Globalization’s Few Winners and Many Losers

I often write about the Tyranny of Price, the rarely examined assumption that lower prices are all that matters.

Thanks to the Tyranny of Price, the quality of many goods has plummeted.Obsolescence is either planned or the result of inferior components that fail, crippling the entire product. As correspondent Mark G. has observed, the poor quality we now accept as a global standard wasn’t available at any price in the 1960s– such poor quality goods were simply not manufactured and sold.

There is another even more pernicious consequence of the Tyranny of Price: globalization, which makes two promises to participants: 1) lower prices everywhere and 2) manufacturing work that will raise millions of poor people in developing economies out of poverty.

Globalization is presented as a win-win solution: the developed countries get cheaper goods and the developing world get the benefits of industrialization.

But now a new study, Poorer Than Their Parents? Flat or Falling Incomes in Advanced Economies, finds that globalization has been a bad deal for 80% of the people in developed economies, as their income and wealth has stagnated or declined.

A Cheerleader for Globalization Has Second Thoughts: A new study from the McKinsey Global Institute finds that changes in the world economy have left many people worse off..

The McKinsey report focuses on the 540 million residents of developed nations who have lost ground in the era of globalization. But if we look at the terrible pollution in China, we find that rapid industrialization hasn’t been as win-win for developing nations as advertised.

The mainstream cheerleaders of globalization have been forced to accept that globalization exacerbates wealth/income inequalities by boosting the rewards for the 20% who benefit from global markets and capital-friendly central bank policies (zero interest rates and quantitative easing) that have pushed asset valuations to incredible bubble heights around the world.

Domestically, the American ruling class and the mainstream punditry are struggling to square the circle, that is, defend the globalization of the U.S. economy that has greatly enriched corporations, the wealthy and the top 5% of the work force but also alleviate the stagnation in the incomes and wealth of the bottom 80%.

Correspondent Graham R. summed up the situation very succinctly in a recent email:

“Focusing on the minimum wage is a false flag. The society as a whole is now stressed at every level because Globalism has promised us cheaper prices at the cost of destroying societal structures and their meaning for its members.”

Graham identifies a key consequence of globalization that the mainstream media has ignored: the erosion of social/economic structures that supported communities and provided purpose, meaning and stability to their residents.

When price is all that matters, factories and offices are closed overnight and the work is shipped elsewhere. When production costs go up, the production is moved to another locale.

In this environment, employees are competing with workers globally, which suppresses wages everywhere. Since global corporations have gained political power in globalization, they can buy lobbying and political influence that raises the cost of commerce for small businesses–a process known as regulatory capture that erects walls that stifle competition.

Regulatory capture is the inevitable result of globalization’s rewarding of capital and erosion of labor.

Price is not the sole absolute good. Price is only one kind of information. Since price is easily quantified and converted into any currency, it has achieved total dominance in markets and mindspace. Quality, quality of life, and well-being are not easily quantified, so they are ignored. Stagnation, insecurity and a loss of social cohesion are the inevitable result once price is all that counts.

This essay was drawn from Musings Report 29. The weekly Musings Reports are emailed exclusively to subscribers and major contributors ($5/month or $50 annually).

My new book is #10 on Kindle short reads -> politics and social science: Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle ebook, $8.95 print edition) For more, please visit the book’s website.

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    • ICFubar

      Unfortunately children are often used to spy during war and can pay the ultimate price. That they should not be used to spy goes without question. Dead is dead whether by bullet, hanging or gruesome beheading. Those who make aggressive war are guilty of all the crimes generated and contained within that war.

  • ICFubar

    Why the shock? This was warned of and exemplified back when NAFTA was being instituted. Globalism is neo-liberal apartheid economics, as planned, wherein you remove all the barriers to making profits like safe guard regulations, tariffs and any labor organization so that capitalism,capital and the owners of capital can swim free. The rentier capitalists and their entourage of corporations in a yacht while the rest are in the ocean without a life jacket. Who will catch the most fish? Of course if played out to the end enough of the working classes numbers might be over exterminated one way or the other bringing this brand of capitalism back into equilibrium. That is unless all hell doesn’t explode first with the attitude taken to only pay enough to keep the workers coming to their job and procreating more workers. As a fail as indigenous western populations begin decreasing, or enter the open border policies seen in the west currently.

    As for the cheapness of goods today, they are apart of the economic paradigm where more resources must be turned into more product and then discarded every year in escalation to keep the debt cycle and Ponzi scheme growing. It would wreck the economy to make a major appliance that would last for the twenty to twenty five years or longer, before repair, that products in the past built to those kinds of standards were. Hell I have a Fridgedaire built in the fifties still rumbling along in its old age still keeping our food fresh and from rotting in our old cabin. What a great invention is the fridge!

  • cstahnke

    We might start calling Globalism by its proper name: neo-feudalism. I believe this sort of arrangement may suit most humans who may simply only want to be told what to do and what to think. I see little interest in liberty and a lot of interest in security.