The allure of economic nationalism, alas, isn’t only real, it’s also powerful. Even once-libertarians aren't immune. Yet as Don Boudreaux points out in this guest post, far from being imposed on us it's so popular that governments actively have to suppress it. Because globalisation, as he says, is a "fundamental human activity" that benefits us all ...

Defending Globalisation

Guest post by Don Boudreaux

THIS PAST SEPTEMBER, THE CATO Institute launched a major new initiative called “Defending Globalisation.” The brainchild of Cato’s prolific international-trade scholar Scott Lincicome, Defending Globalisation is a multimedia project designed to explain the benefits of what is described on the project’s website as “all aspects of the fundamentally human activity that we call ‘globalisation.’”

Many people, no doubt, will object to globalisation being described as a “fundamentally human activity,” a term that conjures images of a natural process that has long been familiar to humans. But the term is accurate. Globalisation is what happens naturally when individuals in modern society are left free from government restraint to trade – free to offer to sell, and free to offer to buy, with no one compelled to accept any such offers and, importantly, with no politicians or policemen obstructing the offerers and offerees.

Trading comes naturally to humans. The trading instinct is the root cause of great commercial cities, ancient and modern. In the past, when transportation and communications were very costly and time-consuming, the natural geographic range over which intensive trading regularly occurred was small. But as the costs of transportation and communications fell, and as each of these activities became faster (with the latter becoming instantaneous literally over the whole earth), the natural geographic range over which intensive trading regularly occurs grew. Today, that natural range for many goods and services spans the entire populated area of the globe.

The indisputable truth that today the natural range of trading activity is large – certainly larger than the area of any individual country – comes in an ironic form: tariffs and other government-erected obstructions on trade. Only because people are eager to trade with people in different countries do governments feel the need to suppress this trade.

Stated straightforwardly, this truth is undeniable. Nevertheless, it is denied by the many pundits and politicians who assert that elites impose globalisation on ordinary people. The implication is that globalisation is both detrimental to the masses as well as unnatural. Of course, if these pundits and politicians really believed that globalisation is unnatural (and, therefore, must be imposed) they’d be content simply to leave ordinary people free to trade, confident that no, or only minimal, cross-border commerce would occur. The very existence of government-erected restraints on international commerce proves that those persons who are responsible for erecting these restraints understand that what must be imposed is not globalisation – that would arise naturally – but economic nationalism.

The allure of economic nationalism, alas, isn’t only real, it’s also powerful. People in different countries and different eras have willingly embraced it. Just why so many people are so easily deluded into believing that they are made better off when their access to goods, services, and investment opportunities is restricted by elites has long been a mystery. This mystery is partly solved by public-choice economics: Voters are rationally ignorant, and disproportionate political influence is enjoyed by special-interest producer groups. 

Another reason is that we humans are likely evolved to see reality as a struggle between “us” and “them,” and therefore the interest groups who stand to gain from protectionism find success in portraying actions that benefit foreigners as actions that harm us and our fellow citizens while simultaneously enriching those who mean us harm. Relevant here is the fact that trade restrictions are invariably described by their peddlers as both “protection” of fellow citizens and “standing up to” or “fighting back against” foreigners.

Free trade and globalisation, although great benefactors of humankind, are not naturally popular. It might even be closer to the truth to say that free trade and globalisation are naturally unpopular. Thus they are forever in need of sound defense – which is precisely what is supplied by the Defending Globalisation project.

I ENCOURAGE YOU TO READ every essay in this project, many of which remain to be published. I’ve read each that has been published, and attest to their excellence. Here’s a small sample of what you’ll learn.

From Johan Norberg’s contribution, titled “Globalisation: A Race to the Bottom – or to the Top?”

In his book 'Globalisation and Labor Conditions,' Robert Flanagan summarises the evidence: “Countries that adopt open trade policies have higher wages, greater workplace safety, more civil liberties (including workplace freedom of association), and less child labor.” Flanagan and Niny Khor also document this relationship in “Trade and the Quality of Employment: Asian and Non‐​Asian Economies,” in the OECD report Policy Priorities for International Trade and Jobs.

This would be extremely surprising if companies always scoured the globe searching for the lowest‐​cost country. But they don’t. If they did, 100 percent of foreign direct investment would go to the least developed countries, but in fact, no more than 2 percent of all foreign direct investment is heading in their direction. Most investment goes to relatively developed countries, and GDP per capita is the strongest influence on labour conditions. On average, richer countries have higher wages, safer jobs, shorter working hours, and stronger labour rights, such as freedom of association and less forced labor.

The race‐​to‐​the‐​bottom hypothesis got it wrong because it neglected half the cost‐​benefit analysis. If labour compensation (in the broad sense, including working conditions) were just a gift generously bestowed on workers, it would make economic sense to reduce it as much as possible, but in a competitive labor market, it is compensation for the job that someone is doing, and therefore there is a tight link between pay and productivity. Some workers might be twice as well paid as others, but that does not make them uncompetitive if they are also twice as productive.

From Daniel Drezner’s “The Dangers of Misunderstanding Economic Interdependence”:

While contemporary fears about excessive interdependence are real, that does not mean that these fears have been realised. Indeed, a quick perusal of the alleged downsides of interdependence reveal that much of what has been feared has not come to fruition.

For example, consider the allegations about how China gamed the liberal international order to serve its own revisionist ends. It is undeniably true that as China has grown economically stronger, it has also grown more repressive and more revisionist. Neither of these facts, however, falsify the liberal theory of international politics. 

The liberal argument posits that interdependence constrains rising powers from pursuing more bellicose policies than they otherwise would have. It says next to nothing about interdependence triggering democratisation. It is possible that China can repress domestically while still acting in a constrained manner on the global stage. Most of China’s alleged revisionist actions have been exaggerated. For example, neither the BRICS (Brazil, Russia, India, China, and South Africa) bank nor the Asian Infrastructure Investment Bank have challenged the Bretton Woods Institutions. Claims that the Belt and Road Initiative is an example of debt‐​trap diplomacy have also been wildly exaggerated; indeed, if anything, China’s recent lending practices suggest that it will not weaponise debts from the Global South. While China has built new institutions outside the purview of the United States, none of them contradict the principles of the liberal international order.

And from Daniel Griswold’s “The Misplaced Nostalgia for a Less Globalised Past”:

Even these adjusted income data understate the gains enjoyed by American workers in our more globalised era. In 'Superabundance: The Story of Population Growth, Innovation, and Human Flourishing on an Infinitely Bountiful Planet,' Cato scholars Marian Tupy and Gale Pooley compare time prices (how many hours people must work on average to acquire various goods and services) across decades and find that American workers have experienced dramatic gains since the 1970s. 

In particular, they calculate that the number of hours an average U.S. blue‐​collar worker would have to work to afford a basket of 35 consumer goods fell by 72.3 percent between 1979 and 2019. For example, in 1979, a coffeemaker cost $14.79 while the average blue‐​collar worker earned $8.34 per hour, meaning he would have to work 1.77 hours to buy the coffeemaker. By 2019, a comparable coffeemaker sold for $19.99 while the average blue‐​collar worker earned $32.36 an hour, translating to a time price of 0.62 an hour — a 65 percent decline. 

Using the same methodology, the authors found similar improvements for other household goods: the time price of a dishwasher had fallen by 61.5 percent; for a washing machine, by 64.6 percent; for a dryer, 61.8 percent; for a child’s crib, 90 percent; for a women’s blazer, 69 percent; and for women’s pants, 44.6 percent.

Today's workers are better off than in decades past not only because familiar goods have become more affordable, but also because new types of products have come on the market and spread rapidly.

Again, the above selections are only a slim sample of the impressive abundance of wisdom, insight, and information that await you at “Defending Globalisation.” Embrace it.

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Donald J. Boudreaux is a senior fellow with American Institute for Economic Research and with the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center at George Mason University; a Mercatus Center Board Member; and a professor of economics and former economics-department chair at George Mason University. He is the author of the books The Essential Hayek, Globalisation, Hypocrites and Half-Wits, and his articles appear in such publications as the Wall Street Journal, New York Times, US News & World Report as well as numerous scholarly journals. He writes a blog called Cafe Hayek and a regular column on economics for the Pittsburgh Tribune-Review. Boudreaux earned a PhD in economics from Auburn University and a law degree from the University of Virginia.

His psot first appeared at the American Institute for Economic research blog.