The Fallacies of Globalization and the Future of LibertySubmitted by Menschken on Sun, 07/07/2013 - 14:01
Mises was clear that economics does not determine ends, but just analyzes the means of reaching ends. Economics can never determine whether or not having x or y national industry is of higher value than having unlimited free trade. That is a moral or value judgement every person has to make for themselves. Even if nation A sucks at making airplanes and is awesome at making ice cream cones, does not mean it won't have the political desire to make sub par airplanes independently rather than import them.
The market guarantees no outcome or ends. The market can exist with tyrannical governments or free limited ones. The market can produce lackey, de-clawed journalism or aggressive investigative journalism. Private prisons and draconian laws can flourish without the market resisting. Consumers can demand garbage culture or higher culture, or both. A specific set of economic conditions can result in centralized concentration of wealth or broad ownership of property and distribution of wealth. The market does not prefer, it is neutral. Politics is the field where ends are determined.
What the proper goals of society and politics are is an open debate, and ultimately up to individuals to decide. How much liberty is desirable versus other competing factors, such as order and security, is up to people to figure out.
Maximum efficiency is realized with unlimited division of labor between all sentient creatures. True as far as it goes.
This does not guarantee that the interests of every nation, class or individual is automatically served equally by the removal of all trade and labor barriers between nations and populations.
The total output can be higher, while nation A's standard of living falls visa vi nation B, or the middle class income in nation A falls visa vi those in highly cognitively demanding fields in nation A or B.
The entire global market can become more productive of goods without everyone sharing in the benefits equally, or necessarily benefiting at all.
China has a goal of industrializing, so they've used the modern equivalent of the tariff by holding down the yuan. Economics cannot decide whether that was a good or bad goal. It can only speak to the effectiveness of the policies chosen to achieve the end.
In a floating FX (exchange rate) system, currency policy is equivalent of what tariffs were on fixed exchange rates. The trade surpluses and capital accumulation of China by suppressing the Yuan are a political goal. Even if it doesn't maximize universal global efficiency, it serves their specific goal. It serves what they perceive to be their specific interests.
Low cognitive-demand (blue collar) labor in country A gets lower pay in a system in which it competes globally against impoverished near subsistence labor everywhere in the world. Universal global output goes up, yes, and many products are cheaper, and those specializing in cognitively demanding work in country A might benefit much more due to their somewhat more insulated position in the new schematics.
This kind of globalization has real political effects. The resulting arbitrage of wages worldwide and the greater concentration of wealth amongst the top quintiles and deciles creates a new demographic or political profile of influence that has real world political consequences on how governments are elected and controlled.
The only thing free trade claims is that it maximizes universal global output of production. It says nothing about the distribution of benefits between nations, groups or classes. Most importantly, it says nothing about what their political consequences will be.
Positive outcomes in production don't necessarily lead to positive outcomes politically. Economics is objective -- you can measure output objectively. Political ends are subjective, they are the value judgments and decisions of individuals and populations about ultimate goals.
The distribution of political influence reflects the distribution of income and wealth. The vast differences between wealth and status (and power over politics) between classes can have major impact on the formation of political and cultural consensus.
Whether or not equality under the law and civil liberties continue depends a lot on the power the average individual has, or or a broad middle class, over the state. If they lose their economic influence, they lose political power.
The liberties the middle class demanded during the past centuries were based on their economic influence. It rose to a point that allowed them to throw off their previously imposed political limitations.
This, alongside the democratization of violence (gunpowder) and of propaganda and information (printing press) gave us Modernity.
Force is becoming less democratized through technology. Information is becoming more democratized through the internet. Wealth and income are becoming less distributed and more concentrated, throwing the balance in favor of greater concentration of political power to elites.
Libertarian political ends are not necessarily served by the outcome of globalization of labor and trade, even if they make economic sense. It could easily serve elitist or authoritarian political ends to have tremendous concentration of wealth. Whether there is any way of stopping it, I don't know and somewhat doubt. But it is worth understanding and considering the implications.