The Perils of Globalization

So this week, Trump met with the manufactuering CEOs and said that he wants jobs to come back to America.  He's been meeting with many CEOs and top business people, asking for this very thing.  The question is: what is he doing?

The answer is simple: Trump is trying to reverse the effects of globalization on America.

Now, it's interesting to see that the effects of globalization have gotten so bad that the president of the United States is stepping in and getting involved to stop it.

Why has it failed?  In theory, globalization sounded like such a good thing; people were well off and it was going to be great to allow other people to have a piece of the pie as well.  The poor would be raised out of poverty, there would be great equality and fairness in the world, and it would all be great.  At least, that was the theory.

When we look at the actual results, it's not good.  Wages are down, unemployment is up, and the poor of the world aren't really that much better off.  Why didn't it work?

In a capitalist society, everyone is free to do as they wish: start a business, or get a job, or perhaps to do nothing.  In such a society, there will be some rich, some average, and some poor people.  That's how capitalism works, and for the most part, it works as long as there are safety nets and support systems in place to help those who are truly poor and destitute and need help.

Countries are the same way.  There are some rich ones, some average ones, and some poor ones.

When it comes to economic theories, the one that has been the worst failure is communism.  In communism, everyone is equal - a doctor makes the same as a plumber, and everyone from the highest educated to the least all get the same thing.  As the saying goes, if you have a phone, the government comes by, takes it from your home and installs a phone on the corner that everyone in your neighbourhood uses.

Communism is founded on Karl Marx's idea that all people are equal, and the problem is, that idea is false.  All people are not equal.  One person might be a fantastic mechanic, but be horrible as a carpenter.  Another person might be a great carpenter, but they can't do math.  And the mathematician can't fix his car on his own.

People have different skills and talents, and treating everyone equally does not work, because it drags everyone down to the lowest common denominator.  If you're going to be paid $50/week from the government whether you empty trash, fix engines, or are a doctor - where is the motivation to study for 8 years?

Communism fails because it takes the income inquality and flattens it out.  Yes, now everyone is equal and has the same amount - but that's because everyone is poor.

So why doesn't globalization work?  For the same reason.

Countries that are independent of one another are like people operating in a capitalistic society: some do better than others, but that's fine.

Globalization is simply communism applied to countries.

Under globalization, all countries are now equal, they should all have the same wealth -- and this doesn't work because countries have different costs. If a person is living in a country like England, yes, they make more money than someone living in India, but the cost of living in England is a lot higher.

So what happens with globalization?

Now a company can hire an American worker for $50,000/yr, or the company can "offshore" the work to a country like India, where the person living there can get by on just $10,000/yr.

What it means is that workers in well-off countries all of a sudden have to complete with people who can accept a much, much lower wage than them.  The result of this?  Wages and salaries have declined significantly in the well-off countries like America.

Now, in communist countries like China, there is great wealth: it's just that the government has it all.  All the people are poor, and the key people at the top in government control the wealth.  But when we look at well-off nations like England, the government isn't running surplus budgets.  So where is the money going?

It's going into the corporations.  And the corporations are owned by the already wealthy 1%.

This is why the wealth of the 1% continues to grow when the wealth of the average person is on the decline.  The corporations, which are owned by the 1%, are now able to save tons of money in labor costs by paying people in other countries much lower wages to do the work.  This is why the middle class in well off countries is eroding so fast.

So, who has really benefited from globalization?

It hasn't been the world's poor.  Yes, some of them are a bit better off because they have low-paying jobs that they wouldn't have had before, but the real winners are the super-rich elites.  Globalization has allowed their corporations to make even more money than before, by paying lower wages.

In other words, globalization was nothing more than the shift of money: re-distributing it from the middle class to: a) the ultra-poor, and b) the 1%.  But, it should be noted, not evenly.  The ultra-poor received some of the pie, but the majority of it went to the ultra rich.  It was like taking money from the middle class, giving most of it to the already-rich, and a few crumbs to the poor.

This is why globalization is not an altruistic thing.  There are many people who support and sing the praises of globalization, thinking that it is a charitible thing because it gives to the poor and makes everyone a little more even. 

No.

Globalization is a game, played by the 1%, to make themselves richer at the cost of the middle class.  And if you're angry as you read this article, then you're likely one of the people who fell for the lie that globalization would make the world a more equal and better place.  Or you might be one of the middle class who see your bills going up, you have less and less money, and yet you thought globalization would be good for you or good for the world.  It wasn't.

On that note, observe who has been complaining the loudest about Trump's policies which attempt to reverse the trend of globalization and allow the American middle class to have decent and well-paying jobs.  The countries that have been objecting to Trump the most are the same countries that have benefited the most from globalization: the ones to whom all the jobs have gone.

These countries are not angry; they are scared - instead of growing their own economy and taking care of their people, those governments instead simply relied on the prosperity that they were enjoying from taking money out of the hands of the middle class of America.  Now that the middle class has simply asked for fairness, it means these countries are going to lose - and that's why they are complaining so much.

But the reality is; globalization should never have been a route to prosperity for them in the first.  It's like a person who steals from their neighbour's yard every night.  Yes, that person is slowly getting rich, but not in a good way.  And when the neighbour installs an alarm (which is effectively what Trump is doing), that person doesn't have any right to complain and says that their "main source of income" is unfairly being cut off.

Globalization has been a disaster for the well-off nations.  It has benefited only the super-rich of those nations, while creating huge unemployment and massively lowering wages and the standard of living.  This is why the new trend towards putting an end to globalization is being embraced by so many people.  They simply want to end globalization and return back to a system where it is okay for some countries to be better off than others, and where the middle class can once again contain the wealth, not the rich 1%.

How that will play out remains to be seen.  But hopefully you understand now, there is nothing noble or altruistic about globalization.  Yes, we still need to solve the problem of economic inequality in the world, but globalization is not the solution.

LKvi