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The Fallacies of Globalization and the Future of Liberty

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.

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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.



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Well reasoned and written post...

...and I appreciate your effort to make the distinction between means and ends, economics and politics.

But, free trade is certainly to the advantage of *everyone* in the longer-term. Likewise with free markets in general. Various kinds of interventions, including tariffs or currency devaluations, can benefit certain groups for a time, but ultimately they impoverish everyone, including members of those groups. If the end is maximum prosperity for everyone, the means is free trade.

Re your point about the political implications of free trade, I think we need to disentangle free trade from the complex of statist policies now called "globalization." The two have *nothing* in common. Globalization is certainly a threat to liberty, free trade certainly is not.

"Alas! I believe in the virtue of birds. And it only takes a feather for me to die laughing."

i agree with this mostly, but

i agree with this mostly, but have 2 objections.

one, the political fact is that nations will continue to exist. people will continue to form groups around common identity and act together for mutual interests, primarily national defense. they will require political autonomy from other nations. therefore, some minimal forms of protection of some industries will continue, the extent of which has to be determined somehow. we aren't going to have f15's manufactured on the basis of slight comparative advantage. you need to either abolish nations and governments or accede to the globalist goal of one world government if you wish to see the nation-state dissappear.

second, with regard to globalism and free trade, i realize they aren't precisely the same thing. but, if anything, the globalist elite prefer more restrictions than the ideological free trade dogma. i find this similar to the no true scotsman argument. they aren't for complete 100% unregulated trade, therefore they aren't for free trade.

aside from currency manipulation (strong dollar policy, weak dollar policy, dollar pegging in developing world, etc.), and some reciprocal low tariffs, and a few political boycotts, a few subsidies for agriculture, and a tax code full of unequal treatments, in what other ways is your ideal of free trade different from the modern globalist form of free trade?

that would be an interesting subject to explore.

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some minimal forms of protection of some industries will continue, the extent of which has to be determined somehow. we aren't going to have f15's manufactured on the basis of slight comparative advantage.

There is no contradiction between the principle of free trade and the USG buying all its military materials domestically (as, IMO, it should indeed do) - as there is no contradiction between free trade and you, I, or anyone else choosing (for whatever reason) to buy more expensive domestic goods over cheaper foreign goods. Free trade doesn't mean you *have* to buy foreign goods, it means you are free to do so if you like.

you need to either abolish nations and governments or accede to the globalist goal of one world government if you wish to see the nation-state dissappear.

Who said anything about abolishing the nation-state, or creating world government? :-?

aside from currency manipulation (strong dollar policy, weak dollar policy, dollar pegging in developing world, etc.), and some reciprocal low tariffs, and a few political boycotts, a few subsidies for agriculture, and a tax code full of unequal treatments, in what other ways is your ideal of free trade different from the modern globalist form of free trade?

It is precisely the existence of all those subsidies, tarrifs, currency manipulations, regulations et al which make the current system anything but free trade. :-?

"Alas! I believe in the virtue of birds. And it only takes a feather for me to die laughing."

You describe free trade but call it globilization...

Of course, when people on this site see the term globalization, they immediately think of a one world government - which free trade is not. This use of language is likely intentional.

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.

A free market guarantees no winners or losers. Equal opportunity does not guarantee equality of outcomes. In a free market, no one is "too big to fail."

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.

Qualify the statement, "it serves their specific goal [of industrializing]." It very well could be the case - and probably is - that China is benefiting from increased trade while protectionism is likely retarding their growth to some degree. With that realization, in order to validate your argument, you need to show a direct cause and effect relationship.

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.

In a free market, this is not a problem. Demand increases for more highly skilled labor. In addition, there would be a reallocation of unskilled labor to other labor intensive industries. Your argument is similar to the traditional argument against technological progress - that is, "machines take away jobs." In that case, we should get rid of heavy equipment and dig ditches with spoons. In reality - as in the above case - new demand is created for workers to build, service, and operate the heavy equipment - ie a re-allocation of labor. The argument you present has been shown to be fallacious many times over in the past.

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.

[...]

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.

History shows that free markets foster an environment where middle classes burgeon. Modern banking cartels also act to concentrate the wealth towards the top. However, banking cartels cannot survive without an alliance with government. True free trade and the abolition of central banking would result in the creation of the largest middle class the world has ever seen.

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.

What about slave rebellions? What about the fall of the USSR? Did the USSR fall because the people there gained a sufficient amount of economic influence to challenge the "imposed political limitations"? Your statement is incorrect. As well, the middle class - here in the US - gained more economic viability because of the lack of "imposed political limitations" - not the other way around.

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.

...only if central banking schemes are allowed to continue.

As for politics trumps economics, it is bogus. The crash of 2008, the fall of the USSR, the monetary policy of Diocletian, the upcoming economic collapse, ...

The list can go on and on. Economics is more powerful than governments - and, accordingly, politics.

Using deceptive language is a tool of tyrants. Globalization and free trade are not the same, and the word globalization has an anti-libertarian ring to it - which is likely why anyone upvoted this post in the first place.

why do you think everyone is

why do you think everyone is too stupid to read a post a decide how to vote for it?

Why don't you address my previous reply point by point?

Is it that free trade is not fallacious while your arguments against it are?

I don't think anyone is stupid...

I do, however, realize that people follow the crowd.

They see globalization and fallacy in the title, see that others have upvoted it, and follow suit. It has little to do with their intelligence.

so the vote count is an

so the vote count is an entirely random phenomenon based on crowd psychology?

im the last person to give an F about votes, but thats still crazy.

Great Post. Is it really "Free Trade" when the other nation....

....is basically a prison camp for 95% of its citizens? Free Traitors http://arkansaswatch.blogspot.com/2010/02/free-traitors.html

Localism is for people who can still sleep at night even though somebody they don't know in a city they have never been is doing things differently. ("Localism, A Philosophy of Government" on Amazon for Kindle or Barnes and Noble ebook websites)

that's a great article.

that's a great article. subscribed.

Great post, these are the not

Great post, these are the not so easy problems to solve.

thanks. no, they sure arent.

thanks. no, they sure arent.