Image citation: Movement across borders, licensed under Wikimedia Commons
We hear a lot of debates these days about globalization. What is globalization? Globalization is simply the process of the free movement of goods, capital, people, and ideas around the world and across borders.
Globalization is a great boon to the world. It means more specialization and division of labor, which are vital components of economic progress. It makes rich countries richer and brings poor countries out of crushing poverty.
Market reforms within countries are important, but becoming part of the global division of labor has been crucial to the rise of middle classes in China, India, Mexico, Chile, and eastern Europe. The proportion of the world population in extreme poverty, i.e. who consume less than $1.90 a day, adjusted for local prices, declined from 36 percent in 1990 to 10 percent in 2015.
That’s the biggest story of the epoch, maybe the greatest achievement in human history. As Max Roser of Our World in Data points out, newspapers could have run the headline NUMBER OF PEOPLE IN EXTREME POVERTY FELL BY 137,000 SINCE YESTERDAY every day for 25 years.
But people don’t know this!
In a recent poll 66 percent of Americans thought world poverty had doubled. A free economy is not a zero-sum game. Trade and specialization are win-win. The pie grows for everyone.
And what’s the alternative? Self-sufficiency? As Leonard Read and Milton Friedman pointed out, no single person on earth can make something as simple as a pencil. You’d need wood from Oregon, graphite from Sri Lanka, wax from Mexico, castor oil from the tropics, and rubber from Indonesia. Not to mention factories to combine those elements into a pencil.
Andy George, host of the Youtube show How to Make Everything, decided to make a chicken sandwich from scratch. It turned out to mean spending six months and $1,500 growing a garden, turning ocean water into salt, making cheese, and killing a chicken all so he could take a bite of a sandwich truly made from scratch.
From both President Trump and President Biden, we hear a lot about “Buy American.” That’s almost as senseless as making a chicken sandwich from scratch. The raw materials, the labor, and the technology necessary to produce the elements of modern life are spread across the globe. It would be vastly more expensive for any country – the United States, India, Nigeria – to refuse to trade with people in other countries to produce goods cheaply and efficiently.
And if it makes sense to “buy American,” why not “buy California”? “Buy Los Angeles”? “Keep our money here in Hollywood!”
As trade specialist Dan Ikenson observed in 2009, most of our modern products should be labeled “Made on Earth,” produced by “a truly global division of labor, [with] opportunities for specialization, collaboration, and exchange on scales once unimaginable.”
In the past generation globalization has brought more people into the world economy, and billions of people are rising out of poverty.
At the same time Enlightenment values of tolerance and human rights are spreading to more parts of the world, with particular emphasis on the rights of women, racial and religious minorities, and gay and lesbian people.
The Internet is giving people more information, more ways to connect, more commercial opportunities, and more choice. Despite what we may be led to think from the flood of information about the world, we are probably living in the most peaceful era in history.
But economic progress inevitably means change. And change can be painful. Think of the transition from 90 percent of American workers working on farms, to about 2 percent today. Now we’re in similar transitions from manufacturing to services and robots.
Some people get hurt in such transitions. They may lose their jobs, or their businesses, or see their own wages not increasing as fast as other people’s, or simply fear that such consequences may happen. And when people perceive a decline in their income or their relative social status, they often want help, and they want to blame someone. That can mean both a demand for government programs and the scapegoating of villains – whether it’s the bankers, the 1 percent, the Jews, the immigrants, the Mexicans, or whoever – just the opposite of the individualist liberalism that gave us the unprecedented progress we have experienced.
We’ve seen a rise of populist and illiberal forces in countries around the world, on both left and right – with threats to liberty, democracy, trade, growth, and even peace. All the bad new ideas – socialism, protectionism, industrial policy — are really bad old ideas. Libertarians and classical liberals have been fighting them off for more than 200 years, and we need to keep doing it.
David Boaz is Distinguished Senior Fellow of the Cato Institute and author of The Libertarian Mind.