Globalization is Good

By Dean L

Globalization is a tough sell.  Even a lot of conservatives bristle at the idea of letting some Vietnamese worker make shoes at a labor cost of $0.22/hour to be sold in America at $110 per pair.  It seems like both a ripoff of the labor effort and a rip off of the American consumer.  Not to mention the fact that it enables a lot of offshoring of manufacturing jobs in America, thus eroding America's industrial base.

Liberals vehemently oppose globalization on the grounds of child labor abuses and unfair trade practices.  But Swedish writer Johan Norberg takes a look at why globalization and capitalism have lifted millions out of poverty and why anti-globalization protesters are on the wrong side of the argument, and ultimately history.



Show this video to a liberal and their head will spin and they will retort with cries of "Lies!" and "That's just propaganda!"   Or perhaps they really do get it and their protests are merely a cover for union-driven protectionism.  Unions first, consumers second.

Conservatives on the other hand are a tougher sell.  I'm not talking laissez faire libertarians here.  I'm talking more the "America first" conservatives.  The notion of the American economic engine being hampered by international competition is a daunting perception to overcome.  But in reality, competition is not the problem.  The problem is over-regulation.  The economic landscape in the United States is one dotted with legislation, regulation tax complexity etc., and as a result a host of unintended consequences and skewed realities.

Consider this - would you rather get on a space shuttle built in Vietnam or the United States? How about an airplane built in Brazil (which aren't necessarily bad by the way) or by Boeing in America?  Need a battleship? Are you going to ask the US Navy or the navy of Ethiopia? There are inherent advantages to the American worker and production systems.

As you go down the list in terms of product complexity you get into circumstances where the choices aren't so obvious. Cars for example - German, Japanese, American and even Korean and Swedish and others are viable. But that's where the distortions (not only from America but from other countries as well) kick in.  Union rules, minimum wage laws, companies not being allowed to set up factories in states that they want, as well as government subsidies.

When you get all the way down the list to textiles and the garment industry, we are not talking about high tech jobs.  Why not let them be made in countries with cheap labor to benefit consumers around the world.  It's called specialization and comparative advantage.
Ricardo also opposed the protectionist Corn Laws, which restricted imports of wheat. In arguing for free trade, Ricardo formulated the idea of comparative costs, today called comparative advantage—a very subtle idea that is the main basis for most economists’ belief in free trade today. The idea is this: a country that trades for products it can get at lower cost from another country is better off than if it had made the products at home.

Say, for example, Poorland can produce one bottle of wine with five hours of labor and one loaf of bread with ten hours. Richland’s workers, on the other hand, are more productive. They produce a bottle of wine with three hours of labor and a loaf of bread with one hour. One might think at first that because Richland requires fewer labor hours to produce either good, it has nothing to gain from trade.

Think again. Poorland’s cost of producing wine, although higher than Richland’s in terms of hours of labor, is lower in terms of bread. For every bottle produced, Poorland gives up half of a loaf, while Richland has to give up three loaves to make a bottle of wine. Therefore, Poorland has a comparative advantage in producing wine. Similarly, for every loaf of bread it produces, Poorland gives up two bottles of wine, but Richland gives up only a third of a bottle. Therefore, Richland has a comparative advantage in producing bread.

If they exchange wine and bread one for one, Poorland can specialize in producing wine and trading some of it to Richland, and Richland can specialize in producing bread. Both Richland and Poorland will be better off than if they had not traded.
 The argument that the theory means that everything ends up getting produced in China is not reality.  They cannot produce everything, nor are they (or will they ever) be the best at producing everything.  They will never beat the Swiss at making Swiss Cheese for example. They will never make tanks for the U.S. military. The real question is whether they will make so much as to create a permanent trade imbalance.  Will all that flows to China be raw materials for production of goods there? No.

The United States has comparative advantage in a number of areas and could have even more without some of the burdensome intrusiveness of government over-regulation and excessive business taxation.  The challenge for the United States going forward is to both push those comparative advantages further, and to discover and develop new areas of comparative advantage.  Luckily, that is something American ingenuity has always excelled at.

7 comments:

  1. Uh, there is a whole other level of political stuff going on out there that you don't seem to be aware of.

    Yes, free trade ala Bastiat is a good thing, but the regulations are being written to guide it in a certain way. These regulations are not voting in with representative government, but are handed down from on high by paid experts. I think you addressed the problem of over-regulation.

    I'm hear to tell you that regulations come from a cartel syndicate of the organized money on this planet who happens to be down with fascism/communism/collectivism and intend to totally pwn us all. That's the ballgame. If you want to know the details, check out one of my Wall Street series. Or check out the writings of Bertrand Russell or the Huxley boys. They lay out the fact that they want to own the human race and cull a vast portion of it. Someone paid a lot of money to have that fact etched in stone at the Georgia Guidestones in Elbertson, GA. These are just entry points I'm throwing out to those who are not aware that this is really happening!

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    1. Excellent points! Out of the box thinking is indeed a good thing. You rm excel at it. More need to, including me.

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    2. Well the thinking in the box wasn't working for me anymore, that's when I found out about the artificially constructed walls around real information.

      The point here is that the Elite WANT the United States to fail. They are going after Iran because that's the last of the game pieces not in their possession, their central bank that is. If they can get American soldiers to get them that sweet, sweet Persian bank and also the oil that lies there-abouts, all the better. They killed Gaddafi for trying to go on a gold standard. You don't get off their reservation, see? The only money there is fiat script, son.

      In a way, the real battle is the average people of the world against the banskters. If you're in China having a forced abortion (which is what they want here) or in the United States, being regulated out of existence, the enemy is a shared one.

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    3. I don't disagree with your main assertion that there is a whole political backdrop around free trade that distorts the fundamental purity of the free trade notion. I would however dispute the notion that there is an active elitist attempt to destroy the United States (from within at least).

      Rather I would classify those who attempt to distort via politics the free trade path are doing so entirely personal gain. Yes, they are greedy and they are attempting to manipulate the system but not to destroy the United States. Rather, they simply don't give a damn about it and put it's well being a distant second or third to their own personal advancement. The net effect is the same - a distorted version of something that makes sense into something that makes sense for a chosen few. That isn't healthy and it certainly doesn't converge with the ideals of America.

      Nevertheless that should not stop us from embracing the concept of free trade as beneficial to all IF done properly. Throwing out the baby with the bathwater is never a good idea.

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    4. Honeychild, they've no more to "gain" but power.
      They are most certainly trying to destroy the United States, for the United States was built upon free trade. I certainly don't dispute the goodness of free trade, and am aware of what happens when tariffs are applied.

      Going through the evidence is beyond the scope of a blog post, but the evidence is crushing that there is an Elite and they are working very hard to end sovereign nations and consolidate political and economic power in light of a eugenics-centered religion.

      I support free trade by free peoples, not highly coerced, regulated trade concocted by Elites under the banner of free trade for the purposes of forming a command economy.

      "The powers of financial capitalism had another far reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements, arrived at in frequent private meetings and conferences. The apex of the system was the Bank for International Settlements in Basle, Switzerland, a private bank owned and controlled by the worlds' central banks which were themselves private corporations. The growth of financial capitalism made possible a centralization of world economic control and use of this power for the direct benefit of financiers and the indirect injury of all other economic groups."

      Tragedy and Hope: A History of The World in Our Time (Macmillan Company, 1966,) Professor Carroll Quigley of Georgetown University, highly esteemed by his former student, William Jefferson Blythe Clinton.

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    5. "I support free trade by free peoples, not highly coerced, regulated trade concocted by Elites under the banner of free trade for the purposes of forming a command economy."

      I agree 100%. As to your point about elites centralizing power, I also agree that they have nothing more to gain than power (and just a 'little' bit more money). But when you get into the eugenics fewer people argument, it's hard to fathom since there doesn't seem to be a logical motive to wipe out 80% of humanity and have the remaining people be as homogeneous as possible.

      I am not disagreeing with you, or even denying you many be right. Just color me skeptical.

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    6. You are right there is no logic, only teh Krazeeee. Check out the latest post of mine, where we have Ted Turner on tape saying the world's population needs to be reduced to 2 billion. This is the largest land owner in America, owning a vast swath of the media.
      http://therepublicanmother.blogspot.com/2012/06/best-bilderberg-bankster-busting-bomb.html

      I've heard that they plan to merge with technology to become immortal or something. It's totally crazy, but after having so much wealth, no accountability, and no fear of God, maybe that's what happens to people. As a Christian, I see this as going totally according to prophecy. These people are under demonic control, whether they realize it or not to bring about the one world system that the Antichrist will require to carry out what is called for in the prophecies. Remember that God gave humans dominion, and since we were created lower than the angels, the fallen angel, Lucifer is just a mite jealous. I believe he's pulling out all the stops because he knows his time is limited.

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