Progress as Changing Patterns of Dependence

Progress. Hardly any word describes better what is special about the last 200-250 years of human history. Up to then, technological, economic, social progress was scarce, the European Medieval was characterized rather by regress, for instance. But then, then came the Great Transformation, the Industrial Revolution, and changed everything. Today, it is clear to (almost) everyone that the pursuit of progress is what defines humanity, even though it is not the whole definition. Yes, we have difficulties when it comes to agreeing on what progress is. But we mostly identify progress, at least implicitly, with technological progress – all the nice innovations, not necessarily technical in a narrow sense, but also e.g. institutional, that make us less dependent on nature. This is, indeed, what defines social progress in the end – our ability to overcome scarcities and obstacles “created” by nature, be it with regard to natural resources for production, be it our psyche. When it comes to the former, however, it may be argued that we do not really become less dependent – we only change the source of dependence.

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The Global(ized) Antiglobalism

It is an interesting thing that what is commonly called the antiglobalist movement (by the media as well as by those involved themselves) is probably the best interconnected – one may say, globalized – movement in the world. The spread of Occupy Wall Street to Europe is a most recent example. In this context, two question may well be asked: is it right to call that movement anti-globalist? And what does it represent? What are the grounds such an interconnected movement has emerged? The latter questions must be answered first, before we can turn to the former one.

Globalization’s Trilemma and Sustainability

Can we enjoy democracy, nation state and deep economic globalization at once? This is the big question posed by the outstanding development economist Dani Rodrik in his recent book “The Globalization Paradox”. His answer is: no, we cannot have them all at the same time. We are forced to choose two of the goals instead, limiting our pursuit for the third one. As Rodrik further argues, since democracy is and remains one of humanity’s greatest achievements and one can hardly imagine a global government, economic globalization is what has to be constrained. I would like to show here that from the point of view of sustainability, his is an essential insight.

Ricardo’s Theory of International Trade versus Antiglobalist Arguments

There is one particular reason why my study of economics is very interesting: I am confronted, repeatedly, with traditional economic models, theories, and arguments. Some of them are of some value, many are not (maybe for training some basic economic understanding, but not for analysis of real world problems). Recently I attended a lecture in Advanced International Economics, in which the theory of international trade by David Ricardo was presented. For non-economists: Ricardo developed the first major theory of international trade (in the beginning of the 19th century). It is a very simple theory built upon the foundation of the so-called “comparative advantage”, stating that trade between two countries is mutually beneficial when their relative productivities are differ (not as in Adam Smith’s theory, where only absolute productivity was of meaning). For a short introduction see here.

After having explained the theory, the teacher wanted to show us how it can be applied to real world problems (though he himself had pointed out to some deficiencies due to basic assumptions of the theory): he picked up some “frequent antiglobalist arguments” against free trade and “defeated” them using Ricardo’s simple comparative-advantage model.

Trade and Hunger

As you can see in the picture in the right (for source, click on it), food grain prices in international markets has been spiking in the end of 2010 – again, after they already did in 2008, the year of “hunger revolts” in the developing world. It is clear that something must be done to prevent another crisis. Today I would like to shortly comment an article by Pascal Lamy, Director-General of the WTO, on that subject.

Trade Should Not Be Free as a Matter of Dogmatism

In the mainstream economic thought there is hardly any place for constructive criticism of free trade. But, while the idea of free trade is not wrong in itself, it has become a dogma – no matter what it looks like in reality, in the eyes of many free trade is of unquestionable benefit. It was not always so. John Maynard Keynes once made a highly interesting remark that, regrettably, seems almost forgotten:

I sympathize therefore, with those who would minimize, rather than those who would maximize, economic entanglement between nations. Ideas, knowledge, art, hospitality, travel – these are the things which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible; and, above all, let finance be primarily national.

Market Liberalization or Free Trade?

Perhaps, if you ask this question a World Bank official or somebody from the WTO, the answer will be: “But it is the same thing!” Isn’t it really? I would say, it’s not.