| Username |
Post |
| ashu |
Posted
on 24-Apr-01 11:49 PM
Hearts and Heads
RECKONINGS
By PAUL KRUGMAN
There is an old European saying: anyone who is not a socialist
before he is 30 has no heart; anyone who is still a socialist after
he is 30 has no head. Suitably updated, this applies perfectly to
the movement against globalization — the movement that made its big
splash in Seattle back in 1999 and is doing its best to disrupt the
Summit of the Americas in Quebec City this weekend.
The facts of globalization are not always pretty. If you buy a
product made in a third-world country, it was produced by workers
who are paid incredibly little by Western standards and probably
work under awful conditions. Anyone who is not bothered by those
facts, at least some of the time, has no heart.
But that doesn't mean the demonstrators are right. On the
contrary: anyone who thinks that the answer to world poverty is
simple outrage against global trade has no head — or chooses not to
use it. The anti-globalization movement already has a remarkable
track record of hurting the very people and causes it claims to
champion.
The most spectacular example was last year's election. You might
say that because people with no heads indulged their idealism by
voting for Ralph Nader, people with no hearts are running the
world's most powerful nation.
Even when political action doesn't backfire, when the movement
gets what it wants, the effects are often startlingly malign. For
example, could anything be worse than having children work in
sweatshops? Alas, yes. In 1993, child workers in Bangladesh were
found to be producing clothing for Wal-Mart, and Senator Tom Harkin
proposed legislation banning imports from countries employing
underage workers. The direct result was that Bangladeshi textile
factories stopped employing children. But did the children go back
to school? Did they return to happy homes? Not according to Oxfam,
which found that the displaced child workers ended up in even worse
jobs, or on the streets — and that a significant number were forced
into prostitution.
The point is that third-world countries aren't poor because their
export workers earn low wages; it's the other way around. Because
the countries are poor, even what look to us like bad jobs at bad
wages are almost always much better than the alternatives: millions
of Mexicans are migrating to the north of the country to take the
low-wage export jobs that outrage opponents of Nafta. And those
jobs wouldn't exist if the wages were much higher: the same factors
that make poor countries poor — low productivity, bad
infrastructure, general social disorganization — mean that such
countries can compete on world markets only if they pay wages much
lower than those paid in the West.
Of course, opponents of globalization have heard this argument,
and they have answers. At a conference last week I heard paeans to
the superiority of traditional rural lifestyles over modern, urban
life — a claim that not only flies in the face of the clear fact
that many peasants flee to urban jobs as soon as they can, but that
(it seems to me) has a disagreeable element of cultural
condescension, especially given the overwhelming preponderance of
white faces in the crowds of demonstrators. (Would you want to live
in a pre-industrial village?) I also heard claims that rural
poverty in the third world is mainly the fault of multinational
corporations — which is just plain wrong, but is a convenient
belief if you want to think of globalization as an unmitigated
evil.
The most sophisticated answer was that the movement doesn't want
to stop exports — it just wants better working conditions and
higher wages.
But it's not a serious position. Third-world countries desperately
need their export industries — they cannot retreat to an imaginary
rural Arcadia. They can't have those export industries unless they
are allowed to sell goods produced under conditions that Westerners
find appalling, by workers who receive very low wages. And that's a
fact the anti- globalization activists refuse to accept.
So who are the bad guys? The activists are getting the images they
wanted from Quebec City: leaders sitting inside their fortified
enclosure, with thousands of police protecting them from the
outraged masses outside. But images can deceive. Many of the people
inside that chain-link fence are sincerely trying to help the
world's poor. And the people outside the fence, whatever their
intentions, are doing their best to make the poor even poorer.
|
| shrestha |
Posted
on 25-Apr-01 09:17 AM
Good arguments. For different view on similar issues:
http://www.globalissues.com/
|
| Kali Prasad |
Posted
on 25-Apr-01 06:42 PM
With few caveats, I should say I support free trade but the following article has been bothering me since I saw it the first time in 1993. Ashu, you may want to read this. I have problem with the equity and labor issues although free trade is supposed to result equality in wage among trading partners which may not happen in the real world as we have been witnessing in the case of NAFTA members.
Author: Batra, Ravi
Affiliation: Southern Methodist U
Title: The Fallacy of Free Trade
Source: Review of International Economics v1, n1 (November 1992): 19-31
Standard No: ISSN: 0965-7576
Abstract: The purpose of this paper is to explode the myth of free trade. Productivity and real wages in the U.S. rose sharply between 1950 and 1972, but since then real earnings have been falling in spite of a continuous rise in productivity. It turns out that America was more or less a closed economy until 1972, as its trade/GNP ratio was close to 10 percent; but since then it has become an open economy. The theoretical model shows how real wages may fall in an open economy, but not in a closed economy, in spite of rising productivity
|
| ashu |
Posted
on 26-Apr-01 12:51 AM
Hi Kali Prasad,
So what are your 'caveats' against a free market
system? Let's hear them.
I haven't read Ravi Batra, but the fact that
a professor from India can get a job at a university
in Dallas in the US and write against free trade
scores home the an ironic BENEFIT of free trade
(i.e. labor mobility, in this case!), don't you
think?
Now, is free market (or open economy) system the
BEST there is?
Yes.
If so, best for what?
Well, for wealth creation.
For improving, on average, the quality of life for all.
For innovation, and so on.
Now, is free market (or open economy) a problem-free,
wonderful, wonderful system?
No.
Emphatically no.
This is where a lot of our policy-related fine-tuning/debates/discussions/arguments can go on.
(At this point, I get a kick out of noticing that
many of Nepal's top intellectuals who are quick to
display their leftist, Marxist and Socialist credentials
and who almost always live in nice comfortable houses
in Kathmandu seem more eager to have their sons and
daughters study/live and work in the United States
of A -- the very country, let it be said, that
pioneered the free market system that these leftists
oppose!!)
Anyway, similar questions could also be asked
about democracy:
Is democracy the BEST political system there is?
Yes.
Without a doubt.
Best fort what?
Well, for people to decide how they want ot be governed
so that they can live with individual dignity and
freedom.
Now, is democray a problem-free wonderful, wonderful system?
No.
Emphatically no.
This is where a lot of our system-related fine-tuning/debates/discussions/arguments can go on to shape
policies.
Economics teaches us all to make choices among
competing interests. Good economics for policy is
rarely about being completely one-sided: that is, being
either COMPLETELY this and zero that or being zero
this and completely that.
That is why, economists talk about a thought device
that goes something like: "all things being equal".
So, yes, not everything is wonderful about free trade
and open economy systems.
But the ALTERNATIVES -- fifty-years of statist socialism
in Nepal and so on -- are much worse.
Hence, in a nutshell, all things being equal, Nepal should
push for an open economy (broadly defined).
oohi
ashu
[Why do so many Nepalis, including the sons and
daughters of Nepali Maxists and Leftists,
|
| Hom Raj |
Posted
on 26-Apr-01 01:15 AM
I'm not an economist so I can't get into the economic fine-tuning debates. But here are few thoughts.
There are certainly some things that are troubling about globalization. One is cultural monotonization. Another is potential loss of sovereignty in some areas. Costs of medicine and who gets to patent what, so-called "intellectual property rights" that disadvantage traditional societies like ours, are matters of SERIOUS concern. I'd like to learn more about these things.
But when we talk about globalization we have to talk in a way that we are actually sincere, and we have to put ourselves in a position that shows us where we stand. Who ARE we, exactly?
When I look in the mirror I see that I am the product of globalization. I am alive because of globalization. Had there been no medicine for an injection when I was one years old, I would have been a child mortality statistic.
I read, write, and think partly in English. I study on the money of the globalized world. Maybe it wasn't for globalization I would be sitting under a pipal tree, propounding some lopsided caste philosophy, and telling people to clean up their houses by sprinkling cow pee (panchagabbya), while I'd have gotten married to a 7-year-old.
Right now, I am doing globalization by writing this.
Globalization broadly defined has happened from the dawn of human history. Nepal has democracy. Have Maoists developed their own ideas or is this somehow related to globalization?
A lot of these street protesters in Seattle and Quebec City are probably not really aware of the situation. I have talked to protesters and mostly they have no idea. They believe genuinely that the Government is doing Evil to Somebody Out There and being the Young Generation they have to Do Something to Save those people who have been Exploited.
But when you ask them, they don't exactly know the real issues. There is genuine exploitation in Nepal and many, many terrible problems. CERTAINLY corporations need to pay decent wages, by local standards. CERTAINLY environmental issues of globalization are troubling.
I oppose corporate domination. But how can I oppose globalization and be honest? Whether you want it or not it's going to happen, so why not take care of it and support MANAGED globalization?
The bath water of globalization can get pretty dirty. But we should not be throwing the baby with the dirty bath water.
|
| Kali Pradad |
Posted
on 28-Apr-01 10:42 AM
This email is in response to my earlier posting on which Ashu raised few good points and wanted to hear my caveats about the free trade. I try to be as nontechnical as possible but if I go overboard then somebody write me back and ask me what the hell I am talking about here.
>Hi Kali Prasad,
>
>So what are your 'caveats' against a free
>market
>system? Let's hear them.
>
>I haven't read Ravi Batra, but the fact that
>a professor from India can get a job at a
>university
>in Dallas in the US and write against free
>trade
>scores home the an ironic BENEFIT of free
>trade
>(i.e. labor mobility, in this case!), don't
>you
>think?
We need to understand the differences between free mobility of output (products) and free mobility of factors (e.g. labor). First, they are totally different although both of them have the same ultimate effect in trade. In fact if you do not have one but other, you will get the same effect. The ultimate effect is factor price equalization. That is, if labors are allowed to move freely between Mexico and US, the result woudl be the same as the free trades of goods between these two countries. This is one of the theorem put forth by a Nobel prize winning economist named Ohlin.
For any trade to occur, there should be comparative advantage for each country. This is again going to your basic economics class. For example, china has more labor so it should produce labor intensive goods. US has more technology so it should produce technology intensive good. Let these countries trade each other freely. Assuming that each country uses good produced in another country, in a long run you see a convergence of wage, and GDP (are we seeing it slowly? yes).
Now lets return to the question of free trade among countries in americas. Again getting back to my points about comparative advantage, to have trade you have to have some kind of establishments of infrastructures. Until and unless the countries involved in a free trade have those establishments, there is no comprative advantage for a particular country. In this case, most of the countries in the South and Central america are that way. That is they do have comparative advantage in banana or coffee production but they export those things raw and most of the profits are siphoned way from the producers and the country itself.
How can you utilize the comparative advantage knowing that a country has that? The most frequently argued policy for a developing country is an IMPORT substitution. This means if you want to have comparative advantage in a certain sector, then protect that sector of economy and foster the particular industry so that the country can have domination in the very good produced and consumed. Initially, there will be some welfare loss to the consumer but we are talking about the long run effect here so if there is any dead weight loss that may occur by import substitution would be cured.
Talk about free trade among the countries in america sounds nonsense to me at this point. I would see that happening more effectively among US and European Union or even among NAFTA and European Union. But my friend, do you know EU has double incentive policy in goods traded? That means they not only tax the import of the goods but provide incentives to producers of goods to export in the world market. That is not fair. The good produced in the EU trades in half of the price in the world market compared to what the price is in the EU market.
Now what is fair trade? You know these big corporations (Intermediaries) pick up the mark-up margin along the way from producer to the consumers. As someone who knows economics and incentive structure, I am not saying that there should not any margin from the producers end to the consumers end. There should be and that is what the foundation of economics. What the proponents of fair trade argue is the margins should be small and farmers in the third world countries should get more (in case of Quebec conference it would be countries like Guatemala). I will give you an example. When I buy a pound of freshly smelling good coffee at starbucks costs me $9, but the farmers in Guatemala sells the same stuff at $0.50 per pound. Is that fare? No. Can starbucks buy coffee in little bit more than $0.25 per pound? Yes. So what is the problem here? In fact, if you travel to high hills of Guatemala, you see Coops now - and they are helpint to organize those coffee farmers so that they get a little bit better price. How better? THe price that farmers get now is 100 percent more than an organized case. These coops contact directly with starbucks and sell their cofees to them avoiding all the intermediaries who used to siphon the profit along the way. Now both are better off. So there is total welfare gain due to trade.
So you see as I was saying earlier I am a proponent of free trade but the trade should be fair as well as free for every one to rip the benefit of free trade.
This reminds me of the barter system I was familiar with growing up in terai area in Nepal. Every winter, those sherpas from hilly areas descend to low land area particularly in terai region. When they descend to terai area they bring few things such as JIMMU, BIRE NUN and all other kinds of herbs with them. They would barter rice with farmers from terai mainly because farmers would have no cash (no liquid) holding with them all the time and sherpas are happy bartering their products to farmers directly. Once in a while, you can see them on the side of the highway and selling those products but I would doubt they would make as much money as their collegues who had direct contact with the consumers. here we are talking about time saving, and perhaps even the cost saving for not to have to stand on the roadside for few days. Think about an alteranative. What if he had sold all those products to our local merchants? Do you think Sherpas would get equal amount of money as they get in the barter system or farmers would be able to purchase those herbs in an equal price as they would have gotton directly from the Sherpas themselves? The answer is no.
So the argument about free trade without infrastructre buildup goes no where. Do you remember the case of Nigeria? During oil embargo time, their economy was booming. An indian friend of mine was born and raised in Nigeria during that time who later came to US and we were in the same university. She said during that oil booming period, there were lot of indians in that country working as doctors and engineers. After oil boom, Nigeria not having import substitution policy for goods that their economy collapsed. Compare Indonesia or India in that respect. Indonesia and India prosper (? yea right) because they followed import substitution policy. I am not saying these countries are rich or any thing but they would have been dirt poor had they not followed the import substitution policy. So for free trade to be acceptable each economy should have some thing they can claim a significant portion of market. If EU and US does not want to see free trade (remember the banana war few years ago) then why should we have free trade among americas now? Let's help these countries to have some infra structure on the sector where they have comparative advantage. Let's help these countries flourish and then only talk about free trade.
Otherwise you are like talking to Jumleli (no offense) about free trade. What do they have to sell? nothing except herbal medicines. And we are preaching free trade to those who have
nothing to sell, so you are not doing any good. That is where we need help from the world bank. Otherwise, the loan that developing countries take from these developing agencies would be spent in consumer goods not the development work. When you have that situation, a country will be parasite forever and there is not any meaning of having a free trade. YOu loose all the dignity and sovereignity. Just read about the situation in Tanzania. They are spending significantly more than there GDP. Their GDP increase is so miniscule and they are spending loan money for purchasing consumer goods which could have gone to development work such as infrastructure development. Can you imagine the proponent of free trades who themselves have the highest trade barrier you can ever imagine? US has just recently put 200 percent tariff in crawfish import from china because US thought China is dumping that goods in the US market? In reality, that is not true.
I think I am lecturing too much about development and trade here but again I think it is necessary for us to understand these simple things. Like Homraj mentioned lot of people do not understand these basic things and follow one or the other view about the free trade.
Coming back to Krugman, when I was growing up in Nepal I used to think communists system for 10-20 years in Nepal would be good to develop work ethic, and prevent corruption at least if there exists an ideal marxism and leninism world. I also firmly believe that we would need social democracy (the one like in Canada or few EU coutries). The rigorous dictatorial system is necessary to buildup work ethic among people of corrupted and rotten countries like ours. After being in the US for several years, my view has not changed at all. In fact every time, I visit ghettos of black people in Washington DC welfare district, harlem area in NY or South Atalanta, my belief in social democracy strenghtems further. That is why I admire Clinton adminstration so much. President Clinton has such a vision for this country. I wish there were not that Monica in the white house then or in that matter republicans in congress and senate. It would have been different country by now.
Cheers,
>
>Now, is free market (or open economy) system
>the
>BEST there is?
>Yes.
>
>If so, best for what?
>Well, for wealth creation.
>For improving, on average, the quality of
>life for all.
>For innovation, and so on.
>
>Now, is free market (or open economy) a
>problem-free,
>wonderful, wonderful system?
>No.
>Emphatically no.
>
>This is where a lot of our policy-related
>fine-tuning/debates/discussions/arguments
>can go on.
>
>(At this point, I get a kick out of noticing
>that
>many of Nepal's top intellectuals who are
>quick to
>display their leftist, Marxist and Socialist
>credentials
>and who almost always live in nice
>comfortable houses
>in Kathmandu seem more eager to have their
>sons and
>daughters study/live and work in the United
>States
>of A -- the very country, let it be said,
>that
>pioneered the free market system that these
>leftists
>oppose!!)
>
>Anyway, similar questions could also be
>asked
>about democracy:
>
>Is democracy the BEST political system there
>is?
>Yes.
>Without a doubt.
>
>Best fort what?
>Well, for people to decide how they want ot
>be governed
>so that they can live with individual
>dignity and
>freedom.
>
>Now, is democray a problem-free wonderful,
>wonderful system?
>No.
>Emphatically no.
>
>This is where a lot of our system-related
>fine-tuning/debates/discussions/arguments
>can go on to shape
>policies.
>
>Economics teaches us all to make choices
>among
>competing interests. Good economics for
>policy is
>rarely about being completely one-sided:
>that is, being
>either COMPLETELY this and zero that or
>being zero
>this and completely that.
>
>That is why, economists talk about a thought
>device
>that goes something like: "all things being
>equal".
>
>So, yes, not everything is wonderful about
>free trade
>and open economy systems.
>
>But the ALTERNATIVES -- fifty-years of
>statist socialism
>in Nepal and so on -- are much worse.
>
>Hence, in a nutshell, all things being equal,
> Nepal should
>push for an open economy (broadly defined).
>
>oohi
>ashu
>
>
>
>
>
>
>
>[Why do so many Nepalis, including the sons
>and
>daughters of Nepali Maxists and Leftists,
|
