Is globalization to blame?(stumblingandmumbling.typepad.com)
stumblingandmumbling.typepad.com
Is globalization to blame?
http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2016/11/is-globalization-to-blame.html
45 comments
Globalization (and corporatization) creates money vacuums, and dead spots in the places that they replace.
Walmart/Amazon/Etc vacuum money and resources from the local (or "local-ish") community to their respective profit centers. It used to be small towns would be relatively self sustaining and much of the money staying within local boundaries, and while the cost of goods was higher at least buying them would support local businesses.
When a factory leaves a town or a company goes under from overseas competition it creates a big gaping hole in the local economy that frequently doesn't end up being filled. There are no companies coming back, and no capital available in the area anymore since all profits are sucked up.
Maybe all this is inevitable, but it doesn't quite seem so to me.
Walmart/Amazon/Etc vacuum money and resources from the local (or "local-ish") community to their respective profit centers. It used to be small towns would be relatively self sustaining and much of the money staying within local boundaries, and while the cost of goods was higher at least buying them would support local businesses.
When a factory leaves a town or a company goes under from overseas competition it creates a big gaping hole in the local economy that frequently doesn't end up being filled. There are no companies coming back, and no capital available in the area anymore since all profits are sucked up.
Maybe all this is inevitable, but it doesn't quite seem so to me.
The last 30 years have shown that growth through globalization mainly benefits the top few percent and hurts the rest. For most people wages have stagnated or gone down. You can get cheap T-shirts while housing prices explode. I bet with more automation even in China a lot of the factory workers that escaped poverty will get stuck at low wage jobs or get laid off soon and be poor again.
I hope people everywhere will develop an understanding that growth that isn't widely distributed is useless or even negative.
I hope people everywhere will develop an understanding that growth that isn't widely distributed is useless or even negative.
It's location specific. It hurts the lower and middle classes workers in developed countries and helps almost everyone else.
Utra cheap Wal-Mart goods are great if you are retired and living on a small retirement. Or worked in a non factory job in the first place.
A soul crushing factory job is still better than manual farm work in a developing country. Those same factory workers add a lot more income for local economies in developing nations.
It also tends to harm farmers in developing nations. But, that's largely from first world farming subsidies.
PS: After China replaces those workers with robots they will be poor in a developed nation which is generally a lot better than being poor in a poor nation.
Utra cheap Wal-Mart goods are great if you are retired and living on a small retirement. Or worked in a non factory job in the first place.
A soul crushing factory job is still better than manual farm work in a developing country. Those same factory workers add a lot more income for local economies in developing nations.
It also tends to harm farmers in developing nations. But, that's largely from first world farming subsidies.
PS: After China replaces those workers with robots they will be poor in a developed nation which is generally a lot better than being poor in a poor nation.
The factory jobs will go away in China soon too and those workers will be out of a job again. As long as the capitalists suck up all gains any improvements for poor people will be temporary until they get replaced by even cheaper workers or robots.
Maybe once doctors' and lawyers' work gets automated then things will change since the political class is mainly lawyers.
Maybe once doctors' and lawyers' work gets automated then things will change since the political class is mainly lawyers.
It hurts developing countries too, e.g. no incentive to give people a good education for free if you'll just lose them to brain drain. Globalization allows the best workers worldwide to spend their time solving the most profitable problems, i.e. rich people problems.
That brain drain also tends to remit a lot of money back to the developing country. Even without family in the area many people spend 10-20 years in the west then go back with significant capital.
Interesting enough the left, for example Chomsky, has been talking and opposing globalization / NAFTA for years.
https://chomsky.info/secrets03/
(excerpt)
---
The day after NAFTA passed, the New York Times had its first article on its expected impact in the New York region. (Its conclusions apply to GATT too.) It was a very upbeat article. They talked about how wonderful NAFTA was going to be. They said that finance and services will be particularly big winners. Banks, investment firms, PR firms, corporate law firms will do just great. Some manufacturers will also benefit-for example, publishing and the chemical industry, which is highly capital-intensive with not many workers to worry about
Then they said, Well, there’ll be some losers too: women, Hispanics, other minorities, and semi-skilled workers-in other words, about two-thirds of the work force. But everyone else will do fine. Just as anyone who was paying attention knew, the purpose of NAFTA was to create an even smaller sector of highly privileged people-investors, professionals, managerial classes. (Bear in mind that this is a rich country, so this privileged sector, although smaller, still isn’t tiny.) It will work fine for them, and the general population will suffer.
The prediction for Mexico is exactly the same. The leading financial journal in Mexico, which is very pro-NAFTA, estimated that Mexico would lose about 25% of its manufacturing capacity in the first few years and about 15% of its manufacturing labor force. In addition, cheap US agricultural exports are expected to drive several million people off the land. That’s going to mean a substantial increase in the unemployed workforce in Mexico, which of course will drive down wages.
---
Note at the bottom the connection between immigration (another hot topic) and NAFTA. I am not sure Trump ever mentioned that, probably not but Chomsky did. I remember reading that from him the first time.
https://chomsky.info/secrets03/
(excerpt)
---
The day after NAFTA passed, the New York Times had its first article on its expected impact in the New York region. (Its conclusions apply to GATT too.) It was a very upbeat article. They talked about how wonderful NAFTA was going to be. They said that finance and services will be particularly big winners. Banks, investment firms, PR firms, corporate law firms will do just great. Some manufacturers will also benefit-for example, publishing and the chemical industry, which is highly capital-intensive with not many workers to worry about
Then they said, Well, there’ll be some losers too: women, Hispanics, other minorities, and semi-skilled workers-in other words, about two-thirds of the work force. But everyone else will do fine. Just as anyone who was paying attention knew, the purpose of NAFTA was to create an even smaller sector of highly privileged people-investors, professionals, managerial classes. (Bear in mind that this is a rich country, so this privileged sector, although smaller, still isn’t tiny.) It will work fine for them, and the general population will suffer.
The prediction for Mexico is exactly the same. The leading financial journal in Mexico, which is very pro-NAFTA, estimated that Mexico would lose about 25% of its manufacturing capacity in the first few years and about 15% of its manufacturing labor force. In addition, cheap US agricultural exports are expected to drive several million people off the land. That’s going to mean a substantial increase in the unemployed workforce in Mexico, which of course will drive down wages.
---
Note at the bottom the connection between immigration (another hot topic) and NAFTA. I am not sure Trump ever mentioned that, probably not but Chomsky did. I remember reading that from him the first time.
It was beautiful vision for corporations, get cheap workforce overseas. Invest billions into China and then wait for those billions to get back to USA. It was true in the beginning because China imported a lot of tech and goods. They didn't have their own tech. Everything would work great but Chinese were not so stupid, they thought we can create our own products with same quality with our own tech with money we got from west. So they built universities and took best minds from west to teach in those schools. Then they started to make their own products that started to compete with those that need mid-high tech knowledge to produce. At this point globalization stopped being golden egg of western countries economies. That's why you see decline in growth in high developed countries in Europe and USA.
It's insane that anyone didn't see this coming, because the whole ideological content of the cultural revolution dealt with how international capitalist enterprise can be used to remove wealth from a country, and how to fight against it.
Warren Buffet saw it coming years ago. He even made a cartoon about it!
https://www.youtube.com/watch?v=5DvuyvuHmJI
This clip is from a documentary called IOUSA. A condensed version of the film can be found here: https://www.youtube.com/watch?v=O_TjBNjc9Bo
https://www.youtube.com/watch?v=5DvuyvuHmJI
This clip is from a documentary called IOUSA. A condensed version of the film can be found here: https://www.youtube.com/watch?v=O_TjBNjc9Bo
> That's why you see decline in growth in high developed countries in Europe and USA.
US GDP growth looks about the same since the '80s, with variability due to puntual recessions: http://www.tradingeconomics.com/united-states/gdp-growth
Same in the EU since the '90s (where the data starts): http://www.tradingeconomics.com/european-union/gdp-annual-gr...
US GDP growth looks about the same since the '80s, with variability due to puntual recessions: http://www.tradingeconomics.com/united-states/gdp-growth
Same in the EU since the '90s (where the data starts): http://www.tradingeconomics.com/european-union/gdp-annual-gr...
Based on the last half decade, growth in almost all first world countries is expected to be the lowest in industrialized history. You can't fight demographics (See: Japan). Political parties are just fighting over how we distribute a pie that keeps getting smaller.
EDIT:
http://www.forbes.com/sites/timworstall/2016/10/12/the-new-n...
http://fortune.com/2016/02/02/end-of-growth/
EDIT:
http://www.forbes.com/sites/timworstall/2016/10/12/the-new-n...
http://fortune.com/2016/02/02/end-of-growth/
Re your edits:
The first one asserts my point instead of yours (steady year-to-year growth).
And the second one is the review of a book, whose author predicts what you claim but for a completely different reason (no more great technological leaps, nothing to do with demographics, globalization, or China).
The first one asserts my point instead of yours (steady year-to-year growth).
And the second one is the review of a book, whose author predicts what you claim but for a completely different reason (no more great technological leaps, nothing to do with demographics, globalization, or China).
Where's that prediction? Is it from a reputable source?
Also, GDP growth means the pie keeps getting bigger, even if it's slower.
Also, GDP growth means the pie keeps getting bigger, even if it's slower.
It makes me very glad that we are starting to question globalization. Whether or not it is a bad thing --- and it may very well be a good thing --- is still an open question in my mind. But for decades now it seems that globalization has been very unjustly considered good by default.
It's "good" but good is a moral argument. We have to examine it on a deeper level, who wins and who loses.
According to economists, it's good because it grows the pie. It makes everyone wealthier.
According to labor, the pie grows but disproportionately the benefits accrue to capital. Without support, whether it be redistribution via tax or job retraining, labor can not react to shock as efficiently.
According to economists, it's good because it grows the pie. It makes everyone wealthier.
According to labor, the pie grows but disproportionately the benefits accrue to capital. Without support, whether it be redistribution via tax or job retraining, labor can not react to shock as efficiently.
Moreover, it's an undervalued question as to whether or not people want more pie, or a greater percentage of the pie. Utilitarianism is tricky at best, and money does not map onto utility; people who feel they're being screwed are not comforted by the promise that if things were more fair, they'd have less cheap stuff. Power over your own destiny is more important to people than consumer goods, and it looks like globalism might concentrate real power in the hands of the few, even if it makes us all able to buy more toys. (There's a reason the only people you see proposing universal basic income are those who wouldn't need it.)
> whether or not people want more pie, or a greater percentage of the pie
The former gets us medicine and computers and the internet and airplanes and expeditions to mars. The latter gets you warlords with local fiefdoms.
The former gets us medicine and computers and the internet and airplanes and expeditions to mars. The latter gets you warlords with local fiefdoms.
This is also true, and does not contradict what I said. If people made all their choices about ensuring peace and prosperity, the world would be a heck of a lot more prosperous and peaceful. We do not.
Also keep in mind, labor can't outcompete capital because capital outflows are not regulated but labor can't move easily, so is replaced by outsourced labor.
I wonder how many companies will now opt for corporate inversion (Hey, Trump won - we want to leave just like you want to), and whether there will be any real push to combat that from the US govt.
I wonder how many companies will now opt for corporate inversion (Hey, Trump won - we want to leave just like you want to), and whether there will be any real push to combat that from the US govt.
Who loses? Labor in the developed world.
Who wins? Labor in the developing world. In the past 30 years, half a billion people have been dragged out of poverty. That's an enormous win...
... at the price of the US and European working class. That's a very big loss.
Who wins? Labor in the developing world. In the past 30 years, half a billion people have been dragged out of poverty. That's an enormous win...
... at the price of the US and European working class. That's a very big loss.
Causing Political instability in those countries is dangerous
I don't think it's as zero sum as this. We could have done better to support labor in the developed world.
Globalization has been questioned for decades.
Does anyone actually think globalism is going to be stopped? My guess is it will be harnessed. Corporations fled the US to increase profits - both to preserve taxes and ignore environmental regulations. Given no regulation to prevent/dissuade the exodus, they outcompeted the ones who didn't.
It would now take a very large effort that would look like protectionism to bring all that back. Can Trump administration pull that off?
It would now take a very large effort that would look like protectionism to bring all that back. Can Trump administration pull that off?
The reason for the "productivity" decline may simply be that manufacturing and agriculture don't have many employees any more. Only about 10% of the US workforce is in agriculture, manufacturing, and mining. Those are the areas where, historically, there's been huge productivity growth. That's how that number got down to 10%. Yet US manufacturing output is at an all time high.
"Productivity" at the macroeconomic reporting level is total output / total workers. So productivity increases in manufacturing are divided by the total workforce size, which dilutes them.
Job growth is in the areas where productivity is low, such as health care and education.
"Productivity" at the macroeconomic reporting level is total output / total workers. So productivity increases in manufacturing are divided by the total workforce size, which dilutes them.
Job growth is in the areas where productivity is low, such as health care and education.
I don't think many people blame globalisation. They blame neoliberalism, of which globalisation is just a small part.
Neoliberalism is a political project that has been dominant in the West since the mid '80s. Other elements of neoliberalism include:
Neoliberalism is a political project that has been dominant in the West since the mid '80s. Other elements of neoliberalism include:
- The decline of trades unions
- Financialization
- Power-biased technical change
- Lower minimum wages
- A meaner welfare state
> - The decline of trades unions.
That's directly linked to globalization. When you can easily move your factory to Mexico or China trade unions lost all power.
That's directly linked to globalization. When you can easily move your factory to Mexico or China trade unions lost all power.
One thing not mentioned is that:
1) In booming urban areas, price-of-living can outpace the return to wages-- not everybody is benefiting, and landlords/homeowners are benefiting more than most.
2) In depressed rural areas, there is likely more people allocated here than there should be-- many oughta be reallocated to job-rich places like cities. However, this mobility is thwarted by high cost-of-living in cities.
1) In booming urban areas, price-of-living can outpace the return to wages-- not everybody is benefiting, and landlords/homeowners are benefiting more than most.
2) In depressed rural areas, there is likely more people allocated here than there should be-- many oughta be reallocated to job-rich places like cities. However, this mobility is thwarted by high cost-of-living in cities.
Anyway, I wholeheartedly recommend reading Henry George's "Protection or Free Trade"[0], which both identifies why free trade is the right way forward, but also identifies all the suffering it is causing today. (The chapters "The real weakness of free trade" and "The real strength of protection" are amazingly insightful to what's happening to Trump's America.)
[0] http://www.econlib.org/library/YPDBooks/George/grgPFT.html
[0] http://www.econlib.org/library/YPDBooks/George/grgPFT.html
Probably. Considering the rise of nationalism all over the world from western europe to even india and the phillipines.
It's actually worth reading the article, since he links to a few studies that show globalization is not to blame for falling wages and living standards (although of course many do blame it nonetheless). The comments below the article are mostly good too, poking a few holes in his argument.
Indeed! I wish HN had comments sections that good. They're civilly debating with references, without demonizing the opposing side.
James Goldsmith predicted problems with globalization in 1994: https://www.youtube.com/watch?v=4PQrz8F0dBI
> If you’re spending $5 on a Chinese T-shirt rather than $10 on a US-made one, you’ve got $5 more to spend on other things.
Thats disingenuous, you spend $5 less in total in your country.
Thats disingenuous, you spend $5 less in total in your country.
Shop will get 50%, supply chain a bit more, and the Chinese sweatshop under $1.
I think the real problem with this argument is that housing eats up such a large part of wages these days that a $5 saving on T-shirts is more than eaten up by rents and lenders. It's house prices more than anything which stop me and many of my friends from enjoying anything like the lifestyle that our parents had.
I think the real problem with this argument is that housing eats up such a large part of wages these days that a $5 saving on T-shirts is more than eaten up by rents and lenders. It's house prices more than anything which stop me and many of my friends from enjoying anything like the lifestyle that our parents had.
Housing really is crippling purchasing power for young people especially. Rent is rising at a ridiculous rate.
But, as long as inflation measurements includes housing, we really hide the true cost of globalization. We have relative deflation in the cost of good produced overseas and cheapened by labor arbitrage, but loose monetary policy is not evident in those diminished captital flows. Instead, too much money is chasing a stagnant supply of housing and inflates the value further.
Net, central banks target
inflation, globalization and labor arbitrage cheapen goods, while the lack of any globalization or arbitrage or supply drives the cost of housing up and up. In the end we balance it all out, and it looks like monetary policy is a very low-res tool.
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But moved demand on T-shirt making elsewhere freeing up resources otherwise spent on expensive T-shirt making to focus on other demands.
The problem isn't how money moves around, it's just money, the problem is resource allocation.
Someone mentiones Henry George, he was on to something in viewing land as an important commons, something to derive rent for all from instead of insisting on labor as the only source of common wealth. (Also see Thomas Pain wrt to that line of thinking btw)
The problem isn't how money moves around, it's just money, the problem is resource allocation.
Someone mentiones Henry George, he was on to something in viewing land as an important commons, something to derive rent for all from instead of insisting on labor as the only source of common wealth. (Also see Thomas Pain wrt to that line of thinking btw)
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Trump was elected because some humans (something around 0.3% of the population) happened to feel some different emotion on the day of elections vs. what they felt the last elections. The shift has been small. There's no one factor that explains it.
The world is changing. Like I heard some pundit say the cause for this change was not globalization or trade agreements. The cause was the microchip. Anyone who thinks automobiles will again be assembled by hand in some factory in the rust belt just needs a reality check. Those jobs are gone. They're never coming back. It's not due to globalization. It just happens that in very low wage countries it might make more sense to do more things by hand vs. automation but the Chinese assembly worker isn't stealing an American assembly worker's job.
The US (and maybe other countries) needs to accept the world is changing and to find ways to adapt to this change. Unfortunately it seems most people aren't thinking along these lines and IMO that's partly due to a long history of "each to his own". Erecting walls and barriers to try and keep the world the way it was isn't going to work but also having a fraction of the population that is making profit from the change while the rest is going down won't work either. Looks like you guys have at least 2 years to think about it now.