the unintended effects of globalization

Global food and energy prices are going up. Oil prices are going up. Materials and commodities prices are going up. Steel, iron, gold, wheat, rice, sugar, corn, meat, etc…..

We are told this is because of increasing global demand for these goods. So this is another effect of globalization that, it seems, wasn’t though through clearly when “globalization” was first propounded as the next great “Holy Grail” of capitalism. Globalization was supposed to lead to improved global conditions and standards of living. Globalization was supposed to lead to more and better trade among nations. It was supposed to lead to greater prosperity for all.

Everybody rose and applauded when China , the last big bastion of socialism, joined the WTO.

Then all of a sudden, this led to what some labelled the big “sucking sound”. The sound of jobs (from more developed countries) moving out of their home countries and into China. Not just China, actually, but to much of the developing world.

China became known as the factory of the world. India, the back office of the world. Singapore, long the export processing center of the East, is trying to be the IT center of the world. And so on and on…

There was much gnashing of teeth among those who lost jobs, only to see these jobs shipped off to foreign lands. Not much chance for these people to chase after those jobs anymore. They were told to “re-tool”, “re-position” themselves, “re-engineer” their career.

All was well because, as all experts kept telling them, only the lowest value-added positions were being shipped overseas. That freed the people of the developed countries to focus on higher value-added services, or jobs that provided better growth – monetarily, intellectually - and promised better job security and satisfaction.

Okay. People who’ve been out of school several years are now being told to accept the reality of having to up-grade themselves. This involved anywhere from attending a few days’ worth of seminars, to an apprenticeship, or going back to school altogether.

Most times, this entailed new costs. Education doesn’t come cheap. And it came a time when many have already lost their principal source of income.

Now that’s proving to be just the beginning of a long-drawn-out period of adjustment.

With global growth comes increased demand for the world’s scarce resources. That includes all of the commodities, materials, energy , etc. I specified above. After all, economic development doesn’t come out of thin air.

Countries that are experiencing jobs growth because of globalization need to build new infrastructure. They need to build new schools, to teach their people how to do the jobs that are falling on their laps. They need to build more factories, roads, bridges, buildings. They need to buy more computers, telephones, pencils, paper, what have you.

Not to mention, these people who now have new jobs, who used to get by on smaller portions of food during their meals- whose food essentially used to come from what could be picked off from the tree in the backyard, or the fish that they caught themselves from the river- they now have more money to buy a decent meal from the new supermarkets and hypermarkets now mushrooming all over their homeland. It’s their just reward, of course. They have been working so hard. Worked longer hours than some guys in the developed countries who used to do these, and to keep costss low, received lower pay for the same amount of work.

Now who wouldn’t want to reward themselves a bit for their efforts? They would probably want to give their families, who never used to see beef on the table, the joyous experience of tasting a succulent morsel.

And if they liked the experience, they would probably buy beef again. For as long as they afforded it.

Now that capitalism has caused the worldwide miracle of globalizing modern-day conveniences – even putting the previously-unheard of luxury of eating beef, on what used to be the most down-trodden of the world’s peasantry, we are seeing the adverse effects on that most elementary of economics principles – the law of supply and demand.

Capitalism, with its ever short-term view (I will only do what is best for my neighbour for as long as its serves my self-interest, and in the long run we are all dead) has successfully increased global demand for goods and services. But in its focus on short-term profits, neglected the long-term goal of sustainability.

SUSTAINABILITY! How can these capitalist moguls have forgotten that if everybody in the world will suddenly be a customer for cars, air travel, and next-day parcel delivery, there will suddenly be a spike in demand for oil, for steel (to makes more planes and cars), for ALL materials necessary to manufacture them, to make them run, for them to run on.

How can they have forgotten that if more people are now part of the global grid of trade, more people will now be clamouring for more upscale things in life, such as meat, that can only be adequately supplied if you have enough grains and feedstuff for an ever-increasing cattle of cows.

There was no coherent plan to raise the long-term productivity of producers of these most basic of goods. Why? Because in the last twenty to thirty years, there had been a glut of these same products. Therefore, nobody bothered to look for better ways to increase productivity in producing them.

Nobody was going to look for a new oil well, if that would mean a further dive in an already low price of oil. Nobody was going to figure out how to increase corn yield, if there already were bumper crops every year, and it pays more not to plant than to plant.

So now we find ourselves in a wonderful confluence of events – a perfect storm. All thanks to globalization, and the attendant short-term thinking with which it was executed.

People in developed countries are losing jobs, thanks to jobs moving to lower-cost countries. People all over the world are experiencing double digit inflation, thanks to increased global demand that has been coupled with long-term planning that reached only to the level of finished goods (not commodity inputs).

Everybody is now feeling the pain. Even the ex-peasants who only recently began to enjoy some of the convenience of the modern world. Now even they cannot sustain their newly-found small luxuries.

And what about the new gleaming factories in the developing world? What happens to these when their target markets – The developed countries of the world – cannot anymore afford, or even want to – continue patronizing their business?

What will happen to global trade then? And the long-held promise of globalization, what then?