Friday, January 30, 2009

Is Globalization Beginning to Backpedal?

It's one of the questions we political science educators having been posing to students since the term "globalization" was coined -- can it go backwards? "We've all been building this big, integrated financial system," said James Rosenfield, a co-founder of Cambridge Energy Research Associates. "We didn't consider what would happen when it disintegrated."[1]

According to this article in the IHT reported from the World Economic Forum in Davos, countries are pressuring banks to lend only to borrowers in their own countries. Furthermore, the stimulus package (a term that sounds a LOT more exciting than it actually is) passed yesterday by the House revives a "Buy American" provision that states all projects must operate with only American-made goods. (See Washington Post article.)

This may at first sound like a safe move meant to ensure that big government bail-outs help out at home before going overseas. However, the world economy (of which ALL national economies are just a part) doesn't work that way.

To demonstrate, let's say that I want to stimulate the economy in my own family. My plan is to give lots of money to my relatives. (NOT that I necessarily think that this is the best way to achieve this, OR that I would ever have the resources to help out any of my family members NOR the kindness to want to do so -- just in case any of them are reading this -- but I'm trying to make the metaphor match what's actually happening). Then I tell them that they can't spend any of this money on anything outside of the family.

"You dork," my imagined brother then might comment, "How are we supposed to make money without spending money outside of our family?" And he would be, totally true to his actual character, both insightful and tactless.

BUT! -- you protest, the US economy is not like your stupid little family's petty economy! There are plenty of Americans to buy things from and sell things to, and we don't need any of that cheap crap they sell us from foreign lands where monkeys pick your pockets and pirates bury their treasure instead of buying American!

Oh, but it is, my pretty little nationalist. I'll try to avoid the cliches about globalization that use sappy words like interconnectedness and dependency, but come on -- we are all spinning on the same ball of dirt! As if it's not tough enough to run a competitive business these days without using foreign suppliers, there's also the little problem of tit-for-tat economic protectionism which did more than a little to contribute to the collapse of the world economy the last time things looked this bad.

Is it really wise (or even possible) to try to undo the globalization of financial capital markets? Vote now!


Artificial Wisdom said...

A large growth that occurs when economies interact is that of the middlemen, and then the service sector servicing those middlemen. Disentangling an economy from a larger economy would simply force everyone to operate outside of the law.

Gavin said...

On the large scale 'buy American' or in my case 'buy Irish' its a bit overwhelming. For me its keep it simple, buy local, and ask questions. Buy local - get out of chain supermarkets and use local butchers and fruit an veg sellers, ask where their produce comes from, if the same as the supermarket there is no point, if Irish then there is a point unless extravagantly overpriced. Ireland easily grows great vegetables but most chain stores do not sell Irish vegetables, they choose central European suppliers. Unless you are feeding a family of five, the extra cost (not always) of shopping locally can be very little.
We are a world who wants everything for as cheap as possible, so much of what we own we would never own if it was produced in our own countries with labour laws etc.

Nejla said...

BTW, here is economic analyst's Marc Faber's opinion:
"The federal government is sending each of us a $600 rebate. If we spend that money at Wal-Mart, the money goes to China. If we spend it on gasoline it goes to the Arabs. If we buy a computer/Software it will go to India. If we purchase fruit and vegetables it will go to Mexico, Honduras and Guatemala. If we purchase a good car it will go to Germany. If we purchase useless crap it will go to Taiwan and none of it will help the American economy. The only way to keep that money here at home is to spend it on prostitutes and beer, since these are the only products still produced in US. I've been doing my part." ["Prostitutes and beer in the US", Daily Telegraph 10/17/2008]

willis said...

I'm not an economist but it would seem to me that "un-globalization" would be impossible. Hell, I doubt that we'll even be able to stop future globalization. Not sure if I can explain my opinion but just consider the "Euro". How do you back it out to Pounds, Marks, Francs etc. All the Walmarts in Mexico or the KFCs and McDonalds in other global locations play a part in this as well. I think Walmart sucks in struggling countries like Mexico (I think it sucks here in the US!), but once it's murdered all in town small family shops, how do you put all their local employees out of work and restart those shops?

Pretty good question though!!