for god's sake, somebody teach me econ
Yglesias' observation that the Democrats ought to figure out what they think about globalization got me wondering what I think about it. Allow me to preface this by pointing out that it's a cry for help: honestly, I don't know jack about this stuff and am hoping someone can explain it to me. So here's my thinking.
In the past my intuition has been that globalization will mostly be a race to the bottom -- can global economic growth really occur quickly enough to offset the diffusion of wealth from the first world? Given the gaping divide between American prosperity and the rest of the world's relative poverty, it at least seems like the answer is probably "no". I understand that assuming a zero-sum situation is a classic mistake in economics, but assuming growth will fix everything also seems myopic.
I have no doubt that globalization will increase the planet's net wealth -- to the extent that this is true it seems like we have a moral imperative not to oppose it. But I'm not convinced that everyone will come out a winner; nor am I convinced that protectionism is as futile as some people suggest. I know there are important human rights and environmental considerations to be sorted out, but my thinking generally arrives at the conclusion that Americans have an ethical obligation not to fight globalization, and that we're going to end up mostly getting screwed by it.
Yesterday's adventures with AllOfMP3 has got me thinking that this problem might be worse than I'd imagined. In globalization fans' rosiest storytime fables the US stays healthy and wealthy by virtue of being wise: we export parts of that wonderful Information Economy we've got going and in return the developing world sends us cargo ships full of injection-molded plastic lawn furniture.
The internet seems to be teaching us a couple of important lessons about how this arrangement is going to work, or fail to. First, if you want to sell information it needs to be priced affordably or it'll simply be stolen. Related but separate is the idea that the market in which it's sold needs to prosecute piracy. China's the classic example of these prerequisites not being met -- foreign music and movies are too expensive and enforcement is lax, so piracy occurs on a truly mammoth scale.
But how can you price information elastically across the world when network technology eliminates all trade barriers? Obviously this problem is worst at the consumer level of IP-purchasing, but it seems like the principle will broadly scale: IP owners will be pushed toward using a single price point, and will consequently either be unable to optimally sell their product overseas or will take a huge cut in their domestic revenues. Artificial measures like DVD region codes are feeble stopgaps -- it's easy to find a $40 player that ignores them completely. And so far, intellectual property treaties don't seem to have done much good -- what incentive does the Chinese government have to protect Hollywood?
Maybe I'm too dumb to see the alternative, but I can't figure out a way to sell intellectual property more effectively than manufactured goods. Combined with a rapidly declining monopoly on high-tech innovation -- most chip fabrication happens in Asia, you know -- I'm not feeling too good about America's economic prospects. Maybe we'll invent flying cars or fusion energy generators or an amazing new kitchen utensil that grips, flips, scoops AND strains. But assuming for a moment that such a miracle doesn't occur, what's going to save us?
Well, probably I just don't understand econ and everything will be fine. But so far I haven't been able to understand why that is.
Comments
Interestingly tom, on my theory of IR syllabus it lists globalism as one of four major theories in addition to realism, liberalism, and idealism. We haven't gotten to that part of class and I'm too lazy to read ahead to tell you what its about, but perhaps when I do, I'll let you know what it says.
"Well, probably I just don't understand econ and everything will be fine. But so far I haven't been able to understand why that is."
Well, from the perspective of most americans or europeans, it won't be, near term. But its got little to do with intellectual property.
Pricing something affordably, as you mention, also has little to do with it. One needs to price something over the amount it costs to steal (which currently has a near zero marginal cost, as far as mp3s go). Wheat, capital and arms are slightly more difficult to pilfer, hence their relative importance to the US economy.
The real problem with the US economy is your average kenyan can produce a bushel of wheat a great deal cheaper than your average american, which is good for american wheat eaters, but bad for american farmers, tractor makers, tractor mechanics etc... Without large subsidies, the american and european agricultural sectors would implode, and quick. In aggregate this could fuck things up big time.
Naz: keep me posted. I'll be interested to have you and my buddy Aaron square off this spring -- he's studying the same thing in Liverpool at the moment, and I imagine they might have a slightly different orthodoxy.
FM: Thanks for the reply. I had kind of assumed as a given that American agribusiness was largely screwed. I'm just curious what is supposed to fill the void, even if only in theory. The defense industry seems like a plausible answer (although -- capital? I thought capital came from China these days). But the answer I've usually heard bandied about is that American ingenuity will product various types of marketable intellectual property: movies and culture, pharmaceutical formulas, sophisticated engineering.
It seems to me like consumer goods face a different balance of piracy concerns than things like deug patents and product designs, although they're still part of the same continuum -- it's just that piracy of consumer products is primarily restricted by access to technology rather than enforcement, and for patents and other "large" IP goods the situation is reversed.
I'm not sure the extent to which this will be affected by the easier interchange of ideas. I guess it's hard to buy a bridge design from a US engineering firm in Bangladesh and move it to England, but for a number of other goods it seems like we're going to be relying heavily on no-export clauses in international contracts.
But I guess we do already. This'll no doubt affect the consumer entertainment sector most and I guess you're right that that's a small piece of the pie.
the "grip-n-flip" is truly mindblowing, isn't it?
Ok, 1st, I am not trying to turn the comments section into Jen's blog. Globalization just happens to be complicated. Anyway, one semester with Dan Drezner saved me from becoming an anti-globalization protestor. You're right-- a rising tide raises all ships. Arguments that globalization produces a race to the bottom tend to be based on anectodal evidence a la William Greider or Ralph Nadar. Or the Democratic Party (not the DLC, though). Looking instead at statistical analyses, economists have shown that many free trade policies reduce global poverty and inequality. Outsourcing numbers are overblown, and it's actually an economic boon because it allows countries to utilize their comparative advantages. I don't know that much about IPR, but developed countries have tried to strengthen regulations by, for instance, tying Chinese WTO membership to better IPR enforcement, which serves as a pretty big incentive. But I don't think this is enough to address your IPR concerns.
Anyway, I have several articles (geared towards a general readership-- because I couldn't tell you the difference between micro and macroeconomics) that explain market forces way better. Interested? I can email them. Even though doing so validates your point on intellectual property stealing. But I don't care because I want everyone to love globalization.
Happy Birthday!
Post A Comment