Basically, these are my views on globalisation and free trade as touted by the IMF’s all knowing world play book on free markets in the last 5 to 10 years.

Throughout this document I freely use the term globalisation specifically in relation to free and relaxed trade practices as seen in the world today( in certain areas), and further more to the flow of money in, and internationalisation of, the world economy.

Please note that I make no attempt to disguise the fact I'm no literary or economic genius or in turn verify the accuracy of anything I say. This document is purely my opinion and I force it on no one, my only goal was to use it a social experiment in regards to a wider audience.

Globalisation

Globalisation is a great idea and has some great benefits, it’s wonderful for developing nations, and it’s great for large multinationals and banks, globalisation gives short term price relief to mature economies as corporations rush to deliver you the cheapest goods from the lowest charging manufacturer and country.

The standard of living for the average person in a mature economy initially gets rewarded by the initial influx/windfall of cheap goods, and can afford mass produced luxuries like plasma tv’s and other consumables for which they would otherwise not have the resources to obtain (big business working for you).

Corporate profits swell as companies are able to give value for money by sourcing goods resources and labour from cheap foreign locations, which in turns employs an army of service based employees locally.

Low income workers in mature economies are made redundant by cheap foreign labour and find other more challenging higher paying jobs. They in turn, help the economy in areas and sectors their country delivers efficiently and competitively, as they rejoin the ranks of the cash rich multinationals integrating into the service industry.

It seems like everything sorts itself out; the poor get richer and the rich stay rich, the world mean standard of living rises, we continue to peruse bigger problems like world peace, equality , global warming. People start to get a sense of confidence in their part of the world, and walk around with warm fuzzys for a decade.

But that’s assuming you’re an economist; you have rose coloured glasses; you live in a perfect world; everyone has the same exchange rates; everyone is run by a lovely nice and fair world government; and you don’t mind starting the last 50-100 years of world history all over again.

Here in lies the problem with globalisation. The world isn’t perfect, change isn’t instant, exchange rates aren’t equal and the world is full of diversity and has very different styles of governance and ideologies. I think, on a social level, economists fail to take into consideration, that one person’s loss of job can be a long term and devastating experience. New skills need to be learnt and industry experience acquired, not to mention the restructuring of whole economy to suit a new trade paradigm.

Inequality and poverty

In my opinion, globalisation does try to solve some great issues in the world, namely inequality, and poverty. But the very truth is, poverty and inequality has never been imposed on anyone directly by a voting populace within a 1st world country (well at least not in any wholesale sense). I mean to say, the poverty in Africa/ Middle East / and parts of Asian and Europe, hasn’t been caused by trade, or lack of a free and open markets (with few exceptions).

This poverty is a result of war, corruption, multinational greed, and direct failure and inability of these particular governments to industrialise and secure the standard of living of their own populace. The ironic thing is the majority of the poor nations in the world are usually the ones that have the most to gain from natural resources, but are in fact the ones that benefit the least.

Now I'm not suggestion by any means that we forget about the inequality in the world for the sake of a dollar, but I am proposing we take a serious look at what we are trying to achieve and exactly what methods we are going to use. Just opening the flood gates to free trade and globalisation, is a great simple solution, but the ramifications are so vast that it could implode economies and bring a whole new round of inequality to the world.

Restructuring

When we talk globalisation and free trade we actually talk about assigning different types of economies to nations that might not have all that much to offer in a globalised world (with their current standard of living anyway).

The core of this is, while foreign countries can produce cheaper consumables along with other various products and services due to their standing of living, political environment or just plain good luck with natural resources. At the end of the day you can only watch as industry gets sucked out of your economy, be it the very industry that made it an industrialised nation.

Sure, we aren’t talking about the restructuring of a whole economy, as we know service and non manufacturing sectors are a huge subset of an industrialised nation. But to this day there is still a surprising amount of manufacturing, agriculture, and labour intensive industries (both low-tech and hi-tech) that are being degraded and or at direct risk of being redundant in the restructuring process that delivers globalisation. In truth we have seen the start of this over the last decade with outsourcing of IT jobs to India, and massive trade deficit with china.

The free trade proponents jump up at this stage and say free markets bring equilibrium, but hang on… economists aren’t the ones directly in the firing line here, low incomes earners in various labour orientated sectors are. It’s these very same globalisation proponents that are directly making decisions on behalf of these threatened workers which state “we don’t mind you having to lose your job while the world equalises over the next generation or 2”. And furthermore it’s these very people that keep the bread and butter of any economy flowing, let’s face it, we can’t all be waiters and hairdressers.

The expected response of a free marketeer is that when markets, and new industry are eventually created through the retraining re-educating and reemployment of various parts of the work force, the overall efficiency of the exporting sector starts filtering through to the economy hopefully doing something to reduce the trade deficit.

That’s all well and good, but the clenching issues with globalisation, in an add hock world is as follows,

• If your country is on the wrong side of a trade imbalance how exactly are you going to fix that?

• What is your country going to do better than everyone else, to at minimum maintain a trade balance, to stem the loss of money to the rest of the world?

• How are you going to stop money flowing unequally to countries which have larger populations combined with cheap labour markets, bad political environments, or even just unnaturally large amounts of natural resources?

The equalisation

It’s absurd to think all countries will equalise in this affect and magically obtain static trade relationships in a supernatural state of equilibrium. Sure in a perfect world, with a perfect world government, with unfluctuating exchange rates or a combined world dollar, this would all be possible. However in the current configuration, globalisation is like building a pool table on a wildly uneven surface, the results are as expected, every time you hit the ball, its most likely going to land in someone else’s pocket .

A further analogy of this is, that the stream of money through trade is still fairly regulated; you can think of it like dams built around entire countries, they help to keep the money in. the regulation of the flow of money through trade agreements, tariffs and export taxes are actually keeping mature economies alive through a virtual system of financial trade damns. However as soon the barriers drop or are minimized the money will try and flow to the countries of least resistance, where things are cheaper, be it fairly or not.

And here in lies the problem in our current environment, who is going to control the application of what is fair and playing by the rules the WTO, and how are they going to enforce it? Even if there was such an organisation, would it have the teeth to bite on issues such as human rights? Would it consider environmental safe guards, quality control, worker safety and unfair trade practices, or even delve into unrepresentative political structures, such as communism and corrupt governments.

Blah, such organisations by nature never work due to diversity of world governments and their own priorities and perceived sovereignties, not to mention differences in ideologies and future world placement aspirations.

In short globalisation will, unavoidably result in some countries having massively uncontrollable trade deficits to other countries, which results in money directly leaving the economies of some, into and unfairly favouring economies of others, and worst still over very long cycles. The only possible way a mature economy on the wrong side of this coin could compensate, would be to lower its cost of living, or if you like standard of living; the cheaper the standard of living, the less money you need no need to be paid, the cheaper you countries goods(sounds painful).

This is the whole premise of globalisation, to spread the wealth, and a good goal it is; but if that’s all we are trying to achieve, we’re colourfully trying to play pick-up-sticks with our bum cheeks. We just don’t live on a level pool table. The fact is the world’s resources weren’t divided up equally per capita; most of the world live with substandard water, let alone with human rights or effective, fair and elected transparent governments.

How the heck do we expect the unregulated flow of money to somehow solve the world’s larger issues; being that of wars, local wealth distribution and corrupt governments? How do you stop a 2 tiered society, one were foreign governments are unfairly rewarded for relaxed human rights, standards of living, quality controls, and environmental safe guards;? How do you compete against unlimited amounts of cheap labour, and unusual amounts of natural resources?

In short you can’t, and the only way it could ever work is if there was a majority world unilateral approach to trade or there was a world government with a total concentration of power in such issues. Personally as good as that last suggestion sounds, I'm not sure I'm too kosher with the idea myself, some of the evilest people in history have dreamed of such power.

The downfall

The main problem with this restructuring process as seen with unfettered globalisation in the real world recently, it is that the socioeconomic fabric of mature economies is starting to rip down the centre; While the well placed are profiting immensely, times start seeming a little harder for others as inflation becomes more evident, and additionally increasingly harder for governments to control.

This affect, is a direct cause of large corporations/banks institution, hedge funds, multinationals and finance markets soaking up the large amounts of excess cash created by the optimisation of redundancies in the trade chain (buying cheap stuff offshore). Additionally this sponge affect has been leveraged by the respective parties investing heavily on the premise future growth is stable and sustainable (ludicrous really).

Well that’s great and all if you were a well placed corporation, multinational, individual, or at one stage you had your money in housing, shares, resources or financial instruments, you were in a sense riding on the back of the inflationary lion. The problem arises when the lag of this restructuring starts to take full effect and the very basis of your economy starts to be discombobulated from the inside out.

Using a case study, the US housing crises which lead to the larger financial crisis of 2008, wasn’t caused by cheap interest rates, or the war in Iraq, or any other commonly touted reason for the current financial crises. It in fact, in my opinion, was the critical mass reached by the decoupling over the last 5-10 years of local industry for the sake of a quick and nasty profit.

Sure housing played significant roles in the crises, whilst bush and greenspan with rates helped inflate the problem; additionally spending so much money fighting wars is far from contributing positively. However a good subset of the money spent on the war actually comes back to the economy through government contracts and so forth (obviously not all). But a net trade deficit is a trade deficit, and each dollar you lose is a dollar you lose, no exceptions.

The bust

The real pin that popped the housing bubble, was little more than the slowing down of the economy in very unseen subtle yet predictable ways. For if the US had seen continued growth (however ludicrous or uninflated, considering the last 5 years), the mortgage sector wouldn’t have burst. I.e. mortgages fail for a reason and that reason is reflected by the overall health of the economy.

The unwieldy fact is that everyone got complacent, banks corporations and individuals borrowed on the idea the good-times were going to last forever (underlying growth over the last 5-10 years). we were living in a new age, the internet age, the post tech boom age; the age of iPods , growing capital markets, and housing prices. The consensus was our 1st world life style has been set in stone, and would last forever, and institutions lent money like there was no tomorrow.

To cite the exact problem, the US trade deficit to just china last year was 256 billion dollars unseasonably adjusted and exponentially rising; currently around 15 percent a year. In comparison, I believe as ofAugust 2008, the war in Iraq will cost around $550 billion. This does seem like a waste, until you consider, the US gives half of that amount to china every year, for the sake of cheap fix, toxic, un-environmentally made consumables. The war will end soon, trade agreements in their current relaxed configurations may not.

In retrospect, we have been globalising for the last 10 years, and the same boom that has lead to the wonderful growth and inflation in our standard of living(our new houses, with the internet ipods plasma tv’s) is the same boom that has eroded the underlying fundamentals of our mature economies. Free trade (or relaxed trade) has bitten in ways that were never expected and totally unseen, and can be seen in various places from the effect on the US economy, through to the sharp increase of global carbon emissions( more money more wealth, higher standard of living, and no constraints equals more pollution).

More so, people even refuse to believe their own purchasing habits as laid out and prescribed for them by the greed of corporations trying to generation larger profits, are directly causing all the adverse affects they are noticing in their day to day lives.
Anyway how do we solve this problem? I have no idea, certainly there has to be a compromise somewhere, though personally I believe countries should try and produce everything they need, and only trade when absolutely vital, however, even that has inherent problems. Well at least that should be the case until the world forms are free and fair world government with free and fair rules of trade.

Conclusion

While the trend in globalisation has been increasingly good for our standard of living over the last decade I think the honey moon is over, and trade relationships should be formed only with likeminded countries or else at the last possible choice. These countries would be willing to install the appropriate quality controls, and environmental safe guards, as well as conforming to some minimum standard of political structure and human rights among other things. Additionally these rules would in turn also be affective with all its respective trading partners.

It’s easy to see that there is no easy fix and my 2 bob solution is probably full of just as many holes, but at least the process of change would be less of an impact socially.
In short, should we keep pushing globalisation? In my opinion no. should we start looking at more protectionism and regulation for corporations and imports into our economies? Yes. Should we put Paris Hilton and Britney spears on a spaceship and send them to mars? Yes.
Note I realise this is a big post and it will be hard to list all the points of contention you may have (assuming you even got that far), so ill except responses of YOU SUCK TARDFACE.
Anyway Thanks for your time and I look forward to your abuse.