Monday, October 16, 2017

Is Globalization Good?

I don’t know if there will ever be a final word on this argument. The Ricardian argument for comparative advantage feels right in the model, but once you start looking at the actual results of periods of globalization, it is troubling. Because what we have to be careful when we’re asking if globalization is good is who is it good for. Is it good for the world economy in aggregate? Is it good for workers or business owners or both or neither? 

For me, I have called myself a Free Trade Marxists because for me my religion has long been summed up by the call in the last lines of the Manifesto: Proletarier aller Länder vereinigt Euch!

All Lands

In the long term we have to have worker unity across cultures and languages and realize that the myth of national borders is just another form of bourgeois social control where we are angry at the wrong people. It is not the Mexican worker that is stealing jobs, but the owner of capital using the logic of capitalism to ship those jobs elsewhere or to even mechanize them away.

Because what is happening in the short term is that the benefits of globalization are spread thin. We as consumers are able to save pennies on our consumer goods at Walmart or Aldi. The problem is that the costs are spread in a much more chunky manner. If you work at the Whirlpool factory or live in the community that is supported by that factory and Whirlpool’s parent company decides to cut costs, globalization’s costs far exceed the reality of a cheaper consumer good. Your income goes to zero and you can’t buy that consumer good, no matter how cheap.

This disconnect has given rise, in concert with other issues, to economic nationalism reflected in the Brexit vote or the Electoral College victory of Donald Trump. What I’m afraid of is that these political actions won’t lessen the costs – there is no movement towards a large retraining or relocation plan. One of the key plans Trump has supported is lessening the so-called “War on Coal,” which is fighting its own market forces in light of a larger move towards cleaner energy generation. This is a move backwards. Then on the other hand there is a move to eliminate the benefits of free trade, in ripping up agreements. The hope is that these manufacturers will reshore, but the reality is that to rebuild factories where once thousands were employed will only have a fraction of that because of technological advances. And then you have to hope people are trained for your needs. This will raise costs for everyone and not be the panacea that is hoped for by the people who need jobs and have seen the productive capacity of their towns leak away. 

So politically, globalization is a huge issue in terms of how we as an individual country react to it. I just worry that in pushing economic nationalism we will be throwing out the baby with the bathwater.

Wednesday, October 11, 2017

Eurocentrism! In Economics?

The study of economics is very Eurocentric. This is reinforced by the reading in the History of Economic thought where once we get past the Physiocrats we’re really talking more about the history of economic thought in England – Smith, Ricardo, Malthus, Bentham, Say, Senior, Mill. Bastiat is Frenchy, so he’s the outlier. Marx was from Trier but he popped on over to France and then the image of Marx is him huddled over books in the reading room of the British Museum. He lived and died in England and sponged off an Engles-man.

We don't even know Ho over here either

And it doesn’t just stop there and spread out. I looked at the list of Economic Nobel winners (and real Nobel or not, it does represent the top line of the consensus of the more orthodox line of thought) and there is one person not from Europe or the Americas. And even then, Amartya Sen was educated in the Western system. That’s weird, right? This is subjective, but I can only think of a handful of people outside of this structure, some Aussies and a couple of Japanese Marxists.

So the question is why this is. Why did it begin that way and why does it persist? In a way I can understand why the Fathers of Economics are where capitalism started. You’re not going to study something as a system if you’re not close to it. And then if you are looking at how society reproduces itself in a non-capitalist or pre-capitalist system, what you are writing has no worth as capitalism took over the world. But where are the non-European or American economists? Are they, like Sen, pulled to the western canon and system? Do they exist but are marginalized? Or are they just not there? Who is the sub-Saharan Samuelson, the African Arrow, and the Thai Thaler? Should we be doing what we can to help create these people, and why haven’t we?

Thursday, September 28, 2017

Marx and Capital: The Problem of Depreciation

One of the things that’s been bugging me about the Marxian value transformation into prices is the term of fixed capital that goes into prices.

It’s bugging me because the simplifying assumption is that this constant capital is thought to be used up in the process, and we know how much it was worth going in so that is easy to track.

The problem is that is a gross oversimplification, and I’m not sure if it is straight from Marx or if it is from Hunt’s editing. In accounting terms there is a way to track this sort of thing. If something is not automatically used up as supplies and will last a while, it is literally “capitalized”. This is done because of the matching principal where expenses need to go with income, and anything longer than a year shouldn’t be directly expensed, but the expense of the purchase applied over time. This shows how the machinery wears out. Then you have on your income statement the depreciation which is an expense but not a cash expense.

The complicating factor is that useful lives of capital equipment are based on convention. Your capital item may have an actual longer or shorter life than you plan for when you buy it. In account terms that’s something you can deal with down the road – write off my supercomputer if Moore’s law makes it obsolete or have a loom that is abnormally long-lasting so you’re getting production from it long after it has been fully depreciated. But in pricing terms, you need to know this beforehand, so that all the labor that went into the capital item is used up in your period however it is defined. I’m LTV until I die, but once you put the microscope on some of these things and start looking they are hard to quantify. I know capital is in itself controversial from Cambridge to the other Cambridge, but is there a place in Marx where he deals with such problems?