Myths of our time: globalisation

[JohnT]

Here's a more thorough analyis: http://www.fff.org/freedom/0199d.asp

[DAVOUT]

Interesting reading, JohnT; but not a single word about the European bastards !

[Fake Boris]

Originally posted by JohnT

I've never seen a US president more despised than Bush in my life.

You really are young, aren't you?

Seriously, I really think the US was more liked during the Cold War than it is right now. People saw it as a barrier against the worse worst.

But maybe I'm wrong, since my point of view is exterior. Obviously, I guess the conscripts sent to Vietnam didn't like the presidents of the time much more...

[Master Zen]

Globalization can be good or bad, it all depends on how good your country's institutional framework can adapt to it. I am very much against of a quick "opening" and breakdown of barriers as if globalization were a panacea which it is not. I will give 2 examples: the first, my own country, Mexico which in its intent to be one of the "big boys" practically slashed all its tariffs (at least with the NAFTA countries) and ended up getting its small and medium industry absolutely devastated by foreign competition resulting in thousands of jobs lost, jobs which were much better than the crappy sweatshop jobs which sprang up later. This was a terrible economic policy, caused more by our idiot polititians who seem to prefer Mexico's image to the world more than our own internal prosperity. That being said, I am a firm believer that NAFTA was a TERRIBLE treaty, one that we were pretty foolish in having adopted at least the way it was worded. Interestingly a world bank report from a few days back showed that the overall benefits of NAFTA have so far been negligible thus proving my point. In this case, I would not support such a quick opening, it should have been done much slower and with far more government support.

The success story however, is Chile which apparently got it all right and thanks to globalization is the most prosperous country in the region. They were smart enough not to make the same mistakes we did and it also helps that they have a pretty stable and effective government and minimal corruption and bureacracy. Proof that globalization worked for them is that their poverty rate has dropped from 40% to 20% in the last 15 years.

As far as farm subsidies, I am a firm believer that subsidies should be slashed just as much as tarriffs, after all subsidies are the tariffs of the rich since those governments can afford them. However, subsides distort trade as much as tariffs do and there is no reason whatsoever to keep them while asking for reductions in the other. Obviously given that most industrialized countries are those which stand to benefit from farm subsidies, we cannot expect any WTO ruling against this although the pressure is slowly increasing. The thing about subsidies though, is that they can't be targeted toward any country in particular. For example, Mexico and the US can agree to slash their tariffs and that would only affect trade among themselves as tariffs with other countries would be maintained. If you eliminate subsidies you are basically dropping your guard against everyone. (a good but rather unrealistic solution WTO-wise would be to drop subsidies and increase tariffs).

That is the reason why the US is reluctant to drop its farm subsidies unless the Europeans do also, and given that Euro agro is FAR more innefficient its actually the Euro block (led by France) which are the ones who stand most to lose by this.

Which is of course a shame since many 3rd world agricultural produce could compete quite well but end off screwd up because of these distorted prices. True globalization will only happen when these farm subsidies are eliminated, in the meantime, it only serves to benefit those countries rich enough to maintain such subsidies.

[Dinner]

Exports from Mexico to the US & Canada have gone through the ruff since NAFTA came into effect. They aren't all just sweat shop jobs that were created. There's alot of Automobile factories and high end electronics jobs.

[Fake Boris]

Mexico which in its intent to be one of the "big boys" practically slashed all its tariffs (at least with the NAFTA countries) and ended up getting its small and medium industry absolutely devastated by foreign competition resulting in thousands of jobs lost, jobs which were much better than the crappy sweatshop jobs which sprang up later.

I LOVE YOU SO MUCH.

This is a blessing. I'm already expecting Imran and JohnT.

Seriously, in your reading of the situation, what has Chile done right to benefit from globalization?

edit: all right, I'm exagerating here, but I consider empirical evidence from a Mexican to be interesting material.

[Master Zen]

Originally posted by Oerdin
Exports from Mexico to the US & Canada have gone through the ruff since NAFTA came into effect. They aren't all just sweat shop jobs that were created. There's alot of Automobile factories and high end electronics jobs.

The auto factories have been here since the 70's. And the high-end electronics jobs are export-geared which means that when those products enter the national market the can even be more expensive. Same with textiles, much of the jeans, shirts, etc. are made here, exported to the US, re-packaged and re-sold over here at US prices so tell me where are the benefits?

[Master Zen]

Originally posted by Oncle Boris

I LOVE YOU SO MUCH.

This is a blessing. I'm already expecting Imran and JohnT.

Considering they don't even live here I don't see how they can really present empirical evidence in favor but anyway...

Seriously, in your reading of the situation, what has Chile done right to benefit from globalization?

IMO Chile has benefitted because 1) they did not do it so recklessly as Mexico 2) they have a far superior political system than ours, this benefits the country because the benefits of globalization can be distributed among those which need it the most, in other words, the poor. Unlike Chile, poverty in Mexico has not decreased, it has stayed more or less the same (40% poor, 25% dirt poor), plus, because of our reckless opening of our agro sector (something which the US did not reply in kind because of the farm subsidies), the agro sector was also hit terribly and that is where most of the poor people work in.

I read a pretty idiotic editorial the other day in the Washington Post claiming the "success story" of both Mexico and Chile, nothing could be farther from the truth. Mexico has not shown any substantial growth compared to the pre-NAFTA era (hell, we were growing at 8% average during the 50's and 60's even with our damn tarrifs!), the real minimum wage has dropped 71% since 1994 (the year NAFTA went into effect), purchasing power has not yet reached its 1982 level, and income inequality has worsened considerably. We also have the highest unemployment rate in recent memory at this moment.

So has NAFTA helped? Yes, it has helped the export sector. It has helped those companies that were already highly developed before 1994, but it totally devastated light industry though which employs far more people than the big companies. It has devastated the agro sector. I of course blame the government for having signed it so quick and for not being able to channel the possible benefits to help the poor.

Globalization is an opportunity, not a recipe for success. If employed properly it can have excellent consequences (Chile) if it is mired under a terrible and corrupt political system it can do more harm than good.

[Ramo]

It was the "Freedom to Farm Act" and it was pushed by Republicans in Congress who wanted to end subsidies which they saw as being a waste of tax payer money.

This is not true. The Freedom to Farm Act didn't end agrisubsidies, but shifted them from one form to another; in fact, the FtF Act drastically increased payments to farmers.

[chequita guevara]

"Opposition to globilization" is nothing of the kind. It is opposition to anti-democratic treties which strip citizens of the right to determine their own destiny. If Americans decide they don't want to eat shrimp caught in a way that kills mass quantities of sea turtles, Malaysia can take us to the WTO and force us to either open our markets to turtle killing shrimp or pay damages to Malaysia.

How are American shrimpers supposed to compete if they have to follow environmental regulations and their foreign rivals don't? How can American businesses compete if their foreign rivals can hire childern or use slaves? If a company can't get its products into the major markets because it doesn't comply with environmental or labor protections, it won't make it any easy for them to get into those coveted markets if they move from Mexico to Vietnam. They will still be blocked. If the price to get access to America and Europe's markets are environmental and labor standards equal to the major countries, then they will adopt those standards, not move around.

[Ned]

Originally posted by chegitz guevara
"Opposition to globilization" is nothing of the kind. It is opposition to anti-democratic treties which strip citizens of the right to determine their own destiny. If Americans decide they don't want to eat shrimp caught in a way that kills mass quantities of sea turtles, Malaysia can take us to the WTO and force us to either open our markets to turtle killing shrimp or pay damages to Malaysia.

How are American shrimpers supposed to compete if they have to follow environmental regulations and their foreign rivals don't? How can American businesses compete if their foreign rivals can hire childern or use slaves? If a company can't get its products into the major markets because it doesn't comply with environmental or labor protections, it won't make it any easy for them to get into those coveted markets if they move from Mexico to Vietnam. They will still be blocked. If the price to get access to America and Europe's markets are environmental and labor standards equal to the major countries, then they will adopt those standards, not move around.

Che, they are saying the same thing about us and our subsidies and tarriffs on steel, etc.

However, one has to wonder about restrictions placed on American companies alone that no one else has to obey. This cannot remedy any problem the restrictions are met to address. But, at the same time, it does hamper or actually drive out of business the US company.

What we need are international treaties for all and the ability of companies harmed by illegal competition to sue the violators in international court for damages. Just having remedies for countries is not sufficient.

[Fake Boris]

Originally posted by Master Zen


Considering they don't even live here I don't see how they can really present empirical evidence in favor but anyway...

I was talking about you, your own empirical evidence!


As for Chile:

I have started reading a World Bank study (the World Bank is moderate and trustable) saying that a raise in the minimal wage actually hurts hiring of poor/young/female workers.
I couldn't really check their methodology, however, since it was full of complex mathematical formulas. *cough* I'm an idiot anyway...

But I suspect then that it could be better, on a few years scale, to have less jobs but of higher quality, because the skilled workers would spend their decent salary on local products and truly help the economy- unlike corporations who bring the profits home and do everything to starve their unskilled workers (those with no power).

It would warrant more investigation, but it seems to me that a fair dose of protectionism can help poorer countries. Just like the FTAA is not going to do.

Oh, and BTW, this is the reason the US tried to depose Chavez: he was openly against the FTAA.

[TCO]

insert Roland is a mpussy for never visiting his coutnry thatr he hates troll

[Master Zen]

Originally posted by Oncle Boris

I have started reading a World Bank study (the World Bank is moderate and trustable) saying that a raise in the minimal wage actually hurts hiring of poor/young/female workers.
I couldn't really check their methodology, however, since it was full of complex mathematical formulas. *cough* I'm an idiot anyway...

An easy way to look at it is this way: A company spends X amount of money on the salaries of Y amount of people, if the minimum wage goes up without any corresponding increase in the company's spending then it cannot pay all those people anymore so the solution is to fire some of them. That's why countries with rigid labor laws frequently have huge unemployment rates, for most dim-witted polititans, raising the minimum wage might seem like a patriotic pro-worker thing to do but once put in practice, the market will likely end up with a lot of fired people which in the end is worse (and those getting fired will be the ones winning the minimum wage: the poor/young/female as you mention).

But I suspect then that it could be better, on a few years scale, to have less jobs but of higher quality, because the skilled workers would spend their decent salary on local products and truly help the economy- unlike corporations who bring the profits home and do everything to starve their unskilled workers (those with no power).

Most studies regarding the "globalized" industries of third-world countries find empirical evidence that the more they open up to foreign competition, the more technology they adopt, demand for skilled workers increases, driving the unskilled out of that industry and thus creating an even wider gap among the income distribution. That's why you'll see in countries like Mexico massive local multinational corporations and conglomerates producing world-quality goods and paying great wages while the rest are very small backwards low-wage industries (or large low-wage-based factories like the sweatshops). That globalization increases the income inequality of a country is a proven fact, even in the success stories like Chile since only certain sectors profit from it (sectors that were already prosperious) while the rest collapse due to lack of competitivity.

It would warrant more investigation, but it seems to me that a fair dose of protectionism can help poorer countries. Just like the FTAA is not going to do.

Size of a country matters most, or rather the size of their internal markets. Small countries like Nicaragua, Haiti, or El Salvador, for example, benefit GREATLY from globalization, in fact there are practically no compelling reasons not to open up in those cases since their small internal market is not big enough for more developed industries and thus need to take advantage of the larger world market. For example, think of how Volvo or Saab could have possibly survived selling only on the Swedish market, or Nestle in the Swiss market. Impossible. However, larger countries like Mexico, Brazil or Argentina have much more to lose because these countries already had an established industrial base before globalization. As you can see this is another reason why Chile benefitted more as it was a smaller country with much less developed industry than Mexico.

I have always been a strong supporter of the Korean trade model which basically protected "strategic" industries for a limited time until they were competitive enough upon which tariffs and taxes were dropped down. This was done step by step, starting with light industry, followed by heavy industry, then electronics and finally information technology. My other idea for successful trade is to group free trade zones among similary-sized economies where competition is more even. That's why, IMO, latin america would benefit far more by a series of regional free trade zones (Mercosur is one, a central-american & carribean zone could be another), followed by a latin-american trade zone, and THEN as a final resort in, say, 10-20 years a complete American trade zone including canada and the US. Sadly, I think that the FTAA is being very hastily drawn up, it is being pushed too soon and will end up having these countries competing against two of the most developed countries in the world with hardly the experience or the preparation behind them.

My forecast? If the FTAA comes into effect in 2005 as "promised" it might as well be called the SSAA (Sweatshop Agreement of the Americas) because that is likely what most of the poorer countries of the regions will turn into as I doubt the treaty will have provisions like the European Union to help these countries out (heck, its largely thanks to the EU that certain countries like Spain actually became prosperious).

[Fake Boris]

Now, Master Zen, that is an interesting reading. Care to suggest me some sources to further my understanding of the topic?