Should We Welcome Globalization or Fear It?

Having just finished reading Gregg Easterbrook’s new book, ‘Sonic Boom’, I think he would say that we should welcome globalization. He sees fantastic potential for social progress, but improved living standards are likely to be ‘wrapped with ribbons of stress, anxiety and dissatisfaction (p.34). His bottom line seems to be that globalization is inevitable and that we just have to learn to live with it.

Easterbrook expects the forces of globalization to grow stronger. That means that the insecurity that people often associate with globalization is likely to accentuate:

‘Job turmoil, the economic roller-coaster, financial bedlam, media superficiality, celebrity inanity, political blather, targeted advertising, scream-and-shout discourse, the paving over of nature – they’re all going to get worse. A lot worse in some cases. Most likely, global economics will be blamed for whatever about coming decades we don’t like.’

He also suggests, however, that much of what people tend to like about life will get better:

‘Prosperity will increase, especially in the less affluent nations where improvement is most needed. Democracy will flourish on five and perhaps six continents … . Information and knowledge will proliferate as never before, while art and culture become available to everyone. Many aspects of this evolving sonic boom will be really terrific.’

Then comes the recommendation:

‘The terrific aspects and the anxiety inducing aspects will be intertwined and we’re just going to have to live with this’ (p. 209).

Why is globalization inevitable? I think Easterbrook discusses this in several places but I have noted one place in particular. (I’m glad I made notes as I read the book because there are few clues offered in the contents page about where to find stuff and the index doesn’t seem to be as helpful as it could be. But I digress!) Easterbrook suggests that we can’t stop global change because it is associated with the spread of freedom – ‘most of the world’s nations are acquiring the same core structures (democracy, free-market economics, emphasis on education) that makes the United States the current world leader … . The more America-like the world becomes, the faster the pace of economic change will be’ (p. 192).

I think Easterbrook is basically right about this. It would probably take a world war to stop globalization and there doesn’t appear to be one of those on the horizon. Perhaps some people said similar things around 1900 – prior to a few decades of disruption in global trade and investment. Even so, the main point is that the forces shaping the future of the global economy are beyond the control of any individual, firm or government. At a national level it is possible to shield some groups from the forces of global change but only by reducing the opportunities available to others.

Easterbrook acknowledges that it is possible for governments to provide a safety net that will provide citizens with some degree of security, particularly in relation to health care. He argues that people in the U.S. suffer more stress than do people in western Europe because of problems associated with the U.S. health care system (pp. 200-202). I don’t know whether or not this is a valid point. Evidence from the Gallup World Poll suggest that people in the U.S. tend to experience more stress than do people in western European countries and Australia. But Mexicans report experiencing a lot less stress than Americans and less stress than Europeans and Australians – so there is probably more involved than health care.

My main reservation about this book, as with Easterbrook’s earlier book ‘The Progress Paradox’ (discussed here), is that I think he overstates the insecurity that people actually feel as a result of the forces of globalization. The book seems to be full of colourful phrases to describe this insecurity. For example, Easterbrook writes of ‘change-based anxiety’ (p.34), ‘Multiple Media Personality Disorder’ which he defines as a ‘a universal low grade nervous tension from which there may be no realistic escape’ (p.70), ‘the Super Bowl of stress’ (p. 72) and ‘collapse anxiety’ (p. 168).

I acknowledge that job insecurity has increased. Easterbrook makes a strong case that each year it gets easier for someone to come along with a superior idea and put an established firm out of business (p. 134). He could be right that in future there will be a greater risk that people who have risen to the middle classes will ‘fall back’ down the economic ladder and end up bitterly unhappy (p. 196). I also acknowledge that the insecurity of modern life is a popular topic of conversation, particularly in the media. But I don’t think insecurity is having a large impact on behaviour and the way people feel about their lives. If a lot of employed people were feeling a high degree of insecurity about their jobs I think they we would see more precautionary saving and less willingness to go into debt than we have seen in recent years. Survey evidence suggests that the vast majority of people in high-income countries feel that they have a great deal of control over their lives.

My conclusion is that there must be a huge gap between the fears that a lot of people express when they talk at a superficial level about the challenges and insecurity of modern life and the deeper feelings that they have about opportunities and threats in their own lives.

Alan Greenspan and the Ruination of the US Financial System

The Financial Times had the article “Greenspan Mauled Over Role In Meltdown”, which was about that loathsome, worthless lunatic Alan Greenspan testifying at the Financial Crisis Inquiry Commission, which is enough to make you laugh in itself; the morons who perpetrated constant deficit-spending are facing off with the guy who provided the money and credit with insane levels of monetary inflation to make it happen! Hahahaha!

For his part, Greenspan lamely admitted that he and the Fed had never tried to do anything other than keep creating money, day after day, month after month, year after year, to finance those boom-era boondoggles, like, for example, the housing bubble, a federal government idiocy of massive size and a particularly odious failure, a pungent stinkeroo made possible with the low, low, low, insanely-low interest rates and laughable banking changes that Greenspan, alone, provided.

Even worse, to make such low interest rates somehow defensible, Greenspan and Michael Boskin rigged up a slimy methodology (commonly referred to as “hedonic adjustments”) for “adjusting” both the price changes and the standard, measured market basket of goods and services, so that inflation in prices was always understated by, apparently, as much as they wanted! Hahaha!

For the Federal Reserve to do otherwise (to wit: not act like morons), says Greenspan, “Congress would have clamped down on us”, which means that he is admitting, on the record, that the fabled “independence of the Federal Reserve” is just another Stinking Load Of Lying Hooey (SLOLH), which I say means that he ought to be dragged out into the street and horsewhipped, along with all Congresspersons (except Ron Paul), either living or dead, meaning, of course, that if a former Congressperson was dead, then his or her dead body ought to be dug up, taken out into the street and whipped, too, and then all of them thrown into prison, except for the dead ones, of course, because that would look, you know, stupid.

Of course, is too classy to get dragged into discussing the merits of Extreme Mogambo Retribution (EMR), and, instead, calmly says, “We start with Greenspan and his recent denial of any role in provoking the current financial crisis by keeping interest rates very low for an extended period of time. We are a bit baffled by his denials. He knew then and he knows now that paper money creates difficulties when issued by private/public central banks under the aegis of the state. He understands the business cycle, Austrian economics and how destructive publicly issued fiat money can be. First comes the boom – courtesy of an overprinting of paper money – and then the inevitable bust.”

Exactly! Almost taking the words out of my mouth, they continue that the boom-bust cycle is inevitable because “It always happens that way as Ludwig von Mises and FA Hayek showed us. Greenspan knows, and must know, for he wrote about it as a youth and supervised the mechanism as a mature economist and regulator.”

What to do? Lie! And just like most of us (me) lying at work about whose fault something was (me), and who ought to be fired for it (not me), and his future salary disbursed to the remaining workers (me), Greenspan denied everything, prompting Daily Bell to note “We suppose he must deny it. One doesn’t go to Capitol Hill and admit that one caused the undermining of the wealth of the Western world. And certainly it wasn’t Greenspan’s fault entirely.”

It was that last sentence, “And certainly it wasn’t Greenspan’s fault entirely”, where I saw my chance! An opportunity is dropped into my lap to get a little attention (and to probably commit professional suicide) by disagreeing with the Daily Bell!

Thinking that they would be persuaded if I couched my rebuttal in terms of Long, Loud And Rude (LLAR), I said “You’re wrong, you morons! Hahaha! You’re wrong and I’m right for once in my lousy life! It was all Greenspan’s fault! Greenspan is the one that created the money that made it possible! Don’t you see, you nitwits, that without him, and the monstrous mountains of money he created, none of this bad stuff would have happened!”

Well, I learned Long, Loud And Rude (LLAR) was not the ticket to recognition and acclaim at the Daily Bell, although I am right about Greenspan being singularly at fault, just as I am right about how you ought to be buying gold, silver and oil right now instead of sitting there reading my Stupid Mogambo Crap (SMC).

Perhaps, in hindsight, I should have taken the more up-tempo and literary road, and say, all sophisticated-like, “As P.J. O’Rourke, the famous writer, might have put it if he was paraphrasing himself, just because teenage boys want whiskey and car keys doesn’t make them guilty of anything, especially when it was their own stupid dad that gave them the whiskey and car keys while telling them to have a good time because there was nothing to worry about!”

Still no response from Daily Bell, even when I offered that “Maybe if he was sending the kids out to buy more gold, silver and oil because he was unable to go himself, then maybe Greenspan could be forgiven. But he didn’t, and now look at the mess we are in!”

Again, nothing. So, I surmise that the lesson for today is that nobody cares about how I feel about the odious and satanic Alan Greenspan, who is the lying, repulsive turd that caused the booms and the busts.

And, apparently, nobody cares for my constant exhortations to buy gold, silver and oil, either, which they must do to survive financially as a result of the insane Federal Reserve creating so insanely much money so that the insane federal government could borrow and spend an insane $1.6 trillion this year, and trillions and trillions more borrowed and spent dollars for at least 10 years, which will double, triple, maybe even quadruple the money supply, which will cause such ruinous, catastrophic inflation in consumer prices that you can hear me, way off in the distance, screaming “We’re freaking doomed!”

And if you do you decide to get some gold, silver and oil, go and get it yourself, and not trust some drunken kids to get it for you. We’ve seen what happens!

Alan Greenspan and the Ruination of the US Financial System originally appeared in the Daily Reckoning.

Economic Events on April 16, 2010

At 8:30 AM EDT, the Housing Starts report for March will be released.  The consensus is that construction on 605,000 new homes was started last month, after a weak February due to poor weather.

At 9:55 AM EDT, Consumer Sentiment for the first half of April will be announced.  The consensus is that the index will be at 75, which would be an increase of 1.4 points from the second half of March.

Join the forum discussion on this post - (1) Posts