pyongyang, December 17 (KCNA) -- The "globalization" strategy of the imperialists, the U.S. scheme of uni-polor world, is bound to go bankrupt, says Rodong Sinmun in a signed article today. It goes on:
The United States is resorting to arbitrary and strong-arm practices in the international arena in disregard of the United Nations, international law and the demand of the era, styling itself the "only superpower" and "leader" of the world. This throws a revealing light on the reactionary nature and danger of the "globalization" advertised by it.
The developing countries are suffering enormous damage from the imperialists' "globalization" moves.
The phenomenon of "the rich get richer, the poor poorer" is becoming more pronounced worldwide with the world being divided into capitalist countries getting richer and the developing countries poorer. The reactionary nature and injustice of the imperialists' "globalization" strategy have been proved by realities.
The developing countries should buckle down with a zeal to working out a correct strategy to cope with the imperialists' "globalization" scheme negated by history. The main channel to knock the bottom out of this scheme is for each country to apply the principle of independence in keeping with its specific conditions and thereby defend and develop the Juche character and national identity in politics, economy, culture and all other areas and build an independent society, a new world based on independence.
One of the important matters for the developing countries to free themselves from the clutches of the imperialists' "globalization" strategy is to expand and develop south-south cooperation and economic relations on the principle of collective self-reliance and increase their own competitiveness.

Gautam writes:

The weakness in exchange rates can be caused as much by poor saving habits at home, and easy money-low interest rate-expansionary monetary policies at home as much as by trade. You increase the amount of money at home, you decrease its value relative to the currency abroad.

Eric Krieg writes:

>>The weakness in exchange rates can be caused as much by poor saving habits at home, and easy money-low interest rate-expansionary monetary policies at home as much as by trade.

No argument there. That explains the dollar's recent fall.

But that does not explain the exchange rates of India and China. Both have very large internal savings rates.

Arnold Kling writes:

"The weakness in exchange rates can be caused as much by poor saving habits at home"

See http://www.techcentralstation.com/111803C.html
(The Balance of Saving)

Cap'n Arbyte writes:

Steve,

(Replying to both threads)

"Like I've said, I understand the theories. I just don't see why it's okay to stab your fellow man in the back instead of cooperating with him. Nor do I understand why people who make decisions on trade are people who are the least negatively affected by their decisions."

Freedom doesn't stab anyone in the back -- protectionism does. Protectionism would forbid your employer from hiring the workers it would like to. It would hurt the stockholders and would prolong the foreign worker's poverty. In the long run protectionism doesn't work anyway. Those educated foreign workers can either be employed by American companies or by competitors to American companies, but they *will* be employed. If you kept your job due to protectionism, you would lose it again when your employer found itself unable to compete with foreign companies with a lower cost structure.

There is no malice in globalization, but there is in protectionism. If an immigrant arrives in your town and voluntarily offers to do your job for less than you earn, that's not malicious. Forbidding them that job through the coercive arm of the state, is.

"America CANNOT compete on anything that involves labor now that the 3rd world has equal access to jobs. That's great if you're a machine, but I'm a human, all I have to offer is labor. Take that one to bed tonight."

Labor is all that I have to offer, too -- it's the only thing that any person has to offer. But that doesn't mean labor-saving technology is evil or that lower-cost production is evil. It only means that people need to adjust to changing economic circumstances. There is, there logically must be, another line of work for you to enter. And in that respect, the freer the labor market, the better -- because a controlled labor market could prevent you from obtaining the most appropriate job.

"How can you say they are the same when intra-country does not cause weakness in ones' currency, while inter-country does? How can you say they are the same when intra-country does not cause loss of tax revenue, while inter-country does?"

I view changes in currency exchange rates as essentially the same as inflows and outflows of gold under a gold standard. They're natural and important and useful because through the resulting changes in prices they tend to balance international trade. (Price controls of any kind inhibit this benefit and cause waste.) For the same reason I wouldn't be concerned with a net flow of gold from California to the rest of the nation, I'm not concerned with the exchange rate between the dollar and the euro. (Except to note again that currency price controls cause waste.)

I don't have any sympathy for a government with falling tax revenue. They all have too much revenue already.

Lawrance George Lux writes:

' In the past, economic progress has created more winners than losers in the United States. Are there factors that could make things different today?'

Yes, there are many factors which have altered the basic framework. The volume of exchange overloads the Transportation industry, with added Fuel Costs. All Tonnage rates are going up and will continue to go up.

Advantages to Trade decreases with increasing similarity of Capital investment schedules. This investment decreases need for Importation, and increases desire for Exportation; it faces increasingly sound domestic competition. Advantages of Geographic production decline with inputs of Capital.

The age of national populations has extreme effect. Labor retraining loses effectiveness with aging labor cadres, and the rate of Labor assimiliation declines. Heavier populations means greater shift of Labor conponents, with greater transference costs for such Shift. Loss of tax revenues from outsourced production constrains domestic consumption, and raises Government expenditures.

Use of foreign production curtails Capitalization of domestic production, within areas of low profitability; this specifically means areas which utilize high levels of Labor/Capital. Unemployment becomes endemic with Globilization. lgl

Steve writes:

I read this on another website, and would appreciate hearing what you guys think about this:

---QUOTE---
While the expected outcome of retraining for some segments of the blue collar workforce (older, less skilled) may have been overly optimistic, the idea wasn't at all hypocritical, it was logical -- a guy that worked with machines might likely have become retraied for running a more sophisticated machine tool or something.

Unfortunately, retraining can't take into account the zeal at which corporate management has decided to move ANY job which pays more than minimum wage overseas. In an era in which Wall Street considers a company with jobs that pay something akin to middle-class wages as having "uncompetitively high labor costs", then there will be nothing to retrain for, except operating the fryer at the local corporate fast food place.

In that reality, retraining is fruitless. But we're racing to the bottom, creating a plutocratic society where government and industry collude to create a handful of very wealthy people and a sea of working poor, with little in between.
---QUOTE---

Is Globalization helping us Race to the Bottom or are we just truly in a lull right now?

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