I recently replaced my electric razor. Now when I open the top I see "made in
Current economics literature says that most things still
are, although that is hard to believe when virtually all we buy as consumers is
labeled otherwise; but whatever the present facts may be, the
internationalization of the economy is increasing inexorably, albeit at varying
rates, under the pressure of immense forces.
The volume of both imports and exports for the
As with most change, the globalization doesn't move at a
constant pace. The Asian economic crisis
that started in 1997 significantly impacted both the exports and imports of an
advanced economy like the
The factors bringing about a worldwide competitive economy are found mainly in communications, transportation, the growth of a world capital market, and the increasing role of multinational corporations.
Our review of recent scientific/technical advances showed that the global economy now features a vast technological network which uses devices unheard of a few years ago and which will soon be replaced by others more advanced. Optoelectronics, lasers, fiber-optics, space satellites, the Internet, telemedicine, electronic libraries, online universities – each of these and many others intimately affect each locality at the same time they bring the world into increased economic integration.
When transportation was still expensive, it was necessary to do the manufacturing of goods near either the resources or the consumer. Today, capital investment flows toward the places of cheapest production regardless of their location, because the resulting products can be taken to market at low cost. Palletization and containerization have made the transporting of goods much easier and non-labor-intensive. At the same time, miniaturization and the new materials sciences are making products lighter and less bulky, further reducing the cost of transport. Many products in the information age will be electronic and won’t need physical transportation at all.
The world capital market
The “Great Credit Crisis of 2007-2009” will have a long-term impact on global finance, and should lead to much restructuring of what came into existence before the crisis. But even a decade before that crisis hit us, “global finance” had become a major phenomenon, as we see from a passage I wrote at the time:
“World capital flows are massive and virtually
instantaneous. A fax was able to relocate an entire bank from
World trade is increasingly conducted by corporations whose
stock ownership, key employees, headquarters, subsidiaries, places of
manufacture, and markets are so spread-out among countries that it is difficult
if not impossible, other than by an arbitrary, superficial criterion, to assign
a national identity. A shipping label
for the products of one electronics company says, "Made in one or more of
the following countries:
An interesting thing about multinational corporations is their relation to technology, which is mainly brought into existence and used by such firms. At the same time, technology is causing economies of scale that will make large firms less important, since automation allows “shorter production runs” that can be done by smaller firms. Many large corporations are now loose webs of many small entities from a variety of entrepreneurial centers.
Worldwide competition puts unrelenting pressure on firms to be the lowest-cost producer of quality goods or services, since to be otherwise is to invite failure in the struggle to survive. In turn, this creates pressure to use the lowest-cost labor or to do without labor if at all possible.
The search for the lowest-cost labor is made feasible by
the ready availability of workforces all over the world that are accessible through
the ability of capital to flow to them and to some extent by the growing ease
of national migration. Their products
may then be transported or communicated inexpensively and quickly. Labor, both skilled and unskilled, already
exists in large pools throughout the world, as is apparent with the hundreds of
thousands of engineers
Economists cite the fundamental rule of supply-and-demand
in agreeing that the long-term tendency will be a decline in wages in the
well-paying advanced economies and a rise in wages for workers elsewhere. This will not, however, be anything like a uniform
This undercutting of wages in the advanced economies by low-pay world labor will, however, occur only of the near- and medium-term. Only slightly further removed is the reality that non-labor-intensive and extremely low-cost production using a combination of computers and science will out-compete even low-pay international labor. The dirt-cheap Chinese engineers may find little demand for their services. Even where some labor will be needed, its cost will be only a fraction of the total production cost. This doesn't mean workers in the developed nations will get their jobs back or that their wages will be restored to previous levels. It means that work itself will become increasingly obsolete.
The reigning worldwide
free-trade ideology co-exists with much national industrial policy, suggesting a gap between words and
conduct. Since World War II, and
especially since the collapse of the
This appearance is bound to change, however, as the new technology's displacement of firms, industries and workers comes to match the marvels of innovation as a primary reality confronting the world's peoples. This will force peoples everywhere to “look inward" to assure themselves a mode of survival that they cannot attain otherwise. In that scenario, the ideology of free trade, unless adapted to fit the new conditions, will not appear nearly so beneficent and all-rewarding. A purpose of this book is to show how the ideology must be changed if it is not to become obsolete and at the same time overwhelmingly rejected by the world's peoples, including by most Americans.
Free trade proponents complain about the extent of
government intervention and will be among the first to agree that, even at
present and during the free-trade emphasis of the post-World War II period, the
world has not been as committed to free trade as the rhetoric and ideology lead
us to believe. This is true of the
In noting these things, we shouldn’t lose sight, of course, of the fact that even this amount of protectionism has not been such as would shield the U.S. economy from the hollowing-out effects of a tidal wave of low-cost world competition.
What are we to make of the gap between philosophy and action? Are all of these countries, and many others besides, renegades acting badly when they should know better?
Something to notice is that – even in the relative absence
of the gigantic forces that are impacting the world economy – each of these
nations has to some extent put aside free trade ideological pressures enough
"to do what it has to do."
That is what the German economic thinker Friedrich List urged
Free trade thinking expresses a theory that is elegant in its stress on worldwide betterment through a division of labor in which each country's people produce what they can market most cheaply. But the theory focuses almost exclusively on the benefit to consumers. It pays little regard to how a people in their role as producers (which is necessary to their having the means to become consumers) can gain viability, or maintain it once it is gained, in a circumstance of hard-pressing external competition. Accordingly, it is significant that all countries have felt it necessary to deviate from the pure theory.
This should give market theorists pause. If mankind universally perceives the need to deviate from the theory, one is prompted to question whether the theory really is sufficient, even though it unquestionably sees much that is valuable. The body of thinking rightly argues that "each party to a voluntary transaction benefits, as the party perceives it, or else the party wouldn't be willing to enter the transaction.” We will discuss the "theory of the transaction" – its problems as well as it strengths – later. For now it is enough to note that almost every nation has seen that the theory doesn't fully meet its people’s practical needs.
As global competitive pressures for ever-lower costs force enormous worldwide displacement, each people will be driven to rely on their particular political structures to assure all their citizens' participation in economic life, since the market by itself won't be able to give that assurance. This will cause what will ostensibly be massive departures from free trade theory. However, if the theory is adjusted, as it must be, to address the new realities, there will no longer be a gap between theory and practice. Instead of criticizing governments for "protectionist" programs and "industrial policies," the world may well find it worthwhile to acknowledge each government's need to take the measures it finds essential to look after the interests of its own citizens.
Even during the past century and a half it would arguably have been wisest to have seen free trade in a different light than pure free trade theory does: to see it as something that has much to contribute if in a given case it serves the needs of a people. That would have reflected a much better understanding of the measures all peoples have felt a need to adopt. An open competitive market would then have been seen to occupy a certain sphere that is supremely important but that isn't the only sphere. Ultimately, free trade theory, to be most sound, will have to come to that understanding.
We have seen that the present forces at work in the world economy erode national identity and sovereignty, but that this is offset by many movements for local and ethnic identity. Moreover, in the not-too-distant future the measures needed to overcome the displacement of workers and whole economies will necessarily put the nation-state, and perhaps some regional confederations, at center stage. Because of this, the issue of national sovereignty is a matter of “ebb and flow.”
ebb: the move away from national identity and sovereignty. It has
long been a fact that some major
In his book The Great Betrayal, Patrick Buchanan
discussed the trade agreements, NAFTA and GATT.
He said that "to opponents, NAFTA was always about more than jobs
going south; it was about American sovereignty going south." He considered the undermining of national
sovereignty so important that today "within both parties, nationalists are
now in rancorous conflict with the globalists.
And it is true not only in
The trade agreements override state and municipal laws where they conflict. World Trade Organization (WTO) disputes are decided secretly, with no outside appeal. The agreements are put through with limited debate, and are so long that legislators aren’t able to read them.
The transfer of power away from representative institutions
shows the strength of ideology and of a worldwide elite whose interests are
served by that ideology. We have seen
that the late Harvard historian Samuel P. Huntington, in his monumental 1996 book
The Clash of Civilizations and the Remaking of World Order, spoke of "the Davos
Culture." He explained that
"each year about a thousand businessmen, bankers, government officials,
intellectuals, and journalists from scores of countries meet in the World
Economic Forum in
This disavowal of national loyalties isn't because the individuals involved are evil or misdirected, even though a given nation's patriots will think their values offensive. Everything about the global economy – future necessities aside – creates this mindset. When a product is designed one place, built another from components coming from several countries, financed internationally, marketed everywhere, and involves effort by people of several different countries, it is dysfunctional for those involved to embrace any seeming "provincialism."
This flight from nationality appears in several ways:
· Increasingly, money and people are making themselves invisible to national governments through offshore banking and tax havens in a largely uncontrolled environment. Whether this will be reversed by improved regulation in the wake of the economic crisis that hit in late 2008 remains to be seen.
· Multinational corporations use various techniques to optimize their advantage vis a vis governments. These include accounting practices that understate profits in places where taxes are high and shift them to countries that have little or no taxes.
"blackmail" is commonplace between governments and firms.
Competition forces the firms to play the game, since in a competitive market where the spoils go to the low-cost producer every advantage has to be sought. When ones competitors do it, that doesn't just make it right—it makes it necessary.
· In this context, governmental regulatory standards decline beyond what is called for by the simple plea for "deregulation." The process leads to a search for the bottom as reasonable regulatory parameters are abandoned in the competition to attract or retain firms. It isn't just the standards in the developed countries that are affected; the process keeps a downward pressure, too, on the standards the less developed nations might otherwise adopt.
institutions are continuing to develop at odds with national sovereignty. Before the WTO was voted on, the attorneys
general of 42 American states warned that the
In diplomatic and military affairs, a vastly significant mental change is evident when we see American soldiers assigned to serve the United Nations rather than their own country. Reflecting this seismic shift, Al Gore, while vice president, spoke of 15 Americans who died patrolling Iraqi skies, expressing condolences "to the families of those who died in the service of the United Nations."
· Governments find themselves less in control of economic policy, and the international flow of money acts as a sovereign power in its own right. It has been said that individual countries are losing control over their own economies.
The flow: tendencies toward a reaffirmation of national sovereignty. There will need to be a reassertion of national prerogatives as displacement demands the political action we are describing in this book. It won't be long before the low-cost production of the world market undercuts agriculture and industry everywhere, displacing hundreds of millions, most likely billions, of people. Potentially, they will be awash in goods – but will face a crisis caused by the quandary of how to find a way to share in them by plugging into the income-stream.
For two hundred years the movement of displaced peasants
into industrial cities has caused revolutionary situations, such as in
In addition to the coming demographic and political realities, there is also the moral reality that such mechanisms should be resorted to if a global market will for many people bring disaster rather than well-being. In almost anyone's philosophy, and certainly within classical liberalism as best conceived, the well-being of people is the ultimate measure.
A reassertion of national sovereignty is also implied by the many movements worldwide for local and ethnic identity.
In her book A New World Order, Anne-Marie Slaughter argues that the nation-state, not world government, will be at the heart of the world system she sees developing. Nevertheless, the nations will engage in a great many “networks” among ministers and other officials, providing a web of governance that brings the nations together in shared policies. She doesn’t mention it, but we will want to notice that such networking, which she describes as already occurring to a very large extent, almost certainly embodies the cosmopolitan outlook and ideology of the world elite. If that is so, it keeps the form of national sovereignty while in fact running toward international governance.
. William Greider, One World, Ready or Not (New York: Simon & Schuster, 1997), p. 206.
. Robert Kuttner, The End of Laissez-Faire (New York: Alfred A. Knopf, 1991), pp. 117, 127, 7.
. Business Week,
. Harald B. Malmgren, “Technology and the Economy,” in Brock and Hormats, ed.s., The Global Economy (New York: W. W. Norton & Company, 1990), p. 103.
. Patrick J. Buchanan, The Great Betrayal (Boston: Little, Brown and Company, 1998), pp. 264-5.
. Samuel P. Huntington, The Clash of Civilizations and the Remaking of the World Order (New York: Touchstone Books, 1996), p. 57.
. Buchanan, Great Betrayal, p. 97.
 Greider, One World, p.323.