Wednesday, 1 March 2017

Economic globalisation is not political globalisation


Just as the concept "power" is the dangerous conflation of two totally different and opposing propositions -- economic power and political power, i.e, the dollar and the gun, which should be totally separated in practice and never combined -- so too the concept of "globalisation" mistakenly mashes together two totally different things, explains Thorstein Polleit in this guest post: economic globalisation and political globalisation.
The former is what makes us all wealthier and the world better; the latter makes making wealth harder and freedom less prevalent. Yet it is the latter that is on the rise, and the former that is increasingly under threat.

Globalisation has fallen into disrepute. More and more people are rejecting it outright as unfair and as a source of all sorts of evil — including economic crises and migration.

This kind of blanket condemnation of globalisation however is a huge problem. The reason for this becomes apparent if one considers the fact that globalisation has two opposing dimensions, an economic and a political one.

Economic globalisation is synonymous with the cross-border division of labour. Today, no country produces solely to satisfy its own needs, but instead also for producers and consumers in other countries. And each country makes what it knows best, relatively speaking.

Economic globalisation, with free trade being a natural component, increases productivity. Without it, the poverty on this planet would not have been reduced to the extent it has been over the past decades.

From the very outset however, political globalisation has nothing to do with economic globalisation. It aims to direct and determine all relations between people on the various continents by way of authoritarian rule. The decision about what is being produced and consumed as well as where and at what time isn't to be found by the free market, the division of labour and free trade, but instead by an ideological-political creative force.

The core argument of political globalisation is that coping with ever more complex problems of this world — ranging from economic crises to the protection of the environment — requires a central decision-making process. The nation state — as a sovereign representative of people — has become obsolete and needs to be replaced by a globally-active political power.

Of course, the thinking behind this opinion is purely socialist-collectivist.

It is also the basis of the European Union (EU). Ultimately, it aims to create a European super state, in which nation states will dissolve like sugar cubes in a hot cup of tea.

For the foreseeable future, this (European) dream has come to an end. The desire to realise uniformity has foundered amid hard political and economic realities. The EU is undergoing radical change — at the very last following the British decision to leave the EU — and may even be about to break up.

With Donald J. Trump taking over as president of the US there is no longer any intellectual support by the US for the European unification project. The change of power and direction in Washington has ousted the political globalisers — which gives hope that the future US foreign policy will be less aggressive in military terms. President Trump — unlike his predecessors — doesn't strive to enforce a new world order. [Yet. - Ed.] But at the same time, it is the economic globalisers who are concerned.

And that's understandable. The Trump administration fancies the use of protectionist measures — be it in the shape of import duties or tax discrimination — to boost production and employment in the US, to the detriment of other countries if need be.

Such an interference with economic globalisation and the turning back of the clock wouldn't just infringe on prosperity. It would probably also rekindle old and new political conflicts. But, it doesn't have to be that way.

With the planned gigantic easing of the tax burden — to the tune of $9.5 trillion — President Trump may be able to generate such a positive economic dynamic that all the backward-looking protectionist electoral promises will disappear in a drawer. [But not if spending increases as promised, leaving the US$20 trillion debt to become ever more unsustainable – Ed.] And that would be most desirable: Globalisation — the voluntary division of labour and free trade — promotes a productive and, what's more, peaceful cooperation across borders.

And that's why it is important to preserve economic globalisation.



Dr. Thorsten Polleit, Chief Economist of Degussa and macro-economic advisor to the P&R REAL VALUE fund. He is Honorary Professor at the University of Bayreuth.
His post first appeared at the Mises Wire.


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