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Friday, November 24, 2006

Globalization ala Reisman

Have a look at a rather good essay by George Reisman titled Globalization: The Long-Run Big Picture.
Globalization, in conjunction with its essential prerequisite of respect for private property rights, and thus the existence of substantial economic freedom in the various individual countries, has the potential to raise the productivity of labor and living standards all across the world to the level of the most advanced countries. In addition, it has the potential to bring about the radical improvement in productivity and living standards in what are today the most advanced countries, and to provide the strongest possible foundation for unprecedented further economic advance everywhere.

This article shows that by incorporating billions of additional people into the global division of labor, and correspondingly increasing the scale on which all branches of production and economic activity are carried on, globalization makes possible the unprecedented achievement of economies of scale—the maximum consistent with the size of the world's population. First and foremost among these will be the very substantial increase in the number of highly intelligent, highly motivated individuals working in all of the branches of science, technology, and business. This will greatly accelerate the rate of scientific and technological progress and business innovation. The achievement of all other economies of scale will also serve to increase what it is possible to produce with any given quantity of capital goods and labor.
Change is certainly disruptive but the benefits are enormous. Reisman does a good job of addressing many though not all concerns.

1 comment:

Hey Skipper said...


1) the vast majority of US households have experienced no increase in real income for more than a quarter century; (2) real wages have been stagnant for that same period

The patent silliness of these two observations is obvious merely via casual observation. It has been a good twenty years since I concluded that they (really, I suppose, they are two ways of saying the same thing), and the economy, could not both possibly be true at the same time.

Malls exist only where people, lots and lots of them, have significant disposable income. The plethora of malls, and the stores within them, is simply impossible to explain if Americans have had no increase in real income since the ostensible Golden Age placed somewhere around the mid-60s.

Similarly with Starbucks. It is impossible to explain the existence of Starbucks unless people -- lots and lots of them -- have so much money they are routinely willing to toss down several bucks for a cup of coffee.

There's no such thing as a true assertion that doesn't correlate with reality.

(3) low-wage burger-flippers have replaced high-paid factory jobs

Here is an artifact of sloppy statistics.

E.g. When the automakers had their own in-house janitorial divisions, those jobs counted as manufacturing jobs. When outsourced, they are service jobs. A great deal of the reduction in manufacturing jobs is due to nothing more than the same jobs arranged differently.

Also, there seems to be an odd bias here: why is flipping a burger somehow inferior to popping door panels onto a Ford? (having both flipped burgers and spent time on an assembly line, I assure you that is a distinction without a difference.)