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From NewsLink, Vol. 4, No. 4, Summer 2000
As an article of faith, most economists believe that globalization, free trade and integrated markets create far more benefits than costs for consumers and producers. For example, a Berliner can choose to eat Moroccan food, read the New York Times on the Internet and visit Paris without much fuss about currency exchange rates or passports. The British can prevail in Hollywood as actors, screenwriters and costume designers, creating a community of exiles that can support several cricket teams. And the cocoa and coffee farmers of the Ivory Coast, once captives of middlemen, can now use cell phones to check prices on London's commodity markets to get a better deal.
Over the course of the last quarter century, the much-maligned phenomenon known as globalization has removed barriers, enabled easier access to credit, disciplined governments, increased consumer choice and vastly improved the standard of living for people around the world. It also has – not so incidentally – increased personal freedom for millions. What globalization has not had is an enthusiastic cadre of defenders willing to jump into the fray whether in Seattle or elsewhere. To wit, supporters – intellectual and otherwise – have ceded the debate to a backlashing Seattle slew of left and right. This class of international cosmocrats is too busy creating wealth to enter the gritty battle of politics and policy. This poses a major problem.
In this threatening specter of global change, Ross Perot, Pat Buchanan and Ralph Nader have all fanned sentiment over homespun goods, lost jobs, environmental doom and vast multinational conspiracies. And the public is sympathetic. In a Business Week poll, 52% of those surveyed express sympathy for anti-World Trade Organization protesters. Slightly more believe that free trade is bad for the American worker.
The economic and political consequences of silence are far reaching. Global capitalism hands great power to the individual and in turn strikes a telling blow for the principles of classical liberalism: free trade, limited government and free movement.
Nations still matter.
In A Future Perfect, John Micklethwait and Adrian Wooldridge, of Britain's The Economist, have chosen not to remain silent: “Globalization is helping to give birth to an economy that is closer to the classical theoretical model of capitalism, under which rational individuals pursue their interests in the light of perfect information, relatively free from government and geographical obstacles. It is also helping to create a society that is closer to the model ... in which power lies increasingly in the hands of individuals rather than government and [in] which people are free to pursue the good life wherever they find it.”
The authors suggest that the so-called losers in this economic upheaval “should usually blame things other than globalization for their plight.” Most likely it's outdated governments or closed societies. For example, Third World nations would gain substantial access to new markets if First World nations removed restrictions and tariffs.
Ironically, the authors base their case on deflating some of the exaggerated claims made by supporters and opponents alike: that globalization leads to bigness; that it ushers in global brand names like Coke and Mercedes at the expense of diversity; that it has repealed the business cycle; that free trade is a zero-sum game and that distance and geography have been vanquished by the Internet.
In this gilded age, nations still matter. Canadian provinces exchange 12 times as many goods and services with each other as they trade with U.S. states. Countries in the European Union may talk of a unified market but people are still six times more likely to trade with fellow countrymen. If the Japanese gave up buying everything American, the U.S. would only lose 1% of its GDP.
An easy myth to debunk is the notion that globalization is a zero sum game. Simply put, globalization makes the American pie bigger. Now in effect for six years, NAFTA has not taken a toll on American jobs. American workers aren't in direct competition with Mexican workers. Because of product sharing between the two nations, the U.S. stands to benefit as Mexico expands trade with other nations.
In the final analysis Micklethwait and Wooldridge ratify both Adam Smith's principle of the division of labor and David Ricardo's principle of comparative advantage. Trade continues to best allocate the resources to the nation that can best employ them.
For most of the 20th century, the ideals of free trade have rarely been articulated. John Maynard Keynes turned out to be a lukewarm supporter, reserving a soft spot for homespun goods. President Clinton, according to the authors, cowed by political concerns about “fair trade,” speaks not only half-heartedly but “has failed to come up with one memorable phrase on the subject.” The authors' role model for proselytizing the free trade gospel lived in the 19th century. In 1846, Sir Robert Peel and his Conservative government repealed the notorious Corn Laws, tariffs that protected wealthy farmers at the expense of consumers. Peel's support cost him his party, but thousands of people contributed their pennies to build memorials to him.
A Future Perfect is a tribute to Peel and a clarion call to free traders everywhere.
NewsLink is the quarterly newsletter of the Beacon Hill Institute for Public Policy Research at Suffolk University. © 1996-2003. All rights reserved.
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