What is it about economics which is so complicated and difficult to understand? I admit, though I get the fundamentals of economics, give me a problem; ask me to solve it using economic models and I am stumped. Supply-Demand curves, deadweight losses et all are fine, but government policies? Consumer/Producer surplus curves and their effect on taxation etc? No thanks.
So I was very impressed by an economist article I read recently. By all counts, the econs articles I have read are either way too technical for my pea-sized brain or way too complicated for my straight connectors to decipher. So it was a pleasant surprise when I read this. I was even more surprised by the author, for Paul Krugman is a very well-known figure in the world of economics and to get such a simple explanation from him reinforces the age-old saying ‘If you cannot explain any of your ideas or concepts to a child, then you do not understand that concept yourself’. That quote is attributed Einstein, Emerson and a host of other people though the wordings differ according to the day and age.
HEARTS AND HEADS
Anti-globalization protestors want to turn the world into a nasty place. 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.
Originally published in The New York Times, 4.22.01