Economy and social affairs

The globalization hoax

(Published in GralsWelt 62/2010)

A friend recently drew my attention to a shop for Chinese imported goods on the outskirts of Munich. The offer consisted of all kinds of bells and whistles, but also interesting products such as pocket knives, tools, electronics and optics. The most important customers are not the Lscouting like me; because the little shop is too far away for that. They are dealers who order larger batches and accordingly negotiate considerable discounts. These dealers then probably sell the goods as "special offers" at fairs, flea markets, on the Internet, etc. with good profit.

Looking at the products and the prices, I got thoughtful. The quality of top western companies is certainly not offered. But for many purposes a somewhat simpler version is sufficient, which in return is unrivaled cheap.

To all appearances, what was warned about a century ago as a possible threat to the industrialized countries has come to pass: the populous countries of Asia are flooding the Western markets with unrivaled cheap goods. The result is a progressive deindustrialization of the once leading industrial nations with a corresponding loss of jobs (cf. "Hungry, proficient, willing to take risks" at "Economy and Social Affairs"). Those who have been "expelled" from the labor market (one prefers to speak somewhat coyly of "exempt employees") are then dependent on the social safety net, which is bound to tear sooner or later under the strains that are to be feared.

Has the much-praised globalization, which allows the low-wage countries free access to the high-price markets of the traditional industrial nations, been to the advantage of all partners, “rich” and “poor” alike? Are the winners who laugh last, the rising industrialized nations of Asia? Do the traditional industrialized countries have to decline, maybe even impoverish?

The ideological basis of globalization

In history, religious or political ideologies have not infrequently set crowds in motion; from the Crusades or the Reformation to the French Revolution, Communist, Fascist, National Socialist, Maoist ideologies to fundamentalist Islam. The examples can be multiplied as required.

What is less well known is that ideological biases can also set the tone in science. One such ideology that seems to be disproved rather than proven by practical experience is that freee trade. Free trade, which supposedly serves the interests of all parties involved and enables optimal economic activity. This dogma also provides the basis and justification of globalization.

Most decisively, in the two centuries that lie behind us, the free trade of Great Britain was demanded and unconditionally - that is, in some cases even with armed force - enforced, up to the Opium War (cf. "China III: China's decline and awakening " under "History").

As long as British industry was a leader, it benefited from free trade. Than the competition of other cities followed and the British supremacy threatened to crumble, the search was not for economic (e.g. import duties) but rather political answers that contributed to the outbreak of the First World War.

A clever speculator

The Englishman David Ricardo (1772-1823) was the son of a punter who introduced him to the intricacies of speculation as a child. David Ricardo left school at the age of 14, never got a higher education, but was a born financial acrobat who started his own business at the age of 21. When he died unexpectedly at the age of 51, he left a fortune of a good £ 35 million.

We need not deal further with Ricardo had he not given in to his tendency to theorize and propagated his ideas in a number of writings. In his most important message he called for completely free trade without any state interference. He served as an example
“A world in which England produces cloth and wine. Portugal also produces wine and cloth, but both on much more favorable terms. Still, trade between the two economies will be mutually beneficial, says Ricardo. It does not depend on the absolute advantage and the actual prices, but only on the comparable advantage and the relative prices. In the case of Portugal, the earning potential of exporting wine is higher than that of exporting cloth, because it can produce more wine than cloth per unit of time. That is why it is economically wise for the Portuguese to concentrate on that: Portugal produces wine for export. In return it receives cloth from England, more cloth than if it had produced the cloth itself. The English cloth manufacturers do not have an absolute advantage, but they do have a comparative, i.e. comparable, advantage over the more complex wine production in their own country. That is enough to make the trade worthwhile for both, says Ricardo. " (10, p. 338).
These ideas are purely theoretical and practice speaks against them:
“The wine exporter Portugal, who is giving up his cloth production in favor of viticulture and doing better than producing both, is against his own interests. The real Portugal has a tangible interest, which cannot be dampened by anything, in abandoning the status of the country of winegrowers. Like every other nation-state, it wants to climb to the next level of economic activity, wants to produce industrial products and offer modern services. " (10, p. 339).

The state in which industrialized countries could sell their industrial products dearly in developing countries, and these in turn had to supply raw materials and agricultural products cheaply, could only be maintained by force during the colonial period.
Today developing countries and emerging economies (which we better "Attacking states" (10) should name) become industrialized nations. The western industrialized countries are threatened with decline "Farewell Societies" (10) who seek consolation in looking back as their future looks bleak.

Ricardo's model lacks the dynamism and a realistic idea of the possibilities of industry, the added value of which leaves agriculture far behind. Ricardo only saw the beginning of industrialization. World trade was also modest in Ricardo's time - even in the largest colonial empire. Though a stock market guru, Ricardo underestimated the dominant influence of finance capital, which today flows to where the greatest returns await.

The financial investor of the 21st century is a global citizen, not a nationalist. Ricardo could not foresee this way of thinking today. Which Englishman would have considered the possibility of relocating his factory to India in order to produce there unrivaled cheaply?

Ricardo's misjudgments led to incorrect conclusions:
“He only saw winners everywhere he looked. Those who participate in free world trade are in a better position than if they fail to do so. Whereby he assumed that a division of labor comes about with the force of natural law. It never occurred to him that Portugal could deliver wine to the British without ordering a cloth. The trade balance of two states was always in balance with him. " (10, p. 342).
But David Ricardo's more superficial, half-baked The idea of free trade found influential supporters and entered economic textbooks. For almost two centuries, the Anglo-Saxons in particular have represented “free trade” with a passion that is reminiscent of religious dogmatism (cf. “When a million Irish died” in “Brief, scarce, curious” page 426).
“Free trade is a kind of creed, and you cultivate it with it. If it is not of divine origin, is it not at least natural, and is nature not the work of God? " (6, page 278).
It is astonishing that such a hypothesis, which has not been confirmed in practice, in a time of high industrialization with worldwide communication connections and the cheapest transport of all time, still finds its supporters, who expect billions of people to undertake the “large-scale globalization experiment”.
Or are the questionable free trade hypotheses just a pretext to justify a global economy that serves to enrich an elite? A small, influential group that not only - as in colonial times - are indifferent to the colonial peoples, but also rigorously ignores the welfare of their own compatriots?

“I have made and publicly submitted a calculation that proves that the winners 'profits no longer offset the losers' losses in the West. The globalization balance for countries like Germany or America has been negative for some time. Many millions are losing their jobs in Germany. In America, millions only lose their jobs for a short time, but only to take up less paid jobs afterwards. Today we are in a win-lose situation in competition with the Asians, in which some win and the other ultimately lose. "
From a conversation with Paul Anthony Samuelson (1915-2009), winner of the Nobel Prize in Economics (10, p. 380).  

Protectionism Rebirth?

Historically, free trade has not been the engine of progress and industrialization. Because countries with different industrial levels cannot simply be left to the free play of forces.

In Europe, at the beginning of the 19th century, Napoleon imposed the continental blockade, a ban on imports of English goods, in order to weaken the economy of his war opponent. This goal - to damage Great Britain decisively economically - could not be achieved by the import restrictions, which lasted only barely a decade.
The continental blockade was disadvantageous for European trade, but the customs barriers proved beneficial for parts of Central European industry. Many goods that could no longer be imported were now Made in their own country, at a slightly higher cost. This allowed important branches of industry to develop on the continent, and even new businesses to emerge, such as the extraction of beet sugar as a substitute for cane sugar from the West Indies[i].

In the middle of the 19th century, the German Customs Union provided protective tariffs that helped its own industry.

Even in the advanced stage of industrialization, Germans, French and Americans retained their status as “persecuting states” that successfully rivaled Great Britain. They took advantage of the freedom of movement in the British Empire while still protecting their home markets[ii].
"The average tariff rate for imported industrial goods in 1913 was 17 percent in Germany, 20 percent in France and 44 percent in the USA, only in Great Britain practically no customs duty was levied." (10, p. 350).
Great Britain has thus accelerated its own descent for ideological reasons.

Free trade also fell into disrepute during the Great Economic Crisis of the 1930s. Many countries looked for other ways. Germany aroused the particular ire of the financial sharks by decoupling from the gold standard. (7, p. 67).

After the Second World War, the "Little Tigers" Japan, Taiwan, Thailand, Singapore and South Korea organized their economic advancement under state control, in contradiction to Ricardo's theories. Not free trade, but gentle isolation to protect their own industry and export promotion was their recipe for success (10, p. 350).

In Japan, for example, immigration has also been made difficult, even in times of acute labor shortages. The Japanese industry was thus forced to extreme rationalization. As a result, more industrial robots were temporarily in use in Japan than in the rest of the world.

Today, China's “bureaucratic capitalism” is following the path of a state-controlled, restricted market economy. So in the summer of 2006 the "Imports of auto parts are subject to a 25 percent punitive tariff if the manufacturer dares to have more than 60 percent of the car's value manufactured outside."
This will force automakers to manufacture as much as possible in China. Such a punitive tariff is forbidden according to the rules of the world trade organizations, but in China they rely on the slowness of western democracies! (10, p. 358).

Accusations by western politicians who demand flexible exchange rates, free trade, human rights, patent protection, political freedoms, legal security, social systems, environmental protection, etc. from China are received with a polite smile. Knowing full well that the western companies are dependent on the rising "big dragons" and hardly any western state thinks of serious sanctions.

In India, a reduction in bureaucracy and reforms that were not easily implemented in the “greatest democracy” have put the country on the path to becoming the most important software company that offers many services at unbeatable prices. Industrial production, e.g. B. in the steel industry, shows impressive growth rates.

“Capital has a horror of the absence of profit or very small profit, like nature of emptiness. With a corresponding profit, capital becomes bold. Ten percent sure and you can use it anywhere; 20 percent, it gets lively; 50 percent, positive daring; for 100 percent it stamps all human laws under its feet; 300 percent, and there is no crime it does not risk, even at the risk of the gallows. "  Karl Marx (1818-1883)

Where are we going?

The cheap products from overseas have made entire branches of industry disappear in the classic industrialized countries. Shoes, for example, are now imported into Germany at 98%!

It started with light industry, e.g. B. in clothing, shoes, household items, tools, electrical appliances. Televisions, cell phones and computers are now largely manufactured in East Asia; not infrequently in appalling conditions for workers. It is probably only a matter of time before cars, trains and planes from Asia can also be supplied at unrivaled prices. Ships have been built mainly in East Asia for decades.

The European Union is concerned about unemployment in Europe and worries about state social security:
"Persistently high unemployment, with its potentially long-lasting effects on labor markets and potential growth, could threaten the European social models that are already suffering from the aging of the population." (12).
What will the competition from Asia have in store for the West? Unemployment, falling wages, rising taxes, impoverishment, dismantling of social benefits, over-indebted countries before national bankruptcy? From selling souvenirs, “Made in Vietnam” or “Made in Bangladesh”, few Europeans or Americans will be able to live on Chinese tourists.
“… One day historians will say that Chinese capitalism was the last nail in the coffin of the European welfare state. France can no longer afford a 35-hour week and Europe can no longer afford the generous social security network, because China and India, with their low wages and their big plans, create enormous competitive pressure. "                                                   Thomas L. Friedman (4, p. 81).

How do we want to react?

The market fetishists would like to wait and see how wages align around the world. Then wages in the high-wage countries would have to fall, the social security systems would have to be dismantled, and government benefits that have become dear to us - from pensions to the health system - would become unaffordable.

The standard of living of the "attacking states" would approach that of the "classic industrialized countries"; but only very, very slowly. Because there is an enormous reservoir of workers worldwide who are forced to work for almost any wage, including starvation wages. Trade unions - if they still exist - will not be able to do much against economic constraints. Accordingly, wages around the world would remain shockingly low for a long, long time.

Perhaps towards the end of the 21st century a tolerable standard of living can be achieved anywhere in the world, but it must be well below the level that we are used to in industrialized countries today. Provided that the world economy can continue to grow, that is, it does not collapse under the pressure of exponentially increasing environmental damage and the continuing increase in world population.

Is it still possible to save the West?

An alternative to the crash would be a merger of the classic industrialized countries (Western Europe, the USA, Canada, Australia, maybe also Japan) in a customs union. These "Transatlantic free trade area" (10) would have to set import duties that are based on social standards and make imports from low-wage countries rigorously more expensive.

There are quality regulations for food and test criteria for technical products that every importer must meet. Why are there no minimum requirements for working conditions, wages, health care, social systems, environmental protection that every exporting country has to prove? Total isolation would not be a solution; this was shown by the collapse of the Soviet Union. However, careful but targeted control with a sense of proportion can make a big difference. This has not least been proven by the rising stars of Asia. They owe their economic growth, in addition to their own hard work, to a pragmatic policy of state economic control, which protects their own market from too fierce competition and promotes export.

Where is the journey going?

It is high time to overcome mental blocks and think impartially about possible alternatives to globalization.

If we don't succeed in turning things around and distorting competition To push back cheap competition, then the consequences of the globalization mania must hit us hard:

“Today, an unemployed person is no longer the object of a temporary exclusion from the economic process that only affects individual sectors, no, he is part of a general collapse, a phenomenon that is comparable to storm surges, hurricanes or cyclones that target no one and also those no one can offer resistance. He is the victim of a global logic that calls for the abolition of what is called 'work', that is, the abolition of jobs. "            Viviane Forrester (3, p. 12)

The industrialized countries, which have long been over-indebted, will then inexorably approach financial collapse. It will become more and more difficult to guarantee the basic supply of water and electricity, health care, local and long-distance public transport, pensions, but above all the state order and internal security. But the consequences of the reality-based economy are inexorable and can only be temporarily suppressed, never permanently overridden!

In decades of prosperity, the people of Western democracies were spoiled and irresponsibly misled by unsubstantiated promises made by politicians[iii] (9). How may desperate crowds react when they slide into poverty? Hopefully we will be spared riots, revolutions, civil wars, wars that could lead to famine, epidemics, collapse of the health system, etc. None other than the President of the European Commission, Jose Manuel Barroso, has already warned of a possible collapse of the crisis-ridden democracies in Greece, Spain and Portugal (11). Other European states whose failing democrats have lost the trust of their peoples could go under shamefully.

Personally, I remain an “optimist with experience” (often misunderstood as a “pessimist”) and I very much hope that we can and will turn things around. But I also hope that not all of the thoughts put forward here have long since become idle, because the ecological catastrophe is already on its way, which is rendering all economic and financial theories to waste and is robbing business leaders and politicians of their room for maneuver. 

(1) Brinkmann Carl, Economic and Social History, Vandenhoeck & Rupprecht, Göttingen, 1953.
(2) The two-wheeler through the ages, Deutsches Zweiradmuseum Neckarsulm, Peter Winkler Verlag, Munich, undated
(3) Forrester Viviane, Der Terror der Ökonomie, Zsolnay, Vienna, 1997.
(4) Friedman Thomas L., What is to be done, Suhrkamp, Frankfurt, 2009.
(5) Galbraith John Wissensh, Geld, Droemer Knaur, Munich, 1976.
(6) Sédillot René, From barter to supermarket, Cotta, Stuttgart, 1964.
(7) Senf Bernd, The Fog About Money, Gauke, Lütjenburg, 1998.
(8) Sloterdijk Peter, Im Weltinnenraum des Kapitals, Suhrkamp, Frankfurt, 2006.
(9) Steingart Gabor, Germany, the descent of a superstar, Piper, Munich, 2006.
(10) Steingart Gabor, World War I for Prosperity, Piper, Munich, 2007.
(11) -democracy-disappaer-Greece-Spain-Portugel.html.
[i] The world's first beet sugar factory was established in Cunern (Silesia) in 1801 after improved beet varieties with a higher sugar content were bred.
[ii] The bicycle industry is a typical example. In 1898, 200,000 bicycles were manufactured in Germany, but without using the possibilities of industrial large-scale production. A bicycle cost 200 gold marks.
In the USA, the bicycle manufacturers, unencumbered by the traditional craftsmanship, had come together to form corporations that produced a million bicycles at the turn of the century. Then the German bicycle industry was brought into distress by imported American bicycles for 80 gold marks. She was on the verge of disappearing when an import duty helped her. (2).
[iii] Many politicians are well aware of the dilemma outlined here. But they also know that melodious lies win voters, while frustrating truths scare away the electorate.