The Greatness and Limits of Globalization
While globalization has made a great contribution to human dignity, it cannot solve ALL of our problems
Recently, globalization has come under attack from both the political left and the political right. This can be best encapsulated by the Guardian article titled The truth is that Trump has a point about globalization. In this article, Larry Elliot makes the argument for state intervention in international trade. Among political leaders, several notable voices such as Bernie Sanders, Donald Trump, Josh Hawley, and even Joe Biden have argued for protectionist policy. In this blog post, the terms globalization and global capitalism are used interchangeably. By globalization, I mean the opening of economies to markets on a global scale.
In this essay, I will first highlight the contributions of global capitalism, then discuss the limitations of economic progress, and then finally delve into why I think disdain for globalization has increased. The contributions of global capitalism are almost immeasurable. Economic history can best be summarized in the following sentences from Jonah Goldberg’s Suicide of the West: “Until the 1700s, humans everywhere-Europe, North and South America, Asia, Africa, Australia, and Oceania-lived on the equivalent of one to three dollars a day, Since then, human prosperity has been exploding across the world, starting in England and Holland with the rest of Western Europe and North America close behind.” It is clear that something happened around the 1700s that drastically changed the economic dynamics of the world. Before I go further, I would like to make a few caveats. First, I am not arguing that any country that opens up to the global market will observe a drastic improvement in living conditions. Global markets often support economic growth and poverty reduction, this is not always the case. Sometimes, extractive political institutions can hamper or even halt economic growth and progress. I am also not attributing all of the economic growth of the last three centuries to globalization. Rather, I am making the point that global capitalism has been a massive contributor to the reduction in poverty rates around the world.
To explain why trade works on a global scale, it is first necessary to explain why trade works on a micro-level. Conventional economic theory suggests that trade is good because it allows people to consume more than they produce. How is it possible? Because value is subjective, people can exchange things and both gain. When I go to the ice cream shop and buy a vanilla (objectively the best flavor) ice cream cone for three dollars, I am signaling that the ice cream cone is more valuable to me than the three dollars. From the perspective of the store clerk, the three dollars is more valuable than the ice cream cone. Therefore, we both go away happy.
Trade also allows people to specialize in producing things they are efficient at producing. This concept is called comparative advantage. Rather than focus on producing everything necessary for survival, countries can specialize in the production of some goods and trade for other goods they need. This concept (or lack thereof) is humorously illustrated by a man who produced a sandwich from scratch. The process took him $1500 and six months. Clearly, international trade makes our world a more efficient place.
What does this have to do with globalization? Everything. Globalization is, in its essence, the expansion of the market to a global scale. Rather than trading with those in our county, state, or country, globalization allows us to trade with people we will never know. Globalization happens by billions of transactions taking place on a global scale. What are the benefits of these transactions? A study from the Institute of Labor Economics examining evidence in China and India found: “A 1 percentage point increase in trade is associated with a 0.149 percentage point decline in poverty, and a 1 percentage point decline in the average tariff rate is associated with a 0.4 percentage point decline in poverty.” When you consider the vast increase in global trade over the past 300 years, the decline in global poverty becomes more believable.
Global capitalism has also done a great deal of good for America. A study examining the effects of international trade on employment in America came to some surprising conclusions. First, international trade is responsible for 39 million American jobs (as of 2017). Contrary to public perception, trade has increased jobs in the agricultural and manufacturing sectors in America. Lastly, and most surprising, trade has led to a net increase in employment in every US state. Supporters of international trade are true patriots.
If globalization is so great, why is it still controversial? Global prosperity is something, but it is not everything. Aristotle is quoted in Politics “Man is by nature a social animal; an individual who is unsocial naturally and not accidentally is either beneath our notice or more than human. Society is something that precedes the individual.” Mankind was meant to live in community, not isolation. There is a general consensus that civil society has been on the decline in America over the past half-century. Because of this, people have lost a sense of meaning. Economic prosperity, on its own, cannot give a social meaning. It cannot answer our deep existential questions: tell us what love is, why we are here, and whether Pineapple truly belongs on pizza (the answer is yes). Globalization cannot encourage nor discourage marriage, church attendance, or the raising of children. At the same time, I would argue that there is something deeply Christian about Globalization. Recall the Gospel of Matthew: “whatever you did for one of the least of these brothers and sisters of mine, you did for me.” (Matthew 25:40 NIV) As previously discussed, globalization has greatly increased the living standards of the world’s poor and lifted billions out of poverty. Globalization, in the past few centuries, has achieved milestones humanitarians could only dream of.
While globalization is working to increase human prosperity, it cannot fix civil society. Rather than express anger at globalization for what it has not done, we ought to praise it for what it has accomplished: give humanity the opportunity to rise from desolate poverty to affluence.