Wednesday, January 23, 2008


Globalization is not a great conspiracy to harm innocent people, but a part of normal human development. It is the natural outworking of improvements in communication and transport.

Two hundred years ago, everything that a person could consume had to be produced in their village. Only the rich could afford Chinese silk or Indian tea. Life was pretty mean for ordinary people. I would not want to go back to that.

Improved communication and transport now gives ordinary people access
to a vast range of goods and services that our ancestors never dreamed could be possible. At the same time the expanded division of labor has dramatically reduced the cost of most the stuff that we buy, improving the well being of almost everyone.

The people of Detroit are currently feeling pain, but so did the people that made carriages, and harness, when cars replaced horse transport. Change always means pain for some, but we cannot lock history in the past. I don’t like horses that much, so I pleased that we no longer depend on them for transport.

There is nothing that Washington can do to prevent globalization. They cannot stop the Chinese from making television sets and they cannot stop American consumers from buying them if they are cheaper than American made ones. The only way that Washington could stop globalization would be to start a world war that disrupts global transport and communication, but who would want that?

Walmart is not the enemy. If Walmart was not importing cheap goods from China (almost all retailers are now doing the same), the pain being felt by poorer Americans would be much worse. If Americans could only buy American made, they could not afford their current lifestyle.

Americans get upset about their jobs moving to China, but they forget about what the Chinese are giving to them.

Although very poor, the people of China are effectively forced by the Chinese monetary authorities to save about half of what they produce (via an undervalued currency). The Chinese government has channeled those saving into US Treasury bonds. The money then feeds through the American financial system to the credit cards of Americans. The result is that ordinary Americans have been using the savings of the Chinese to pay for their consumer goods. If this pattern stops the Americans will feel as much pain as the Chinese.

So as well as providing Americans with cheap goods that they could not otherwise afford, the Chinese are also providing the savings so that they can buy goods that they cannot afford. They should not be to indignant about them.

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