Editorial
Globalization and Globalization
by Fred E. Foldvary, Senior Editor“Globalization” has now become as much a propaganda term as “capitalism.” Critics of markets complain about “capitalism” instead of private enterprise or markets because they can exploit the meaninglessness of the word. They first use “capitalism” as a label for industrial economies, and then note all the social problems we have, which must therefore be caused by capitalism, and so government must tax, restrict, and even eliminate private enterprise. Note here the subtle shift of meaning of “capitalism” from a label for today’s mixed economies to private and allegedly free enterprise that is doing the damage.
The same propaganda technique occurs with “globalization,” which also has two meanings. Globalization can mean lower trade barriers and more interconnectedness, as with the Internet. Secondly, globalization can mean the rule of international governments such as the World Trade Organization, World Bank, International Monetary Fund, and the United Nations. The same trick is used as with “capitalism”: first call today’s system “globalization,” then drag out a big list of social problems, blame it all on globalization, and then declare that the remedy is to restrict global trade and transnational corporations. The clever trick is to subtly shift the meaning of global from world governments to free trade, and blame the problems on trade.
These critics blame environmental destruction on “globalization.” But it is not trade as such, but governments, including international governments such as the WTO, which are inflicting rules harmful to the environment. When the WTO overrules national governmental protections for porpoises killed by tuna fishers, this does not promote true free trade. Critics of trade think so because they don’t understand the concept of markets.
A purely free market is an economy in which all activity is voluntary for everyone. Pollution is a forced invasion into other’s domains, and if there is no compensation for damages, this violates others’ property rights. In a pure market, any pollution and other destruction of others’ property would be compensated, and this cost internalizes the cost, and reduces the damage. So when government permits pollution and the destruction of wildlife, this is not free-market trade but a subsidy and privilege granted to plunder. To blame “globalization” for such damage is to fuzz up the cause and fool gullible ignorant people into thinking that trade as such is the problem.
Critics of trade also blame “globalization” for poverty. They point out that corporations take hold of large agricultural lands and push the workers to poverty. But again, trade as such cannot do this, since purely voluntary transactions necessarily make all parties better off. When the wealth of an economy is sucked up and taken out by a corporate land owner, the real cause of the problem is the government that is letting the company take away the land rent. Wages are low not because some corporation is greedily setting the wage too low, but because the least productive land, or margin of production, has been pushed out to a low-productivity area. The low wage there sets the wage for the whole economy at subsistence or worse.
The remedy is clear to anyone who can think straight. The government should collect that rent and use it for public benefits or distribute it directly to the whole population. That would also enable the state to remove taxes from labor, including sales and value-added taxes. Workers would benefit twice, once from their share of the rent, and again with higher net wages. Indeed, true free trade requires the removal of domestic tax barriers, not just tariffs on foreign goods.
Some corporations may indeed be greedy, but it is international and national government that give them these subsidies, favors and privileges. Corporations do not typically have armies; they cannot force people to buy their products or work for them. These corporations exploit the cheap labor and free natural resources made possible by governmental force.
The critics are correct in saying that corporations bribe governments into giving them privileges. But the chiefs of government are to blame for accepting the bribes and by their corruption, ruining both economies and environments. In a democracy, the people are to blame for electing these corrupt chiefs. The structure of government facilitates this, and the people are too busy to act to change that structure. The whole mess is then blamed on “trade.”
Critics also complain about the products, such as fast-food restaurants and consumer goods. But again, few are forced to buy these. If small businesses are being squeezed out by corporate giants, the first remedy should be to remove the governmental costs imposed on them with taxes and restrictions. Instead, the critics call for even higher taxes and restrictions on trade.
Finally, the critics of trade complain about currency speculation destabilizing developing economies. But who has set up the shaky monetary systems and their unrealistic exchange rates? Governments world-wide control money and banking. If speculators exploit the weakness of a monetary regime, why blame them only and not the government that rigged the exchange rate?
Like propagandists who cry about capitalism, critics of globalization exploit the ignorance of the public and the confusion of terms with shifting meanings. You don’t need to fall for this if you think for yourself and keep asking: What do you mean? and: How do you know?
Copyright 2002 by Fred E. Foldvary. All rights reserved. No part of this material may be reproduced or transmitted in any form or by any means, electronic or mechanical, which includes but is not limited to facsimile transmission, photocopying, recording, rekeying, or using any information storage or retrieval system, without giving full credit to Fred Foldvary and The Progress Report.
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