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Globalization for me but not for thee

Globalization is good. Regions adept at making thingummies can use their natural advantages to produce them cheaper than anyone else, efficiently saving everyone money.

Globalization is bad. The regions outclassed in thingummy production lose their livelihoods, and factories can flit around the globe, escaping labor and environmental laws.

Neither of these problems is new. Only the scale is different. In the Middle Ages, a mass of fiefdoms ringed the Baltic and fought all the time, although nominally they were all part of the Holy Roman Empire. Meanwhile, traders among the independent cities of the area formed the Hanseatic League for profit and protection, and were actually more powerful than many of the area governments. Global corporations are different only in scale, and in their expectation that governments will provide protection.

Getting rich is conceptually simple. One buys low and sells high. The traders or corporations, by having more mobility than average citizens, are able to make money off of regional disparities in pricing. If you or I could hop over to Western China for a couple of dollars, we could buy the t-shirts Walmart makes there for the cheap local price and cut Walmart out of the process entirely. We can’t, so Walmart makes money by buying low and selling (relatively) high.

There is a technical term for making money from pricing disparities that really shouldn’t exist, according the economic theory. (In that particular fairyland, everybody has access to all goods and to the same information, so overpriced goods are immediately outcompeted.) In the real world, disparities always exist. The technical term for profiting by them is arbitrage, the idea being that you “arbitrate” or balance between the two unequal situations. Walmart arbitrages the cost of living in China versus that in the US.

According to economic theory, arbitrage is a good thing because it removes disparities, makes markets more efficient, and generally makes it easier to fit economic activity into a mathematical equation, which is (apparently) the point of the dismal science. Somewhere, there is someone with tenure who thinks that sweatshops in the Third World will increase local wealth to the point where everyone becomes middle class and the disparity ceases to exist.

If arbitrage is such a good thing, then why doesn’t everyone get to participate? Walmart can do it, but the Chinese woman in the company’s factory, who’s quite willing to arbitrage her modest wage demands against the higher expectations of workers in, say, New York, is not allowed to. It’s the exact same thing. The only difference is that it’s a poor person taking advantage of disparity rather than a rich person. Globally, workers are in the same position as medieval serfs, but on a different scale. They’re tied to their land and not allowed to move to better markets for their labor.

Obviously, if everyone willing to work for next-to-nothing were to flood into the high-wage West, it would be the end of life as we know it. However, if everyone were to turn themselves into Walmarts, that situation would also fall apart immediately. The benefit in these things depends on most people being unable to do them. It’s true of labor, but it’s equally true of the corporations. If it’s okay for them, it has to be okay for everyone. If it’s not okay for poor people to end life as we know it, then it’s not okay for the corporations either.

Labor isn’t the only thing whose globalization runs on different rules than that of corporations. Products people buy, rather than those businesses sell, are also not to be globalized. US citizens are not to take advantage of a better health care system in Canada and buy cheaper drugs there. You’d think the economists would be pleased at this free market pressure towards reform of the US system, but they’re oddly silent about the merits. US college students aren’t supposed to buy half-price textbooks in England. The list of anti-globalization measures for consumers could go on for pages, and it’s promulgated by the same outfits who insist that completely free markets are the only fair way to treat corporations.

It doesn’t take much for the pattern to show through. Globalization is used to mean “I want to make as much profit as possible.” Add in the consistency with which “globalization” is used to evade the most basic environmental and labor laws, and it is screamingly obvious that the term is a euphemism. Dishonest business practices are not exactly a new thing. The people protesting globalization at the trade talks aren’t really protesting globalization. They’re protesting greed. Let’s keep these things straight. Then we may have a snowball’s chance in a temperate zone of using globalization to provide wider markets for everyone. (Imagine what an African villager could do with a web connection and reasonable local transport). And we may do it without all becoming wage slaves living in cesspools.

Technorati tags: globalization, free markets, labor market, slave labor, environmental laws