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Eleven theses on globalization
There has recently been lots of discussion of globalization, its effects, especially on poverty and inequality, and many contradictory statements, some even absurd, were made. Here are eleven theses on globalization.
First, inequality and poverty. Globalization is a force for the global good: the globalization of economic activity has enabled production of many commodities and provision of many services to be done in the places where it is cheapest to do. It has released previously used resources for other activities. It has also mobilized capital and labor that was misused or unemployed. The effect was a significant acceleration in global rate of growth (when measuring global growth by using democratic and not plutocratic measures, which have gone up too) and a dramatic decrease in global income inequality and global income poverty.
Second, China. The most important positive effects, largely due to globalization and international trade, have been achieved in China. China explains most of the decrease in global inequality and poverty. But these advances have been realized by the application of non-standard or non-neoclassical policies. This has created the first dilemma for the supporters of globalization and neoliberalism. To defend globalization they have to praise China, but they find Chinese policies distasteful. Thus their comments are most of the time contradictory.
Third, the West. Globalization has opened a series of particularly difficult issues for the West. This was not expected when globalization was "sold" to the Western populations by Reagan/Clinton and Thatcher/Blair as a guaranteed middle class gain. But the success of Asian countries has often been predicated on the loss of jobs, or loss of good jobs, or loss of steady wages by the Western middle classes. The feeling of insecurity and displacement has spread among them. Even when their real economic growth was positive, it was less that the real growth of many Asian populations, and the latter have thus often overtaken Western middle classes in their global income positions. When we come to the positional jostling, globalization is indeed a zero-sum game: I am either ahead of you or behind you. For many Western middle classes this is a new experience: for two centuries most of the Western population was in the top twenty percent of the global income distribution. Some of them are no longer there and others will soon be squeezed out.
Fourth, Great Convergence. The successes of China and India have a geopolitical aspect too. China and India cannot be pushed back to their 19th century positions. They are steadily changing the balance of power bringing the ratio between Europe/America and Asia back to the one that existed before the Great Divergence. The economic and geopolitical decline of Europe and America is not contemplated with indifference though.
Fifth, trade blocs. One way, in some people's minds, to reverse the decline goes through a rewriting of the rules of globalization. "Globalization" would apply only to the politically friendly countries. This obviously has nothing to do with real globalization. It is the return to the world of trade blocs. It is mercantilism which does not dare say its name. Partisans of globalization have hard time defending it ideologically if they care for any consistency in thinking.
Sixth, wars. The geopolitical angle has sharpened global political and even military tensions. Thus ironically, globalization that, through the softening effect of trade (le doux commerce) and mutual interdependence, should have promoted a world of entente and peace has created the very reverse conditions propitious for conflict and even war. Such a war, if led by the US, would aim to stop China from taking a preeminent position in the world, and if led by China, will be used it to propel it to that very position. If globalization preceded World War I, can it precede World War III?
Seventh, disappointments and gains. What began as a globalization pregnant of advantages for many looks now very differently: insecurity of jobs and relative income decline of Western middle classes, inability to ideologically defend both globalization and neoclassical economics, abandonment of globalization by some influential circles, and even putting a stop to it by wars. But from the other point of view, globalization has created a much more equal world, both between world individuals and in terms of economic and political power between Europe/America and Asia. (Africa which has not been more successful during globalization than before is a notable absentee in terms of gains.)
Eighth, climate change. Even the positive aspects of globalization (reduced inequality and poverty) do containsome negative features. The several-fold increase in global GDP in the past 30 years, has also increased CO2 emission by approximately the same ratio. This has made the achievement of climate change targets more difficult, and has opened up another area of contention: the targets can be more readily achieved if the West were to grow more slowly and the rich people everywhere taxed more heavily. Both are politically unacceptable propositions, so climate change problems are getting worse.
Ninth, financialization and amorality. Globalization has proceeded by financialization of the economy where this particular business was valued more than more solid virtues of inventiveness, steadfastness, probity, abstinence and caution. It has favored behaviors that are short-term in their vision, unconcerned with any broader good once the money can be safely withdrawn, and have propagated an overall amorality in business life. Since concomitantly business life has become the largest part of people own lives, amorality has spread further into ordinary relations. When Milton Friedman stated that the role of business is to maximize profit, period, he was right in a narrow sense. But he failed to see the externalities produced by that statement. If achievement of wealth, and especially of wealth by any means whatsoever, becomes the goal of top classes, it spreads throughout the society and ultimately destroys cohesion and social bonds.
Tenth, migration. Throughout this time, globalization was incomplete. It included capital and goods first, services and ideas next, and never included the most important factor: labor. Reduction in global inequality was not achieved by moving people where they may earn the most (which would be a natural way to proceed), but by sending capital closer to wherever people are. Even the minimal migration that has taken place has produced political blowbacks.
Eleventh, What is to be done? We need to avoid war and trade conflicts at all costs, to accept that for the world it is better if there is an approximate equality of wealth and power between different nations and cultures, as well within individual nations, and to reduce carbon emission by a combination of high taxes on emission-intensive goods and subsidies to their alternatives. The nature of current globalization makes me skeptical that we can improve steadiness and security of many jobs, accept greater migration, and make the captains of financial and IT industry behave more ethically.