Globalization

The Financial Times published an article regarding the western world’s backlash against the global economy. Polled citizens are unimpressed by the benefits of globalization, whether it has provided increased choice, lower costs or added more value to their lives.  So much for free markets.  People are losing their jobs, especially at the lower levels.  And everyone knows that a lot of that free market theory is just a load of malarkey anyway, designed to give fat cat owners and managers of big companies a good reason to go take advantage of the bare-foot Chinese at $2.00 a week.  And all at our expense.  Right?

But let us step back for a moment. What does globalization, corporate governance, pay caps and the like all have in common, other than an "Us vs. Them" or "Capital vs. Labor" kind of Marxian perspective of the world.  Isn’t that the way we’re taught to think?  Isn’t that the only way to interpret the bizarre collaboration of poll questions?  After all, the Man is out to get you and this really is a zero sum game, just like Marx and Engels said it was.  Regardless of country, clearly most folks agree these corporate icons need to be reigned in.  They are taking it all, and at our expense.

The last question affords some hope for free economies in that about half the people tepidly support the general idea of free competition within their own trading area. But let’s come at this from a little different perspective.

1. What’s the largest and freest market in the world?
2. What market has the highest standard of living?
3. What are some of the more closed markets in the world?
4. What are their standards of living?

"So," you say, "I understand USA is much richer than North Korea, but I still don’t cognitively appreciate the theoretical connection between free markets and high standards of living." 

Free Trade Example

You live in Chicago.  And I tell you that you can not buy anything from anyone who didn’t go to your high school.  What kind of life do you think you’d have, compared to the one you have now?  What about if you could just buy things from Chicagoans, or better yet, people who live in Illinois?  What kind of life would you have now?  But wouldn’t you prefer to be able to buy things from all over the world?  That’s the inherent power of globalization.  You must have faith in free trade:)

Still not convinced?  Hmmm.  I’m beginning to doubt your sincerity.  But here’s another example.  What countries are getting richer the fastest?  Forget the rich people.  They are in every country, and there will always be rich people.  I mean for the average, everyday Joe.  Who’s getting richer fastest?  The answer is obvious; the countries that have embraced globalization.  Countries like Ireland, China, India, Chile and the USA.  By the way, the opposite is true also (visit Venezuela since Chavez took power).

Europe vs. USA

On a subtler note, compare the EU with the states in the USA.  Compare size of markets, populations, educations, culture, freedom of speech, etc.  One might argue that the biggest difference between the two markets is that the USA is one large, free market, unlike the EU where the barriers between neighboring countries are comparatively large.

Now compare the standard of living between EU countries and the USA.  Go on.  Ignore the western press and its often  prejudiced opinion.  For your average, middle class guy, who’s better off?  Where is life just pretty darn good and getting better, not worse?  Forget what you hear in the press.  What does your gut say?

If the answer to the question is not absolutely, positively, clear, ask yourself this question: "What country does everyone want to move to?"

Perhaps some of our corporate business leaders need a big lesson in fiduciary duty.  OK.  OK.  But does that mean we want government bureaucrats playing games with their wages?  Not OK.  And what does any of this have to do with globalization?  I do not have a clue.

Your Experience

But back to the matter at hand, which is the power of free markets to raise the standards of living everywhere and generally add value and riches to one’s life.  Forget the fact that globalization is literally pulling 2 billion people (1B each in China and India) up into the middle class (as defined by indoor plumbing, no longer worried about food and clothing).  Forget that stores like Walmart make everything more inexpensive.

Just consider whether in the last twenty years, life is getting better for you or not.  And if you’re too young to answer that question, but you’re working, ask yourself if you’d rather be in your shoes, or your parents when they started out.

So, do you still want free markets?