Globalisation

[vimothy]

Ok I'm up for it.

A couple of things first:

We need to define terms. One of the problems with this board is that I often feel like people are using words in a different way to me. That is especially problematic (and easy to do) when discussing economics. Just answer some questions for me so that I know I'm reading from the same script and then I will do my best to provide a serious response and promise to play nicely.

Are we now talking about the market economy or globalisation or both?

What do you mean when you say "globalisation"?

What do you mean when you say "free markets"?

When you say "free market evangelists", who are you thinking of?

And what are you suggesting instead, economic planning in markets dealing with what we're describing as "finite resources"?

Personally, I totally disagree with your timeline of free trade and free markets. Globalisation is old, yes, stretching back into the first age of liberalism, and interrupted by the rise of collectivism in the early half of last century, but it is not as old as humanity itself. Perhaps from this vantage point we can view all human history as a gradual movement towards it, but I don't think there's much to be gained from such romanticism. Can we agree that globalisation has basically come in three sections, roughly 1870-1913, 1950-1975, and 1975-the present or perhaps 2001? At least, if you disagree, you should provide a discrete timeline for globalisation, because if you're describing a process that has been occurring for the whole of human history, it kind of makes my arguing for it a little bit bloody redundant.

Globalisation (at least as far as I'm concerned) is not the same as free markets. Globalisation is the increase in cross-border integration; it has economic aspects (like price convergences), as well as political and cultural aspects (and so on) - it's a process. The idea of a "free market" is different and more limited. It should be understood as a descriptive concept, not prescriptive. In fact clever governance and wise regulation are taken as a given in any market economy. "Good markets require good governments" (Martin Wolf). The market is a regulating mechanism and should be used as such, but that doesn't mean that policy is redundant and I don't know of any (classical) liberal economist who would claim otherwise. For libertarians/liberals the free market is the guiding principle for a market economy because we recognise that the market is a better mechanism for the regulation of society than the government. Government regulation should be kept to a minimum to maximise economic freedom, but that doesn't mean that the market (economy) is or will ever be truly "free" in an absolute sense. (Though obviously specific markets might be very free indeed).

Equally, the market economy is recent. It hasn't been occurring throughout history. The majority of human experience is of subsistence economies.

(And I think that your concept of demand is also too vague to be of much use, as it suggests to me that production of any good proves prior demand ipso facto, when that's clearly not the case. How can you have levels of demand for non-existant goods? That suggests equilibrium price levels for non-existant goods (and is veering perilously close to socialist price fixing). How far in the future can you stretch that? Again, I think you need to spell out what you mean here. But I guess I'll/we'll come to that later... In fact, reading what you've wrote again, I think that I disagree with your description of the market as ignorant of the finite supply of any given good. This is definitley not the case. In fact the opposite is true and the (hypothetical) "free" market allows a naturally set price to regulate supply and demand. That's the whole point and the difference between socialism and capitalism.)

(And you're also completely ignoring the link between capitalism and innovation. People on this board have rubbished capitalism for producing wothless goods people don't want or need, but it is there and it is no accident. Possibly it might be worth your looking at intensive progress and what that represents and why it occurs. I'll link to a wiki on intensive farming but the concept can just as easily be applied to any sector of production. It is overwhelmingly a capitalist system and there is an important reason that explains why that is so.)

 

[vimothy]

But, whatever. The USA has done more to improve the lot of the common man over the last few centuries than anyone else and, yes, free market capitalism is a large part of the mix.

Fascist pig! Just wait till the Chomsky group brain read this - hmlt's going to be pretty pissed off with you.

 

[vimothy]

Also important to note, scarcity:

The basic economic problem which arises from people having unlimited wants while there are and always will be limited resources. Because of scarcity, various economic decisions must be made to allocate resources efficiently.

When we talk of scarcity within an economic context, it refers to limited resources, not a lack of riches. These resources are the inputs of production: land, labor, and capital.

People must make choices between different items because the resources necessary to fulfill their wants are limited. These decisions are made by giving up (trading-off) one want to satisfy another.​

 

[vimothy]

Gabba Flamenco Crossover, bearing that (economic) definition of scarcity in mind, can you also please explain what you mean by "finite resourses"? I am assuming you mean commodities, but want to be sure.

 

[gek-opel]

Also important to note, scarcity:

The basic economic problem which arises from people having unlimited wants while there are and always will be limited resources. Because of scarcity, various economic decisions must be made to allocate resources efficiently.

When we talk of scarcity within an economic context, it refers to limited resources, not a lack of riches. These resources are the inputs of production: land, labor, and capital.

People must make choices between different items because the resources necessary to fulfill their wants are limited. These decisions are made by giving up (trading-off) one want to satisfy another.​

Yes indeed. The basic economic problem. But it seems to me to be the case that having decided that this is the fundamental issue, economics then goes ahead and entirely ignores it.

The question of finitude is absolutely key, it cannot be simply brushed away by saying that globalised free markets (which we have never had, by the way, merely dogmatic pretensions towards) are the best system for delivering a reduction in mean absolute poverty. If the system requires an unending expansion in demand (and associated production of non-essential consumables) then outside of technological singularity eventually the system will no longer work, and that is an absolute limit to efficacy of Globalised Consumer-Capital that cannot be ignored. Your argument also rests on other assumptions- primarily that reducing mean absolute poverty is the primary goal of human society. This seems to be an absolute with which it is impossible (in your opinion of course) to disagree. I'm not certain that this is the case, or that comfort at any cost is a goal which is a moral one. Psychologically if the only way to achieve (incredibly inefficiently too) a reduction in absolute poverty is to endlessly expand demand, then what we have above absolute poverty is a homeostasis of human misery, an endless expansion in actual comfort that can never be perceived as such.

There is another flaw in globalisation- and that is the true implications of globalised labour markets. It is this that will shortly cause real problems for Western governments-- if the 70s - 80s saw the flight of blue collar work from West to the developing world, then the 00s onwards will see ever increasingly a similar shift in white collar work- the attack on the Western middle class has begun. Even Neo-lib free-market hawks feel uncomfortable about the proper implications of outsourcing.

 

[noel emits]

In what way are resources being allocated efficiently? They are just not are they? That's a big problem. Markets favour people who play markets, not people who need a bowl of rice.

Sorry if that sounds naive. It's not scarcity (as in lack) but inefficiency, inequality, stupidity, greed, manipulation, waste.

 

[noel emits]

I saw a guy in the supermarket the other day who had a nike swoosh tattoo. Maybe this is quite common but I was shocked. Now I understand 'branding'.

 

[borderpolice]

The question of finitude is absolutely key, it cannot be simply brushed away by saying that globalised free markets (which we have never had, by the way, merely dogmatic pretensions towards) are the best system for delivering a reduction in mean absolute poverty.

Similarly, it cannot be brushed away by suggesting that after the revolution and after money is abolished, the problem is no longer relevant.

Your argument also rests on other assumptions- primarily that reducing mean absolute poverty is the primary goal of human society.

Whatever the merits of relative vs. absolute poverty, there is no reason to believe that libertarian economic organisation is particularly congenial to reducing absolute poverty. Reduction of absolute poverty is mostly a matter of technical progress. As far as i can see technological progress results mostly out of

1. environments that allow sufficient numbers of scientifically inclined individuals to pursue their research indepentently over long periods of time. There is no indication at all that unfrettered free markets provide such environments. Currently such environments are mostly provided by top universities in the richest countries, which are all w/o exception essentially government funded.
   
2. Sufficiently able and broad educational units (schools, universities) to educate enough children to the point where they can work as scientists. Again, this is unlikely to be provided by libertarian kind of free markets.
   
3. Sufficient economical surplus so that enough scientists can be fed.
   

 

[gek-opel]

Similarly, it cannot be brushed away by suggesting that after the revolution and after money is abolished, the problem is no longer relevant.



Whatever the merits of relative vs. absolute poverty, there is no reason to believe that libertarian economic organisation is particularly congenial to reducing absolute poverty. Reduction of absolute poverty is mostly a matter of technical progress. As far as i can see technological progress results mostly out of

1. environments that allow sufficient numbers of scientifically inclined individuals to pursue their research indepentently over long periods of time. There is no indication at all that unfrettered free markets provide such environments. Currently such environments are mostly provided by top universities in the richest countries, which are all w/o exception essentially government funded.
   
2. Sufficiently able and broad educational units (schools, universities) to educate enough children to the point where they can work as scientists. Again, this is unlikely to be provided by libertarian kind of free markets.
   
3. Sufficient economical surplus so that enough scientists can be fed.
   

I've never argued for the abolition of money- or claimed that absolute poverty is eliminated by such methods... All I am interested in is finding a way to think in a genuinely alternate way to that which the pathways of globalised consumer capital imply. This I contend is literally impossible within capitalism. As such the only aim must be to eliminate and discredit it forever, and the easiest method of doing so is to create a doctrine designed to exploit its own excesses. But your second point is extremely interesting, and absolutely correct-- whilst the educational systems provided by the state absolutely serve the interests of capitalism, it is highly doubtful that they would be as effectively provided in an anarcho-capitalist free-for-all. Which renders the claims of the free-market ultras somewhat absurd, as they always presume (as I believe Vimothy does upthread) that there will be some form of bare state existing as the life-support system for capitalism.

No- of course, free markets are (at best) an unbelievably crude method of eliminating poverty. It is also impossible to pull apart their own operational effects from the myriad of other social forces at work in the last two hundred or so years. But at the same time I'm not sure why you think that it is merely technical advances which have reduced poverty. Technical advances taken apart from any kind of sense of the social, or of the distribution of the advantage bestowed by such advances seems a little limited.

 

[turtles]

It seems like the economic definition of a "limited" resource is somewhat different from the environmentalist/anti-globalisation definition. The economists seemed to be talking about the rate at which a resource can be supplied into a market, with scarcity being defined as when that rate is below the rate of demand. Thus it's a relative measure. However, the environmentalists are talking about absolute limits on resources, where things just plain run out.

Now given, if a resource is a hard to find because there isn't a lot of it (eg diamonds) than it makes sense for it to to be considered a limited resource. But what about a resource of which there was very little, and yet was very easy to get at? This is (kinda, almost) the case with oil, isn't it? This is the level at which a resource would be used up very quickly, because of a lack of incentive to plan ahead. If there's enough to not run out during your lifetime, who cares?

 

[gek-opel]

Actually oil will never be entirely used up- rather at a certain point the remainder is so hard to extract that it is no longer economically viable to do so, and this point is reached prior to the resource being fully exhausted.

I think though that the economic definition of scarcity does take into account absolute as well as relative scarcity, by implication. The consumer-capitalist edifice allegedly constructed on top of it does not really.

 

[tatarsky]

Economics has a very blunt, positive definition of scarcity. It is thought of as the total endowment of a particular resource at any given time. As such it does not ascribe any normative value to our resources, meaning that it does not think about whether the thing we're talking about is actually useful or not - that decision, and the value system underpinning that decision, is left up to the market. The scarcity that most people talk about typically has a normative judgement attached to it - it says that 'we do not have enough of X', but economics doesn't understand this enough, as there are no normative judgements. The model predicts that the price will rise in response to depleting endowments, but is ambivalent about this.

 

[noel emits]

Then economics is dumb.

 

[tatarsky]

Er.., yes it is, or rather neoclassicism is, but hang on... pressure to reduce demand (via rising price), isn't that precisely what is being said is necessary?

The problem that neoclassicism has, is that it's shit at taking into account time. This didn't used to be a problem, when effectively the question was: "what's the best way of distributing the finite resources we have access to now?", but now the question is more: "what's the best way of distribution a seemlingly vital resource that is depleting?". The trouble is, mainstream economics is stuck in a particular way of analysing problems. And annoyingly, most non-economists seem to equate economics with that framework too, as you've amply demonstrated.

 

[noel emits]

Hey hang on a minute. I'm perfectly capable of imagining many alternate ways of looking at economics. I was responding to what you said about an economic definition of scarcity. From what you say above it's that short term view that's got us into trouble now. That was dumb, and lots of us non-economists knew that all along.

 

[Gabba Flamenco Crossover]

What do you mean when you say "free markets"?

A trade system that is self regulating, and is not subject to an external regulatory system. Although as you point out, in the real world markets are never completely unregulated. So in practical terms, it means the least-regulated market of the ones currently available.

When you say "free market evangelists", who are you thinking of?

Thinkers who's view of the free market is characterised by qualities more often associated with religious worship, such as:

Universality (Can be applied to any sphere of human experience, personal relations, gender/sex, politics and power, etc)

Irreducability (No part can be removed from the whole, and the whole cannot be added to)

Omnipresence (Present everywhere and at all times, regardless of human agency)

Dichotomy (You either believe or you're the enemy - no middle ground)

Evangelism (A onus on the believer to proclaim the truth to unbelievers)

Hayek and Freidman weren't free market evangelists, but many of the current commentators on the american right who owe allegience to their ideas are. Even academic thinkers such as Landsburg have a tendancy to move towards an evangelical position when writing for the lay reader. From what you've posted here and in the Moral High Ground thread, I'd class you as a free market evangelist.

What do you mean when you say "globalisation"?

I'm talking about economic globalisation, rather than the wider cultural definition. I don't necessarily see the latter as being an inevitable consequence of the former. Economic globalisation is the process of removing obstacles to trade between all nations or groups of peoples on the globe. It is therefore the furthest logical extension of cross-border trade, which has been a facet of human interaction for most of it's history.

I can see where you're coming from with the distinctions between the terms 'globalisation' and 'free markets' - I'd agree with them to some extent, if we're talking about the wider, cultural sense of globalisation, 'all nations becoming more alike'. But in the modern usage, 'globalisation' is shorthand for 'globalisation of american/western values' - no one talks of Jihad as Islamic Globalisation, for example. So economically, globalisation means free markets. And to the free market evangelist, the universality of free markets naturally implies globalisation. So I'd suggest that the two concepts are interchangable at an economic level. Since we're clarifying terms though, let's go for Free Markets because it's less ambiguous.

And what are you suggesting instead, economic planning in markets dealing with what we're describing as "finite resources"?

I'm not sure precisely what I'm suggesting - I'm still making my mind up, and posting on this thread is a part of that process. But generally, I support lightly regulated free trade in markets where the individual acts alone or in small groups as purchaser, and can be reasonably informed about the purchase without specialist knowledge. I think the free trade model breaks down in markets where the timeframe and capital involved takes the decision out of the individual's hands (defence and energy) or where the technical barriers to informed purchasing cannot be reasonably overcome with layman's knowledge (specifically pharmaceuticals and energy, but an increasing problem in all markets as our society becomes more technological). In those markets a mediator is needed between the supplier and the individual customer, and the natural candidate for that role is the democratic nation state. I also think there is a practical problem when suppliers get large enough to coerce the individual purchaser - I don't see that the real world free market has the mechanisms to prevent this happening without government intervention.

In a wider sense, I object to the view implicit in free market evangelism that the free market is the natural arbitrator in all human experience, that it has a moral dimension, or that it is an inevitable precurser to positive political phenomena like democracy and fair governance. To me, the free market is an economic tool that is appropriate in some situations and not appropriate in others. It can be broken down or combined with other market models as befits any given situation.

Can we agree that globalisation has basically come in three sections, roughly 1870-1913, 1950-1975, and 1975-the present or perhaps 2001?

No, that's far too limiting. Cross border trade has been a fixture of civilization since prehistoric times. The ancient world drew most of it's copper from Cyprus, most of it's tin from Cornwall, it's gold largely from west Africa, and spices and luxury goods from all over what is now Asia. The cathedrals of the medieval world were built by roaming crews of craftsmen and labourers. Economic migration in the form of slavery has been a constant throughout history.

Recorded history has seen at least two major shifts from cross-border trade to protectionism - one following the collapse of the Roman empire, and a second following the shift in the relationship between european and non-european powers from one of trade to one of colonial rule around the Eighteenth century. Cross-border trade and protectionism are conflicting philosophies, and arguments between them are as old as trade itself.

Equally, the market economy is recent. It hasn't been occurring throughout history. The majority of human experience is of subsistence economies.

Again I disagree. The trade of the pre-industrial work required labour in mining, farming/harvesting of commodities for trade, and ships to be built and crewed - all labour intensive activities in a world with far less people in it than our own. Since everyone involved in these activities was too busy to farm thier own food, it would have to be grown by others and purchased by them, or on thier behalf - that implies farmers growing surplus produce and entering into trade relationships. Even at village level, trade relationships would have existed around resident economic specialists such as blacksmiths and coopers, or travelling producers/salesmen (founders, for example). Almost everyone in the pre-industrial world would have had some experience of a market economy, even though thier level of daily interaction with it was obviously far less than our own.

(And I think that your concept of demand is also too vague to be of much use, as it suggests to me that production of any good proves prior demand ipso facto, when that's clearly not the case. How can you have levels of demand for non-existant goods?

The crux of my argument is that I'm flipping that around - I would say that your concept of demand is limited by it's specificness. In a hypothetical situation where a commodity such as iron or oil ran out tomorrow, the demand for that commodity would still be there in our economies and our societies - that's a common sense statement. There is no supply, no trade, hence no price or contract between buyer and seller. But the demand still exists.

The trade relationship is not the reason for the existance of demand - rather, it's the light that illuminates demand in such a way as to allow the economist to quantify it. But economists, like all logical thinkers, are prone to neglecting the effects of forces that they can't quantify. Even in the physical sciences, this is a limiting mindset - that's where the Einstein quote about imagination being more important than knowledge comes from. But in the human sciences it's absolutely fatal, because so much of human experience is unquantifiable. And economics is not a physical science, it's a study of human behavior. The great economists like Hayek, Gilbraith and Hobsbawm never forget this, but minnows like Landsburg are constantly losing sight of it.

I disagree with your description of the market as ignorant of the finite supply of any given good. This is definitley not the case.

Why is it not the case? This isn't as self evident to me as you seem to think it is.

And you're also completely ignoring the link between capitalism and innovation.

I don't ignore it, but I may have downplayed it a bit. But I do think that free market evangelists massively overstate the role of capitalism in creating new knowledge and technology. Capitalism and the free market are excellent at maximising the potential of existing technology and knowledge to create wealth - that, I grant you, is innovation driven by capitalism. But free market evangelists go on from that to say that the process of creating brand new knowledge and technology is also more effective and faster in a free market, which s rubbish. Knowledge is created in all kinds of different political regimes and economic systems.

 

[Gabba Flamenco Crossover]

Gabba Flamenco Crossover, bearing that (economic) definition of scarcity in mind, can you also please explain what you mean by "finite resourses"? I am assuming you mean commodities, but want to be sure.

Gek, Turtles and Tatarsky have pretty much done this for me. 'Scarce' and 'finite' are not interchangeable terms. A finite resource is one which will permanently cease to exist within the market at some point in the future.

As far as I understand it, 'resource' and 'commodity' are interchangeable terms in discussion of trade and markets. I prefer 'resource', because as a concept it's not so narrowly defined by the trade relationship.

 

[Gabba Flamenco Crossover]

Fascist pig! Just wait till the Chomsky group brain read this - hmlt's going to be pretty pissed off with you.

From where I am, Vim, the battle lines are between the sceptics and the true believers, which puts you and HMLT on the same side. Sorry!

 

[vimothy]

From where I am, Vim, the battle lines are between the sceptics and the true believers, which puts you and HMLT on the same side. Sorry!

Very postmodern - he won't like that either.

 

[vimothy]

As far as I understand it, 'resource' and 'commodity' are interchangeable terms in discussion of trade and markets. I prefer 'resource', because as a concept it's not so narrowly defined by the trade relationship.

A commodity is always a resource, but a resource is not always a commodity. At least, that's the lexicon I'm working with. There are obviously others but that's why it's a good idea to define terms.