Globalization, theory and practice...

[nadinbrzezinski]

Ok here is what our wonderful policy wanks are doing. Globalization is supposed to use advantageous competition. To use an extreme example, used by oh Ricardo back in the 19th century... producing wine in Iceland would be nuts. Why? Well growing grapes is kind of hard in that weather. At the same time Cod fishing in France is hard, since the fisheries are far away.

So both nations benefit with better product, that is cheaper when they exchange wine for cod. This is the theory behind globalization, in a nutshell. And for some things, see cocoa growing, coffee growing or even SOME manufacturing it does work.

Now the reality is that either we are facing a complete transformation of the economy where advanced economies are to become intellectual and service centers... which will lead to a lot of dislocation until that happens, or we have seen the deep and dirty underbelly of this, which taken to the extreme leads to the end of consumerism since workers cannot afford the baubles.

Now reality is a few of these baubles are cheaper when made points east... not just because of cheaper labor, but all other externalities they don't pay for... read taxes, education, roads, health care, et al. But there is a limit, and reality is peak oil could bring all this house of cards tumbling down.

But the theory is exactly that wine\cod example. With extreme products due to weather yes globalization does work. That includes things like spices, which has collapsed in price over the last five centuries. But we have a few problems with the system. That said, this is what our policy makers are looking at... the ideals, and I fear they are missing the reality on the ground...

But understanding what they are talking about is a good thing... if you are going to be critical about it. And lord knows there is plenty to be critical about...

[Lasher]

1. Comparative advantage

A sound theory in reasonable application, corrupted to enrich the already-rich at everybody else's expense. How foolish it is for a nation to dismantle a relatively self-sustaining economy, in favor of a system that produces bananas and nothing else.

[nadinbrzezinski]

4. If in theory producing banannas and only bannanas

gave you all you need to get everything else at a good price...

But the problem is that you cannot truly be dependent to that level and remain independent.

That is one of the major, ahem... wrinkles.

[Lasher]

5. Exactly right.

You musta read a book or two.

[nadinbrzezinski]

6. And a few articles

yep, in the middle of it.

[Jim__]

2. Ricardo's theory of comparative advantage says more than that.

It says by each country producing what it can produce with the greatest relative advantage, the total amount of available goods increase (source:wikipedia):

Comparative advantage explains how trade can create value for both parties even when one can produce all goods with fewer resources than the other. The net benefits of such an outcome are called gains from trade. It is the main concept of the pure theory of international trade.

My problem with this is that there is an implicit assumption of full employment inherent in the theory; and when we're looking at the whole world as trading partners, we looking at over 90% of the world being employed.

[nadinbrzezinski]

3. Of course there is far more to this

but realize not everybody knows what it is, and I prefer to start discussing things at the most simple of levels. And Ricardo's example is exactly that, a simple level.

Thank you for adding complexity...

And you also forget something else when it comes to employment... how many millions were around in oh 1810? How many BILLIONS are today on the surface of the planet? I will safely say that is something that David Ricardo could not quite fathom. Now his friend Malthus did. And we may be approaching a Malthusian curve.

Ah there goes the curve ball...

[izquierdista]

7. Trade is really unnecessary

The French can do just fine with locally caught fish and Icelanders can ferment potatoes if they need some hooch to drink. In fact, throughout most of history people did without trade, eating what was fished and hunted and grown locally, building with local materials, and making cloth from cotton or flax or whatever fiber was convenient. In ancient times, trade was for exotic non-essentials like myrrh or spices, and only the haves and have-mores could afford them. If a tribe of people happened to live in a particularly deprived area, they might have to make a trade trip once a year to go and trade their surplus with a neighboring tribe for a necessity, usually salt.

Only when cheap transportation came on the scene did comparative advantage show up. Suddenly, all that excess cod in Iceland could be traded for the excess wine and the standard of both sides rose, for it was not a zero-sum exchange. But in the two or three centuries that have passed since cheap bulk transportation was invented, capitalists have far oversold the benefits of trade, for the purpose of lining their own pockets. They have conditioned the public to expect fresh strawberries any time of the year, season be damned.

As time goes on, and the era of cheap transportation comes to an end with Peak Oil far in the rearview mirror, people will again realize that trade was overrated, just like Italians know now. Ask any Italian from a coastal area where the best seafood in Italy is, and he will tell you his own town. Not 30 km up or down the coast, but his own town. Which also has the best olive oil, the best wine, the tastiest artichokes, etc. They had trade in the Roman era, then it fell by the wayside until Marco Polo showed up. If it goes away again, their way of life isn't going to fall apart.

Trade has really turned the world upside down. I'm reminded of that when I go to the dollar store and see little bags of rocks, carefully selected and packaged by Chinese hands and shipped 10,000 miles so that people can drop them into the bottom of their flower vases.

[nadinbrzezinski]

8. There are SOME benefits to trade

see those spices... I like to be able to afford salt and pepper in my food.

But there are many problems with trade... apples from New Zealand in the US is a problem. Especially when we have Apples in the US RIGHT NOW.

Peak oil will lead to a re balancing of the word economic system, which now is in the POST CAPITALIST era, which again people will ONLY recognize once this age is over. What we live in is a corporatist economy, but they use "capitalism" for propaganda purposes.

But in order to understand what our wanks speak off... people need to first see what exactly they are talking about.