More on "Globalization"

Let me add a few more provocative thoughts about “globalization” today. Again, this is partly in response to the public radio series on the subject, which has made me a bit cranky about it.

But first, let me change the terminology somewhat. In the course that I teach on the subject every year, “globalization” is a term that I assiduously stay away from. I find the term too vague, diffuse, and laden with different meanings for different people to be of much value. Instead I prefer the term “economic integration”. It doesn’t carry all of the meanings that some people attribute to the word “globalization”, and is a term that is much more precise and well-defined to a wider group of people, while still signifying the essence of what worries most people about “globalization”.

Now on to my provocative thoughts of the day.

1) I’m not sure why we care more about economic integration than other types of economic change. Every time there is a technological innovation, some people benefit but others lose. Every time a person decides to patronize one store over another, some people benefit but others lose. Every time any economic transaction happens, in fact, there are winners and losers. Why does it make a crucial difference whether or not that transaction happened to cross a national border? All economic transactions, whether domestic or international, involve a willing buyer and a willing seller… and all therefore (by definition) make the parties directly involve better off. But all also have negative repercussions on some people not involved in the transaction.

Clearly, some would answer, crossing a national border makes a difference because different governments might influence economic decisions differently. True. But realistically, most economic integration is not taking advantage of differences in governmental regulations. The vast majority of international transactions simply take advantage of price differences: the price of labor, the price of capital, etc.

Furthermore, governments interfere in other types of economic change, too. Governments may do research to encourage technological advances in one particular field, which makes an old industry obsolete and throws people out of work as a result… but does that mean that we should try to stop technological progress? Governments may enact policies that privilege one type of industry over others… but does that mean that we should try to forbid people from changing their spending behavior? I would argue no. Economic change happens, and will always happen, and will always create winners and losers. Why do some types of economic change seem okay to most people while economic integration does not?

2) When thinking about the costs and benefits of economic integration, why should we only consider those that apply to people in our own country? Is there any particular reason that I should care more about the welfare effects of economic integration on people in Lubbock, Santa Barbara, or Chattanooga than the effects on people in Lucknow, Sao Paolo, or Chongqing? Personally, I can’t think of any good reason why. I realize, however, that this is a matter of personal preference; others may indeed genuinely care more about people living in the US than people living in other countries.

However, if one cares equally for people in other countries, then it is hard to think that economic integration is a bad thing. As I just reiterated, economic change – all types of economic change – generates both winners and losers. It is reasonable (and, I would argue, virtuous) to care about the losers from any type of economic change, including economic integration. But one should also be glad for those that have gained.

I do not rejoice over the bad luck that displaced workers in the US have had to deal with. In fact, I see the horrible consequences of it every day, living in an old, depressed New England mill town that has had an unemployment rate far above the national average for nearly two decades. And every day I try to effect political and economic changes to help people who are economically disadvantaged through no fault of their own, but rather simply due to the never-ending process of economic change.

But at the same time I recognize for every one of those mill workers who was laid off in my town, several people around the world were lifted out of abject poverty (and you don’t know what real poverty is until you’ve spent time in a developing country), and for the first time given the chance to feed, clothe, and educate their children so that they can be the first generation with a realistic chance of living a significantly better life than a medieval peasant.

One last word about the field economics in general. I realize that some of you are disappointed that I agree with the orthodoxy by thinking that international economic integration is generally a good thing, despite the fact that I call myself “liberal”. And I realize that some of you think that economists are all simply brain-washed when it comes to international trade. But I would like to ask you to give me, and other economists, a little more credit. We have no incentive to simply follow a “party line”, and we have every incentive to come up with a convincing counter-argument; recognition in the field comes not from repeating orthodoxy but rather from overturning it, after all. Furthermore, anything that any economist says or writes is immediately subject to vicious and relentless criticism from the rest of the profession – that’s how all academic professions work.

So if the vast majority of economists agree about something, it’s not because we are simply turning off our brains (and analytical power) on that one subject. It’s because the theory and evidence on the subject are convincing, and have withstood relentless efforts to debunk it. In general most economists think economic integration is a good thing, not because it’s convenient to do so, but because the work of thousands of extremely smart people working over decades has convinced us that it usually is.

That doesn’t mean that economic integration is ever painless, or always good. But I would also say the same thing about technological progress. And just as is the case for technological progress, I also think that in general, it’s more good than bad.