Globalisation is shorthand for "maximised free-trading". Globalisation is
best summarised by David Ricardo's Law of Comparative Advantage (RLCA).
RLCA is as economically stated as Isaac Newton's Laws of Motion and
Gravitation (NLMG).
RLCA and the NLMG are both irrefutable. At least, they are both irrefutable
within certain terms of reference. In the case of NLMG, they are true and
incredibly accurate for most purposes but don't apply over extreme
distances when they have to be modified by Einstein's Theory of Relativity
for absolute accuracy.
What are RLCA's terms of reference? Unlike NLMG, it is not the case that it
doesn't apply when certain limits are exceeded. In the case of RLCA it
surely doesn't apply when certain preliminary limits aren't reached. So
what are those minimum limits or conditions?
In order to find out, let's state RLCA in simple terms. If I can do or make
several different things but am especially efficient at doing one of them,
then it pays me to concentrate on the one I'm best at, produce a surplus,
and then exchange that surplus with one of the things I'm less good at
doing but which someone else is especially good at. It not only pays me to
do this but also the other party. The more that these exchanges of
"most-efficient-goods" can be maximised, the better-off will all be
concerned. We both profit from the arrangement.
In this way, just to choose one example, South Korea, with an average
annual income of US$400 (in today's prices) in 1955 was able to make some
goods more effficiently than some western countries and, by exchanging with
other western goods, was able to raise its average wage to something like
US$24,000 today. More generally, the ratio between the average wages in
about 30 or 40 previously poor countries and in America has changed from
about 25 down to anything from between 5 and 10 in the last 40 years or so
-- and it is still reducing.
But the smooth working of RLCA assumes that (if we talk of trade between
countries) that both countries have a range of different skills and
products from which the other can choose. It also assumes that governments
on either side don't favour some of their industries with special
privileges, and thus don't distort the fair working-out of prices generally
within its economy. It also assumes that both countries are democratic
enough to able to be able to offer or allow a high enough standard of
education to all (boys and girls) which will give them sufficient skills to
produce a wide enough variety of goods and services (for their own purposes
and also from which to choose the most efficient for trade). It also
assumes that all individuals (men and women) taking part in trade, whether
rich or poor, are equally protected by just laws of property and contract.
It also assumes that there is a culture that welcomes individual
initiatives and doesn't impose bureaucratic or religious barriers in their
way. It also assumes that there isn't a traditional clique of power- or
wealth-owners who will either tax free trade too heavily or limit it for
reasons of insecurity.
All these limitations will prevent the beneficial workings-out of RLCA and
thus of globalisation. Each one of them has been difficult to reach in the
case of the 30 or 40 countries which now carry out the bulk of the world's
trade. Some of these conditions have involved civil wars and bloody
revolutions, some have taken centuries to accomplish. Casting one's eyes
briefly over Latin America, the ex-communist bloc of Central Europe, the
Arab world and Africa, one can choose one country after another (probably
close to about 100 altogether) which fail at least one of the above tests
badly, and usually several of them simultaneously, so they seem to face a
grim future for a long time to come.
What to do in the case of those countries? This is something that sincere
anti-globalisers and sincere economists in the World Bank and the IMF ought
to be discussing together instead of fighting each other. Anti-globalisers
ought to accept that the poor countries of the world can only pick
themselves up and maintain themselves ultimately as free and independent
nations by means of trade by at least a proportion of their populations.
The WB and IMF economists ought to accept that financial sticks and carrots
are not always the appropriate solutions -- though they might be in some
cases. In most cases, other preliminaries must be rectified first. Most
poor countries have a unique blend of problems, a unique culture (or they
wouldn't have become an independent country) and need unique solutions.
This is as far as my thoughts take me. I think the IMF has had its day now.
Its shortcomings, and probably those of the World Bank also, have been
demonstrated often enough. Instead, we seem to need an entirely new type of
international bootstrap agency with many more facilities to offer than mere
finance. How this agency can relate to individual countries or how to
create the internal motivation within them is beyond me.
Of course, all the above is assuming that the ordinary people of most of
the 100 poor countries of the world really do want to go down our
particular path.
Keith Hudson
----------------------------------------------------------------------------
------------
Keith Hudson, General Editor, Handlo Music, http://www.handlo.com
6 Upper Camden Place, Bath BA1 5HX, England
Tel: +44 1225 312622; Fax: +44 1225 447727; mailto:[EMAIL PROTECTED]
________________________________________________________________________
