Understanding the
Global Economy

Comprensión de la
economía mundial

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Since the late 1970s, a group of theorists have developed a focus on the new international division of labor and the globalization of production. It is a logical extension of the theory of comparative advantage, though with different results. According to the theorists, conditions in the late 20th century have made it possible to realize production on a global scale. In general, it is through both the age-old laws of property rights and the more recent trade agreements that 1) corporations now have carte blanche to transfer advanced technology to countries with low labor costs, as they 2) exploit the advantages of cheap capital in capital-rich countries, while 3) relative production costs determine global patterns of trade, as it does within the theory of comparative advantage.1 As a consequence of an enhanced global mobility, a new capitalist world economy has emerged. Its main feature is the massive migration of capital from the industrialized countries to low-cost production sites in the third world. Due to capital mobility, capital-rich countries have no economic rationale for producing where the capital is. It is more logical to produce where a well disciplined and inexpensive labor resides, fallow.

II.i. Globalization of production as explanation

Central among the what the theorists of globalization of production seek to explain is a set of interrelated and concurrent phenomena, summarized as

  • deindustrialization of the first world manufacturing areas as factory closures and other capital disinvestment
  • moving production to third world countries with low labor costs,
  • marketing products in the first world and
  • expanding markets to create a global market and a global factory.
  • In a study titled, Capital and Communities: the Causes and Consequences of Private Disinvestment, two leading exponents of this type theory, Barry Bluestone and Bennett Harrison, outline what has to be explained, which in turn, explains why these phenomena happen.2

    Under capitalism, private ownership, for the most part, controls the means of production. That includes the necessary machinery and equipment for society to produce more than the minimal subsistence for its members. To some extent, the ability to produce depends on the skills of employees and on capital, which are the tools and the money used to purchase the tools. When the products are sold, the revenue is divided between people: 1) workers who earn wages and salaries, and 2) the owner(s) or 3) owners as stockholders. The owners have, as Bluestone and Harrison note, every incentive to keep employee compensation down. Their point survives the objection that it is often possible to make high profits by paying high wages, which attracts skilled employees who are loyal and enthusiastic. Such possibilities, however, are not the rule because if it were possible to buy the same skill, loyalty, and enthusiasm while paying lower wages, then profits would be even higher; about this, they wrote

    Employers must keep their costs of production down, which compels them to coax as much productivity from their employees as the existing technology will allow.—Bluestone and Harrison 3

    Managers as representatives of the owners use a variety of means to reduce labor costs in their companies because they are in constant competition with other companies. Workers use a variety of tactics to increase wages, notably action through labor unions and by the ballot box in Europe and the United States in recent decades. Using the ballot box, workers can force owners to pay a portion of revenue as taxes to support social programs. Besides higher wages and overtime pay, the victories labor include

    • unemployment insurance benefits
    • pension rights
    • public assistance
    • disability insurance
    • minimum wage laws
    • health and safety regulations
    • seniority rights
    • some degree of job security and
    • a living wage, narrowly so-called with benefits to augment it.

    Necessity as well as ambition drives owners in the never-ending battle to counter the efforts of workers to increase wages. The basic structure of the economic system forces them to keep the costs of production down. Markets have their ebbs and flows, technology changes are costly to keep up with and aggressive competitors are tireless in their efforts to sell a better product at a lower price. Every crisis drives many employers out of business, especially the smaller and weaker ones. An intense and increasingly global competition is bequeathed to the survivors.

    The ceaseless battle to lower production costs is one that owners must wage to survive. Those who win expand commercial empires and amass wealth, while those who lose go out of business. The resources of the workers include: 1) organizing drives, 2) strikes and 3) the right to vote en masse for pro-labor candidates. The owners still have greater resources as Bluestone and Harrison show that against those resources, the employers have the legal right to

    • move their property from one place to another
    • open and close stores, factories and offices,and
    • seek friendlier governments and cheap labor as a tool to be used against both workers and other competitors.

    Trade unionists are particularly concerned with how companies use capital mobility 1) to keep labor off guard, 2) play off workers in one region against those in another and 3) weaken labor's ability to resist corporate attacks on a living wage.4

    Thus, Bluestone and Harrison outline what has to be explained, which in turn, discovers and explains the phenomena observed as

  • a socially constructed quasi-mechanism as an explanation
  • an opportunity for profit is the input to the
  • the causal mechanism producing the result is the market force driving companies to relocate their production to low-cost sites and
  • the enabling condition is property ownership, which gives the companies the legal right to move.
  • Nothing new of substance stands out in the Bluestone and Harrison account. Ricardo stated its main elements in 1817, as did Adam Smith in 1776. Bluestone and Harrison extend the classical logic of comparative advantage to the contemporary international division of labor.

    Ever since economics began as an organized academic study almost three centuries ago, philosophers have compared its quasi-mechanisms to the mechanisms, properly called, of physics. Galileo's law of freely falling bodies (s = 1/2gt2) is analogous to Bluestone and Harrison's explanation of industry relocation. Galileo's driving force is gravity and its analogy to economic market forces is clear. Thus, the enabling condition as the free space within which the body falls is a metaphor of private property. The values of just a few variables permit Galileo to calculate the location of a body freely falling in space at any given time.

    In Bluestone and Harrison's quasi-mechanism, the values of more variables enter into the calculation. Nevertheless, the result is a similar knowledge about the where and when of the back and forth movement of industries. Perhaps most importantly, the economic quasi-mechanism and one of the mechanisms Galileo discovered are alike in that they are scientifically valid even though from a superficial viewpoint they sometimes contradict experience. If you hold a feather and let it fall, its trajectory, as seen from a superficial viewpoint, will not conform to Galileo's law, which, nevertheless, is still valid. When you correct for friction, wind and air pressure you will have explained the trajectory of the feather. Moreover, without Galileo's law you will not be able to explain its trajectory.

    Similarly, by 1817 Ricardo had realized that the classical economic description of market forces implies that capital will move wherever higher profits are to be made. Ricardo recognized that greater profits could be achieved by reducing production costs exclusively, he thought, by lowering wages. He was aware that the economic mechanisms he was analyzing implied that capital would pursue profit around the globe; thus, he asked why the phenomena predicted by the theory did not (in his day) occur more often; he answered as follows, writing that:

      Experience shows that the insecurity of capital, when not under the direct control of its owner, with the reluctance that everyone has to quit their country of birth and ties and entrust, with all habits fixed, to a strange government and new laws, curbs the emigration of capital. These feelings, which I should be sorry to see weakened, induce most men of property to be satisfied with a low rate of profits in their country, rather than seek a greater return on their wealth in foreign nations.5

    The fact that has to explained for Ricardo, for Bluestone and Harrison and for Galileo threatens to prove too much. It is reduced by postulating a cause with simple and uniform results, which contradicts the complexity of the facts observed. To be true to reality, the causal quasi-mechanisms that are discovered must be supplemented by accounts of the various kinds of friction that modify the effects that the causes produce. For Ricardo, the major source of friction that impedes the globalization of production was the capitalist's fear for his security and property. Bluestone and Harrison agree by way of this corollary:

      When the world becomes better policed so that investors everywhere can feel assured that their property will not be stolen anywhere, the inherent tendency of market forces to bring about the globalization of production will come to the fore and assert itself.6

    Describing the first great wave of globalization, which was the expansion of U.S. industry overseas after WW II, Bluestone and Harrison recount the political and military policies of that era, which contributed to making the world safe for U.S. capital and, ultimately, for anyone's capital. In retrospect, the many civil wars in the third world in the era in which right-wing regular armies put down left-wing rebels, appear as a pacification paving the way for investment. The rebels, even when they had Soviet support, tended to promote traditional and ethnic values. It was the regular army, with U.S. and, at times, European support that held the revolutionary values. The army was preparing the way for the massive social change that in fact happened—the "MacDonaldized" world. About the policies of this era, Bluestone and Harrison point out the following:

      U.S. military policy and foreign aid were vital in extending the global reach of U.S. industry. Whatever their manifest military purposes, U.S. troops, military advisors, offshore cruising naval vessels, strategic long-range bombers and, finally, long-range ballistic missiles, all helped, at least indirectly, to protect and extend U.S. business abroad. During these years, the U.S. government made commitments to a whole network of antidemocratic dictatorships, whose leaders seemed dedicated to, along with keeping themselves in power, promoting the entry of U.S. business into their economies. In this context, many of the new U.S. third world allies—South Korea, Taiwan, Brazil and Argentina—courted U.S. corporations with temptations, such as low wages and prohibitions of free union activity.7

    Bluestone and Harrison distinguish between a cause and a reinforcement. A cause, like Galileo's gravity, is a fundamental operating factor. However, a cause can be mitigated or reinforced (slowed or accelerated) as the force of gravity slows by friction or speeds by a downward push. Thus, they find that U.S. tax laws after WW II accelerated globalization because they favored big business, which was in the process of becoming multinational. Similarly, technical improvements in communication and transportation were important reinforcements of the trend toward globalization, although not important enough to make them causal. Bluestone and Harrison observe that:

      As with the new technologies of production, transportation and communication, it is not the case that the preferential tax and tariff treatment of foreign investment caused U.S. corporate managers to shift their capital abroad. Instead, these public policies reinforced corporate decisions that were based on factors that are more important: markets, labor costs and political security.8  

    II.i.v The international division of labor as explanation

    About half of all international trade occurs among multinational corporations, as different subsidiaries and divisions of the same corporation that ships goods back and forth to each other. The international division of labor explains this trade by the principles of minimizing costs and maximizing profits. Consider this simple example:

    Country A has low wages, high taxes and, thus, impoverished consumers.

    Country B has slightly higher wages, low taxes and slightly less impoverished consumers.

    Country C has high wages, high taxes and rich consumers.

    Widget International Inc. therefore, will do its basic manufacturing in Country A. Its subsidiary in Country A will then sell the nearly finished product to the subsidiary of Widget Inc. in Country B at a low price. Widget will pay low wages because wages in A are low. It will pay low or zero taxes because, even though the tax rate in A is high, its Country A subsidiary will sell its goods at a price just high enough to cover costs. Therefore, the Country A subsidiary will make little or no profit. The Widget subsidiary in Country B will then put a few final changes on the product and sell it at a high price to the Widget subsidiary in Country C.

    The cost of wages will be low because not much labor will be done in Country B. The cost of tax will be low because tax rates in B are low. The profits from buying cheap and selling dear may be piled up in B. More likely, the profits made in B will move back and forth among bank accounts in Countries D, E and F, which are selected because they are, at any given moment, the favorable places to keep cash.

    The Widget subsidiary in C then sells the finished product to the rich consumers in Country C. The wage cost is low because Widget Inc. runs only a sales operation in C. The tax cost will be low because the Country C subsidiary makes very little profit, because of the high cost of goods purchased from the Country B subsidiary.

    The international division of labor uses similar principles to explain transfers within corporations more complex than this simple example.

    II.ii. Globalization of production as prescription

    Those who praise and advocate globalization attribute an ethical merit to it. They claim that it 1) proceeds according to sound moral principles, 2) maximizes that which ought to be maximized and 3) spreads the modern ideals of liberation and inclusion worldwide.

    Beyond the positive value judgments grounded on principle, praise for the new international division of labor appears not to rely on a principle, except to express a sense of satisfaction or triumph so that globalization basks in the glow of a favorable light. Therefore, Rehman Sobhan, for example, advocates that labor services be treated as any other commodity; 9 about this, Sobhan wrote:

      South Asia remains the main source of international trade in labor. The colonial practice of labor export only showed the way to the post-colonial generation with their limited opportunities for employment at home. In response to their greater opportunities open to enterprising young men willing to work long hours at low wages in the hostile terrains sustained a flow in even greater numbers throughout the 1950s and 1960s, as improved communications contracted the global village.10

    The scholars from Malaysia and Taiwan proudly set forth statistics showing the growth of their nation's economies. In addition, Sobhan celebrates a global labor market that creates new opportunities for the most impoverished. Thus, it gives a new status to nations and regions previously neglected, which investors now prefer because of their abundant willing labor.

    The principled justification of globalization begins with the ethical underpinnings of the quasi-mechanism that causes it. Market forces and property rights are the essential elements of Bluestone and Harrison's scientific explanation of the phenomena observed. Freedom is the ethical ideal embodied in the market. The classics of modern ethical philosophy—Rousseau, Locke, Spinoza, Bentham, Mill and Kant—are alike in establishing principled moral foundations for economic society, i.e. for freedom and for property.1 The logical apparatus used to derive the conclusions differ by author, yet these same fundamental conclusions that remain are:
  • the basis of moral legitimacy as free consent,
  • respect for property rights, which is 1) a moral imperative and 2) a categorical imperative in Kant's version as a moral command valid for all rational beings, which is akin to
  • respect for other people's freedom and
  • keeping promises and contracts.
  • While the market forces and property rights elements of the quasi-mechanism driving globalization are intact, globalization will move forward. While modern liberal ethics define the moral rules, it can move forward as a legitimate entity, which is not to say that globalization always moves forward lawfully. As a rule, history consists of lies and violence and the history of the globalization of labor and capital markets is no exception.12

    Suffice it to say that a great deal of ink and a great deal of breath is wasted in printing and shouting matches attempting to establish whether 1) the partisans of grassroots local self-sufficiency ,or 2) the partisans of free trade and 1b) the left wing dictators, or 2b) the right wing dictators have lied more, tortured more and massacred more.

    Globalization on its best behavior is a faithful student of "Ethics 101" as it is taught in Western and Western-influenced universities around the world.13 When, for example, assembly factories move from the U.S. to the maquiladoras in Mexico, they justify themselves by appealing to the standard ethical principles. For example, the young Mexican women hired to assemble TV sets freely consent to their employment, wages and working conditions. Moreover, the property rights of the factory owners authorize them to move their assembly plant wherever they choose to relocate them.

    Capitalism as a Western institution has become a global institution that wherever it goes it carries Western values. When assimilation into the global economy means that work for wages replaces household work or feudal forms of labor, the result liberates the wage earner as the wife, young woman, young man, landless sharecropper peasant. For that reason, the globalization of production may get credit for liberating the oppressed and, thus, improving the morality of traditional societies. Nevertheless, at other times and concurrently, globalization spreads the materialistic values of individualism of the United States. Always, the global or local capitalists use sweatshops and other patriarchal forms of production that combine the worst of the old and the worst of the new.

    Similarly, any increase in the use of money to govern human relationships and practices may point to an increase in tolerance. Therefore, It helps to recognize that money is, at once

    • a cipher, a neutral medium and a pure abstraction consisting of quantity with no qualities
    • the same whether it comes from a Jew, a black, a woman, a man, a Muslim, a Japanese, Catholic, or Protestant
    • indifferent to the personal qualities of the people who use it to enter into commercial transactions with each other and, thus, it
    • brings together people of diverse ethnic backgrounds and cultures.
    The globalization of production, therefore, with the free flow of capital and labor across national boundaries, guided only by the principle of profit seeking that is money—appears to be the fulfillment of the ideal of tolerance. No one with money faces discrimination or rarely, whatever the person's other qualities may be. The globalization of production in theory, thus, appears to have an affinity with the best modern ideals of freedom, personal autonomy, independence, tolerance, cultural diversity and equality, though only in some respects. Many, even scholars, consider free trade to be a corollary of the ideals of the Enlightenment. Therefore, constructive alternatives to globalization have the drawback that critics may perceive them as opposed to the moral progress of the last three centuries.

    In technical terms, mainstream economists justify globalization as more efficient. William Baumol prescribed a criterion of efficiency, writing that — Never take resources out of a use where they bring in say, 9% in order to utilize them in a manner that yields 6%!14 Thus, maximizing the rate of return is clothed with a moral imperative derived from society's need to ensure the efficient use of resources.

    Progressive economists criticize the mainstream's criteria of efficiency with examples such as Ford Inc., which gradually lets a plant in Michigan become obsolete, closes it and builds a plant in Brazil. The move is efficient according to Baumol because the yield on investment goes up from 6% to 9%. It is a profitable move for Brazilian workers, who now make two dollars per hour instead of one. It is unprofitable for U.S. workers, who suffer from psychic depression, move their kids to new schools in new towns and on average, make ten dollars per hour instead of twenty. Moreover, communities are torn apart as

    • buildings, at least, temporarily are abandoned
    • real estate value depreciates
    • the tax base shrinks and
    • social services are cut-back.
    When all the gains and loses total, the net result is that the move was socially inefficient, even though from the point of view of the few Ford shareholders it was efficient, at least in the short term. Thus, if Ford had internalized all the external costs it was imposing on others by this decision, Ford would have made a different decision.15

    I believe that the economists on both sides of such debates have the best of intentions. However, I suggest the approach conceived by Hazel Henderson is a better ethical framework for evaluating global corporations, trade institutions and policies. The term efficient is meaningless without a specific pursued objective. Therefore, efficient describes the achievement of quantity at the least cost or a higher quality at the same cost.16 In the example of Ford, I would agree with Buckminster Fuller that the manufacture of automobiles is not an ethically defensible objective. Thus, whether they manufacture in Brazil or Michigan ought to be a moot point. The point is that we should be making efficient light rail and bicycle paths.17

    The concept of efficient seems meaningful to economists because they treat the revealed preferences of consumers, which become sales transactions and, thus, revenues in dollars as an indication that something worthwhile was achieved. They excuse themselves from asking what or why. Seen in this light, the claim that globalization is efficient is a meaningless claim and allocating resources by market criteria is a form of ethical skepticism Not knowing what good means and, thus, not being able to define a good objective, the economists settle for calculating how to allocate resources to maximize profits. An economist would hope that profits reflect a market that has persuaded people, with enough money, to buy products. This, then justifies that the economist consider profits as an indication of how efficiently the resources overall are allocated. In an indirect way, this ought to reflect how much welfare was derived from the resources consumed. Whereas, in turn, ethical skeptics define welfare as people getting whatever they appear to want.

    Henderson's approach of ecology and the wisdom of the time-tested spiritual traditions (the approach to ethics that I advocate and develop in detail in a previous book)18 shows ways to make the concept of efficient a meaningful one. If efficiency has any prescriptive value, it logically requires justifying the pursued goals. Even with legitimate Hendersonian objectives specified, the concept of efficiency is still defective because it generally implies that there is one best way to do something (subject to any given set of constraints) and that the one best way can be calculated as a maximum or a minimum.19 Nature, Aristotle and the time-tested wisdom of the East and the West agree that the ideal of good is characterized by diversity rather than by committing all resources to a single best way; therefore, the good is characterized by moderation, not by extremes.

    Apart from its association with the enlightened morality of modern times and its specious claim to be efficient, the globalization of production is advocated on the premise that its opponents have no better alternative. Nonetheless, these questions persist about the issues of and alternatives to globalization:

    • Would you compel capital to stay wherever it is?
    • How would you enforce a law against capital flight?
    • Should all international trade be state trading?
    • If we want government to manage trade by slowing the rate of capital mobility, what criteria will determine an effective policy? How then will it enforce the policies without driving capital into hidden bank accounts?
    • Should the state compel landless peasants to stop producing cash crops for export and, thus, return to producing for use?
    • Should each nation produce for itself prohibiting all imports?
    • Is it feasible for labor unions to organize worldwide to counteract the multinational corporations?
    • How could Japan survive with less trade?
    • Should we go back to barter trade, or the potlatch replacing trade with gift giving, or self-sufficient medieval manors?
    • Would it be possible for all companies to become nonprofit; even so, would it do any good?
    For those of us who complain about the global economy, such questions challenge us to find or create a better way.

    II.iii. Globalization of production as metaphysics

    Metaphysics has not become a less controversial term since I paused my discussion of it at the end of Part I. For many people, the term is synonymous with empty words without content and or context. For others, the term denotes an abstract form of religion, a withdrawal from the world to contemplate ultimate reality. The concerns of metaphysics seem distant from the joys and sorrows of life that they could not be relevant to the price of bread, or to any other practical issue.

    Oddly though, while it is the consensus of many 20th century minds that metaphysics is an irrelevant nothing, this century a number of philosophers have built their careers on attacking metaphysics, as if it were a ghost that needed constant burial. Some of these anti-metaphysicians, such as Rudolf Carnap and Sir Alfred Ayer.20 are willing to grant that a metaphysics may express the subjective attitude of the person who believes it, provided that it is understood that metaphysics has no cognitive content. For others, such as Jacques Derrida and Ludwig Wittgenstein, metaphysics is a harmful error that humans can hardly avoid. We are tempted to it by language, as we are tempted to lust by our bodies.21

    Two decades ago, the general educated public found a use for the word metaphysics when critics of the war over Vietnam attributed to advocates of the war a military metaphysics. Because of their military metaphysics, they could not see the reality of the suffering in Southeast Asia. Their perceptions filtered through the lenses of a general way of viewing the world, such that military terms interpreted everything. Similarly, I argue that people today do not or can not see the reality of the suffering in Southeast Asia, or anywhere else, because of an economic metaphysics.

    Here, I will resume my discussion of metaphysics and make two points. First, the globalization of production is the consequence of the metaphysics of economic society. Second, it is useful in practice to regard mainstream economics as a metaphysics. The cause of the globalization of production revealed itself as market forces and property rights, which are metaphysical concepts for the reason noted. They are fundamental ideas from a matrix that generates both explanation and prescriptions.22 In answer to the question—Why?, both mainstream economists and progressive economists such as Bluestone and Harrison say that it is because of market forces. In answer to the questions—With what right? and By what authority?, the classical philosophers and jurists of economic society answer—By the authority of contracts freely entered into and by the consent of the parties.

    Those contracts freely entered into—such as sales, leases, hiring, currency exchange transactions and investments happen to be the facts, the behavior of which, economists describe as market forces. The same is true of the fact of property, which serves as a basis for Bluestone and Harrison's explanation of global capital mobility. Property is also a value, according to John Locke: — Property is the value for the protection of which humans first entered into social contracts to, thus, form political societies.23 In addition, according to J. S. Mill:

    The moral rules defining property rights are so fundamental to society that they are the moral principles to which the word justice primarily refers and violation of which is properly punished by imprisonment.23

    The quasi-mechanism that produces the globalization of production is metaphysical for another reason in that it preexists as presupposed, rather than as a discovery. Using the term used by Aristotle and Kant, market forces and property rights are categories: concepts in terms of which, all that is experienced is understood. The economist does not set out to discover whether markets and or forces exist. That reality, understood as a play of forces, factors, and variables, is not a discovery of economic science. Instead, it is part of a worldview built into the mathematical tools and statistical methods that economists use.

    The economics professor's hypotheses were quantified as propositions about the impact of a particular x on a y, so x and y were always on the blackboard. If one were of a mind to quibble about a minor inefficiency, one might complain that chalk and human energy were wasted every evening when the janitor erased the x-axis and the y-axis—because right after 9 o'clock the next morning, the professor would always draw them again.24

    Similarly, whether there is such a thing, at any given time and place, as a market or property, which are the normative entities, is a question an anthropologist might ask a historian, such as Polanyi or Braudel. Inside the worldview of economic society and mainstream economic science, markets and property are concepts in which experience is understood. They give form to economics, though their existence or nonexistence is not data that economists seek.25 Nevertheless, the normative entities as markets and as property rights move capital and labor around the world in search of profits and jobs. Therefore, the normative entities are presupposed by an economic metaphysics that forms the quasi-mechanism built of social practices and the rules governing them. Thus, it is useful to be aware

    • of the metaphysical basis for the causes of the globalization of production. For the sake of all life, we want the quasi-machine to stop operating like a machine; it helps to know that, thus far, it is only a quasi-machine,
    • that to reconstruct the global economy for the sake of peace and social justice, it is necessary to change both what the mainstream economics considers and what it presupposes, which is that,
      • by changing norms, we can cause facts to change. As Rom Harre defined it—By reinterpreting social institutions, we change their causal powers.26 and
    • that the explanations given by economic science depend on the existence of a metaphysical framework that has a history. Its categories and the institutions they describe, which is its language-games,had a beginning.27

    Thus, the categories and institutions may have an end as well. Humanity may graduate to a more adequate economic metaphysics.

    Even at the practical level, it is useful to understand the metaphysical basis of society's dominant guiding worldview. Because when we evaluate it, we realize that we cannot transform the basic structure of global society all at once. Perhaps known to many and likely to professionals in peace studies and research, we cannot build positive peace without transforming the basic structure of global society. Meanwhile, we take on small projects that we believe will contribute to transformation such as • planning a curriculum • supporting alternative approaches to community organizing • leading a work camp • organizing cooperatives and • presenting conflict-resolution workshops for prisoners in jails.

    When we evaluate it, we wonder and, then ask—Are we taking the right course to, in fact, reform society or just easing a particular result of its dysfunctional structure? Therefore, it is useful to 1) bring questions into our evaluation that concern the root causes of poverty and then 2) rewrite the metaphysical categories of mainstream economic science; we then must ask how do we organize in order to

  • build a world governed more by the spirit of cooperation and less by the machine mind of market forces?
  • encourage sharing?
  • encourage the socially responsible use of property?
  • demonstrate that the righteous alternatives to the profit-driven global factory exist and do work?
  • empower people at the grassroots to infuse friction that slows the global quasi-machine, thus gaining time to reorient and transform it?
  • take a step toward transforming the global economy?
  • Resources

    1. Folker Froebel, Jurgen Heinrichs and Otto Kreye, The New International Division of Labor: Structural Unemployment in Industrialized Countries and Industrialization in Developing Countries (London: Cambridge University Press, 1980, first edition in German, 1977)

    For the first time in human history, anything can be made anywhere and sold everywhere.—Lester Thurow, The Future of Capitalism (New York: W. Morrow, 1996) p. 115

    The globalization topic arises from a cluster of empirical data that show, in many areas of activity, a small number of relevant corporations operate without national boundaries to competition. In sectors such as finance, telecommunications, aerospace, high-tech, etc. worldwide competition exists, thus, among a diminishing number of corporations.

    Jose Molero, ed., Technological Innovation, Multinational Corporations and new International Competitiveness (Singapore: Harwood Academic Publishers, 1995) p. 7

    The changing patterns of international competitive advantage integrate production operations across national boundaries. Such a globalization of industry is based on the complementary matching of the factors of production in developing and developed countries with unskilled assembly in low wage areas.

    Joseph Grunwald and Kenneth Flamm, The Global Factory (Washington, DC: Brookings Institution, 1985) p. 1

    2. Barry Bluestone and Bennett Harrison, Capital and Communities: Causes and Consequences of Private Disinvestment (Washington, D.C.: Progressive Alliance, 1980) p. 3

    3. Ibid.

    4. Ibid. p. 7

    5. Ricardo, On the Principles of Political Economy ... , p. 83

    6. Barry Bluestone, Bennett Harrison, The Deindustrialization of America.  (New York: Basic Books, 1982) p.129-30

    7. Ibid. p. 130

    8. Ibid. p. 130

    II.ii. Prescription

    9. Rehman Sobhan, in Mihaly Simai, editors, Global Employment: an International Investigation into the Future of Work Tokyo: (United Nations University Press, 1995) p. 116

    10. Ibid. p. 119

    11. Jean-Jacques Rousseau, The Social Contract: I, Part 9. (various editions and translations)

    Far from despoiling individuals, the social contract assures them legitimate possession and changes usurpation into a true right and enjoyment into proprietorship. The great and chief end of men uniting into commonwealth and putting themselves under government is, therefore, the preservation of their property.

    John Locke, Of Civil Government: Second Essay XI, (various editions) pr. 124. Spinoza's version is close to the Rousseau version. Ethics Part IV of Human Bondage- 37.2 (various editions). For Bentham the main moral justification for freedom and property is that their protection is conducive to security, which is conducive to industry.

      Who has renewed the surface of the Earth? Who has given to man the domain over nature—over nature embellished, fertilized and perfected? That beneficent genius is security.—Jeremy Bentham

    Jeremy Bentham, The Theory of Legislation (London: Routledge and Kegan Paul, 1950, first edition 1802) p. 119 For Mill, too, respect for freedom and property is obligatory because —The interest involved is that of security, to everyone's feelings the most vital of all interests.—J. S. Mill, Utilitarianism (London: Longmans 1879). p. 80-81

    Kant expressed the categorical imperative as—It leaps to the eye best when we bring in examples of attempts on the freedom and property of others.—Immanuel Kant, Foundations of the Metaphysics of Morals (various editions) Chapter 2, (Paton translation) the review of four previous examples, example 2.

    12. For contemporary accounts of globalization that stress the false and misleading ideas used to justify it, see, e.g., Hans-Peter Martin and Harald Schumann, The Global Trap (London: Zed Books, 1997); Steven Solomon, The Confidence Game: How un-elected Central Bankers are Governing the Changed World Economy (New York: Simon and Schuster, 1995) The difference between my approach and theirs is subtle. My emphasis is on 1) the basic structural quasi-mechanisms at work, 2) the worldview or metaphysics and 3) the ethical basis, which make legitimate those basic structural quasi-mechanisms. Martin and Schumann recommend, in the end, a series of policy measures, such as (p. 242) a European Union Tobin tax on foreign currency transactions, which would not lead to changes in the basic metaphysical or ethical structures of modern Western (now global) civilization.

    13. Karl Marx penned the classic account of how the precepts of modern Western ethics justify the circulation of commodities and the exploitation of labor according. Marx wrote:

      This sphere that we are deserting within the boundaries of which the sale and purchase of labor power occurs, in fact, is a very Eden of the innate rights of man. There alone rule freedom, equality, property and Bentham. Freedom because both buyer and seller of a commodity, say of labor, power are constrained only by their own free will. They contract as free agents and the agreement they come to is merely the form in which they give legal expression to their common will. Equality because each enters into relation with the other, as with a simple owner of commodities, and they exchange equivalent for equivalent. Property because each disposes only of what is his own. And Bentham because each looks only to himself. Karl Marx, Capital: 1 Part 2.

    14. William J. Baumol, "On the Appropriate Discount Rate for Evaluation of Public Projects" in Hinrichs and Taylor, eds., Program Budgeting and Cost-benefit Analysis. (Pacific Palisades CA: Goodyear Publishing, 1969) p. 203

    15. Peter Bohm, Social Efficiency (New York: John Wiley and Sons, 1973) p. xiv.

    Social efficiency involves an attempt to take into account all individuals' evaluations of all consequences of economic acts.—Peter Bohm

    16. See my discussion of the concept of efficiency in Howard Richards, The Evaluation of Cultural Action (London: Macmillan, 1985) chapter 4

    17. See R. Buckminster Fuller, Operating Manual for Spaceship Earth (New York: Simon and Schuster, 1969)

    18. Howard Richards, A Philosophy of Peace and Justice: letters from Quebec (San Francisco and London: International Scholars Press, 1995)

    19. Boulding and Spivey wrote that—Economic optimization is always a matter of maximizing or minimizing some mathematical function.—See the introduction to Kenneth Boulding and W. Allen Spivey, Linear Programming and the Theory of the Firm (New York: Macmillan, 1960)

    II.ii. Metaphysics

    20. Thus, for the young Rudolf Carnap, as he wrote:

    A metaphysics is theory without theoretical content expressing attitudes that should have been expressed through artistic media or in the practical conduct of life.

    Rudolf Carnap, The Logical Structure of the World (Berkeley and Los Angeles: University of California Press, 1967 first edition in German, 1922). Later however, Carnap came to understand philosophy as a normative discipline involved with making pragmatic choices among alternative conceptual frameworks. Henceforth, he left discussion open to regarding a metaphysics as a chosen cosmology or worldview. See the discussion of Carnap's later views in the title essay of A. J. Ayer's "Metaphysics and Common Sense" (London: Macmillan, 1969)

    21. Jacques Derrida's enigmatic and illuminating Spurs: Nietzsche's Styles/Eperons: Les Styles de Nietzsche (Chicago: University of Chicago Press, bilingual edition, 1978) It is, by design, the response to Heidegger's critique of Nietzsche. See Spurs, p. 122-23. Heidegger had argued that although Nietzsche claimed to be destroying the Western metaphysical tradition, his Will to Power (Wille zur Macht) was, in fact, the culmination of the metaphysical heritage bequeathed to the West by Plato. M. Heidegger, Nietzsche (San Francisco: Harper and Row, 1979 and Stuttgart: Neske Verlag, 1961) Spurs may, in fact, claim that Nietzsche escaped the fate of those who, condemned by language, inadvertently erect another metaphysics—when their intent is to disprove all of metaphysics. Due of his style, Nietzsche escaped from having to write another metaphysics. Derrida wrote: There is no totality in Nietzsche's text, not even one that is fragment or aphorism. Spurs, p. 134-135. Nietzsche concludes, wrote Derrida, not with a statement, but rather with a peal of laughter. Ibid.

    22. The word metaphysics began with and always refers to the work by Aristotle, which was the first to bear the title Metaphysics. It is a book about key terms like ousia: substance, existence, archai, beginnings, principles, rulers, ultimate underlying substances and energeia: functioning, activity, act, which, as market are fundamental ideas from a matrix that generates both explanations and prescriptions. See Howard Richards, A Philosophy of Peace and Justice: letters from Quebec, Letter 16.

    23. See note 11

    24. Letters from Quebec, letter 8, cited

    25. In Carnap's terminology, the questions economists ask are internal questions within a conceptual framework, rather than external questions about the choice of framework (worldview or paradigm). See Ayer's discussion referred to in note 1 above. Certain economists move from one conceptual framework to another and offer alternative economic models, whose methods might be incompatible with comparative advantage; their categories might come from Buddhism, deep ecology, or from some other innovative source. I prefer to think of such writers as not economists, but as post-economists, who have freed themselves from the metaphysical limitations that are an essential part of the history of the discipline.

    26. Rom Harre, Social Being: a Theory for Social Psychology (Oxford: Blackwell, 1974) p. 237

    27. Language-game (sprachspiel) is a concept introduced by Ludwig Wittgenstein in paragraph 21 of his Philosophical Investigations (Oxford: Blackwell, 1953)

    Imagine a language-game in which A asks and B reports the number of slabs or blocks in a pile, or the colors and shapes of the building-stones that are stacked in such-and-such a place. Such a report might run: Five slabs. Now, what is the difference between the report or statement: Five slabs and the order, "Five slabs!"? Well, it is the part for which uttering these words plays in the language-game.

    Earlier (paragraph 2) Wittgenstein had suggested that a practice in which each building material has its name, the builder calls the names to his assistant, the assistant then brings the appropriate material to the builder. The process might be considered a complete primitive language. I use Wittgenstein's idea of language-game because it emphasizes that language interconnects, for example the terminology of economics and actions, such as buying and selling made possible by the institutional facts that are formalized in contract and property law.

    For more about the project evaluation that gauges what the contribution a project makes toward social transformation, see "Evaluation for Constructive Development" the second of my Nehru Lectures presented at Baroda University in India.

    1. Which of the political and economic condition since 1970 has expanded the globalization of production: (globalization) most rapidly, in your sense of it? p. 20

    b. What trends in the corporate world do you see as having worked to secure global production?  p. 25

    c. What preexisting ethics do you see as having facilitated the largely unchecked globalization?   p. 26

    2. In your sense of it, deconstruct the phrase—well disciplined, inexpensive labor in its explanation as to who does what and why. p. 20

    3. Advocates for the global economy argue that shifting production and employment overseas will "level the playing field" and, thus, "raise all boats." Describe, as you see it, the exaggeration within this superficial view using the factual results of globalization as evidence to the contrary. p. 22

    4. Choose one or more questions on page 30 and 33 that you would like to study, research and expand with your views and conclusions. p. 30,  p. 33

    5. As you see it, which of the quasi-mechanisms 1) market forces as market growth, or 2) the ethic of property rights (both of which drive globalization) in your sense of it, derives more from the ethic of liberty (economic freedom), which supports the market in general?  p. 25, p. 26

    6. Describe your sense of the ethics of freedom and property in terms of the globalization as a "faithful student of Ethics 101?"  p. 26, p. 27 Consider an ethics that give freedom and property to the few whilst it contracts most into the landless poverty of employment or none. Can this same ethics with the dire consequences now that are contrary to the original meaning and purpose of ethics become transformed by the human heart and its action? Would you expect freedom, property and contractual relationships as the ethics that would construct an ideal economy? As you see it, describe how an "ideal economy" could be constructed in the ethics of liberty, property and contracts and develop from models that are in use, although obscured by the dominant interpretation of ethics.

    7. Given that the globalization results in sweatshop working condition what do you see as the direct cause of it, the owner motivation or the ethical and legal basis for it? p. 25 through p. 27, p. 32, p. 33,  appendix A

    b. Discuss your sense of the authors assessment that "Mexican women hired to assemble TV sets freely consent to their employment, wages and working conditions." Consider the fact that NAFTA changed the Constitution of Mexico so that peasants lost their rights to land. Consider also that after the 1986 earthquake that destroyed much of Mexico City, the IMF and World Bank denied loans to Mexico so that the country had to enforce austerity, which denied basic education to the peasants. What, in your view, does free consent have to do with this? p. 27

    8. In your sense of the text, how is the mainstream economic science expressed as an economic metaphysics p. 31

    9. How do you view a metaphysics in comparison to these concepts: an ethic · an ideology · doctrine · a policy · a philosophy · a worldview · a paradigm · a mentality · a mindset? p. 9, p. 11

    b. What advantage do you see in identifying the economic ideas underlying the theories, principles and practices of a functioning economic system—first as a metaphysics before they become realized, or change the current? p.10

    10. The economic metaphysics, which forms the quasi-mechanism—the market force that drives the global economy presupposes certain normative entities. What, as you see it, are the normative entities in this instance? p. 32, p. 33

    11. A metaphysical shift in a system of economics starts by asking the questions about principles that are ignored by or absent in the current metaphysics. Ideally, everyone can input to the process of change. Therefore, what questions would you add to those on page 30 and page 33?

    Keywords: barter, capital mobility, capitalism, commodity, comparative advantage, competition, cooperation, cooperatives, deindustrialization, economic metaphysics, efficiency, ethical scepticism, ethics, free trade, freedom, globalization, Hendersonian objectives, high wages, international division of labor, international trade, labor, low wages, maquiladora, market forces, markets, metaphysics, military metaphysics, nonprofit, profit, property rights, property, quasi-machine/mechanism, revealed preference, wages

    Description: Does the theory of the globalization of production and the international division of labor explain the rise and current rule of the global economy? Part II examines this as the logical next step in Understanding the Global Economy, 1) an expose of the economic rise and rule of free trade as enforced by trade in pacts between corporations and central governments and 2) a source for building an ethical, sustainable economy based on knowledge and research.


    Part III: Theories about Choices of TechnologyTOCCover pagetop

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