Globalisation Helps Everyone… in Theory

Everyone gains from globalisation…at least in theory.

Some gain more than others. And there is the rub. Most people are not really interested in getting richer – not in theory. Being richer means nothing to them. It is too abstract. It is like eating. Once you have enough kilojoules…you can’t really improve your quality of life by eating more. All you can do is improve your diet slightly…maybe by being more selective about what you eat.

But just because a food is more expensive doesn’t make it more satisfying to your stomach. That is, you’re not likely to appreciate foie gras any more than you do Kellogg’s corn flakes – except that the foie gras might appeal to your vanity. It makes you feel better about yourself; because it proves you are capable of appreciating fine food…and you are able to afford it.

Likewise, if you have $100,000 in the bank…or $1,000,000…what difference does it really make? In either case are you unlikely to go hungry or homeless. It only matters because it affects your IDEA of yourself…your amour proper…and your station in life. In other words, it plays on your vanity and your aesthetic sense of yourself and your surroundings.

These considerations are not absolute. They are relative. Your vanity is flattered not by getting richer…but merely by getting richer than the people around you. Nor do you get much pleasure in living in a better house; instead, the pleasure comes from living in a better house than your friends, family and neighbours.

So even though everyone – again, at least in theory – is better off if the world’s people were able to trade freely with one another, that doesn’t mean that everyone is going to like the results. People don’t like to see others getting richer faster they are – even if they are all prospering. They’ll quickly jump to the conclusion that others are getting rich – AT THEIR EXPENSE.

The next thing you know, some blowhard in the government will be urging tariffs, fair trade, and sanctions.

We know that Asia is a big winner from globalisation. Factories are being built in every Middlesex, village and town. Real wages in China and India are doubling every ten years – or less. Consumption of meat-based proteins is increasing quickly. Apartment buildings and office are springing up overnight. Output is soaring. Coffers of central banks…and private accounts…bulge with foreign earnings.

Last week, we read that Europe is a winner from globalisation, too. Europe sells luxury products to Asia and the rest of the world. Perfumes, handbags, chocolates, watches, fashions, jewelry – rich Asians can’t get enough of the stuff. Europeans also manufacture much of the world’s state-of-the-art tools and machinery. Swiss and German toolmakers are renown throughout the globe. And they make planes, and trains, and automobiles, and subway systems, and pharmaceuticals. Altogether, Europe enjoys a trade surplus with the rest of the world, and a heavy surplus with Asia.

That leaves America. U.S. corporations are extremely active on the world stage…but more and more of what they sell is produced in Asia. From a trade standpoint, the United States is the biggest loser in the world. Its deficit surpasses any other nation…and surpasses even what economists thought possible. Of course, the trade deficit is not the whole story. U.S. companies are still very profitable…and many of them are figuring out how to get along in the world marketplace. They employ Asians to cut costs…and sell to Europeans to boost profits. And their owners – capitalists in the United States and abroad – are happy to reap the profits.

But what about the average lumpen in the U.S. of A? globalisation may make him marginally richer (he is able to buy more stuff at Wal-Mart with less money). Still, his wages haven’t really gone up in 30 years…and yes, he got a little carried away in the last great upswing in the credit cycle. Now, he owes more money than ever to more people than ever – including quite a few foreigners.

His leaders told him the new globalised economy would make him rich. Wasn’t he an American, after all – a citizen in the world’s most dynamic, most free and most competitive economy? How come he is having such a hard time making ends meet? He is likely to wonder.

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail Markets and Money.
Bill Bonner

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