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A Brief Update on Globalization

A Brief Update on Globalization
by Russ Beaton

Globalization. Remember all the rhetoric of the last few years—the “radical left” complaining about the outsourcing of jobs, the standardization of products, the destruction of local economies and the ceding of our economic fate to major transnational corporations? Remember the “elitist corporate defenders of the status quo” contending that we’d have more and better high wage jobs, cheaper products, more access to foreign markets for our export-based products, and in short we’d simply love the results once we got to know them?

At few years have passed and it’s time to take a quick glance at where we’re at. First, the solid “middle wage” production and manufacturing jobs have certainly remained in full flight—to Mexico, China and similar places. (In fact, Mexico is beginning to complain about losing jobs to low-wage havens like China, and China says it’s losing them to Burma…!) Where will it end? Probably in an island nation in the Indian Ocean, newly created out of landfill where the (largely prisoner) population works for nothing. They’ll eat coconuts and papayas produced locally—since they won’t be importing anything. At last, no place else in the world can underbid them—and the multinational corporations will be sublimely happy, since the wage bill will be zero, and the only expenses go to other corporations (packaging, preserving, transporting, marketing and so on.). Let’s hear it for interlocking corporate directorships… Of course, one problem might be that, since producing the product creates no incomes, there may be no one to buy the goods—but for now let’s overlook that one.

How about creation of those “knowledge-based” jobs promised in the wake of the disappearance of the “grunt” jobs? Funny thing, but the “low wage havens” are getting very adept at attracting and creating the high tech jobs as well. For instance, we imported over ten times the information technology goods last year from China than we exported to them. The flight of jobs abroad has crept up the income distribution, and has made significant and well documented inroads into our so-called “white collar” sector.

Have the new markets opened up? Are the hordes of newly affluent middle class Chinese gobbling up our products? Here’s where multinational corporations have really pulled one over on us. Instead of using the increasingly relaxed “free trade” rules to sell our stuff all over the globe, corporations are simply re-locating their manufacturing activities abroad, taking advantage of the lower wages, then re-exporting the stuff from China or Mexico back here, or to other high standard of living destinations. The increment created by producing in the cheapest parts of the world and selling in the most expensive accrues not to workers—as the theory says it should—but to, you guessed it, corporate profits! Every uptick in the Dow Jones average doesn’t mean that Americans are wealthier—as the corporate-owned media would like us to believe—but simply that inequality just got a little worse.

And here’s where I’m either angry or ashamed—or both—to be an economist. The revered theory, with impeccable roots going back more than two centuries to Adam Smith and David Ricardo, says that free trade makes everyone better off and creates more general middle class prosperity and distributed wealth. This has long been a basic tenet in the religion of conventional economics. But in fact, under the terms of globalization, it ends up doing almost exactly the opposite. Clearly, the influence of major corporations has grown like a cancer, with the result that they own all the mobile factors of production and control the terms of engagement over the non-mobile factors (such as wages to you and me, dear fellow worker).

Thus, the economic bottom line for globalization is that standard economic theory becomes a tool for creating elitism, inequality, and even, given only slight ideological tweakings on the part of leaders who happen to ascend to power, a tool for fascism. This is a disturbing outcome for a once useful discipline than was born to a noble cause—improving the general material terms of the human condition.

How best to resist all this—or indeed whether anything can effectively be done – is a topic for another time. For now, practice thinking of yourself as not just a consumer. A complete person has choice about work, friends, family, and what comprises that which we all seek—a sense of community.

There is one silver lining. If you can afford it, you’ll feel very comfortable traveling abroad—to those places where Americans are still welcome, of course. You’ll see all kinds of things that make you feel right at home—like McDonald’s and Wal-Mart. Or perhaps you’re weird, like me. When I travel, I like to experience something other than what I see every day. Call me strange.

Russ Beaton, Ph.D., is Emeritus Professor of Economics, Willamette University.