(5j) Globalisation, a blessing if not done for selfish reasons

Globalisation, it seems now even some diehards are starting to question it. I still think it is the way forward when well-regulated but that's the problem as the remaining diehards claim it should be even more deregulated to open up markets and stimulate the economy.

Globalisation has become that companies are allowed to produce products in poor countries where people are paid too little for the work they do although slightly more than what others in the region earn to attract the best after which companies sell the products in rich countries (mainly the Western world) at prices below the price what should be paid if the same products were produced in wealthy countries where wages are higher. The result: the outsourcing means that people lose jobs in countries where wages are high and thus become poorer while in the developing countries people who work at multinationals improve compared with those without a job at multinationals so local producers can't compete with the multinationals for workforce (thus unfair competition) but still almost everyone remains poor compared with people in wealthy countries. And everywhere wages are down as companies can threaten their workforce with closure if wages are not kept under control (i.e. low) except those who enforce the system on others as they can pay themselves high bonuses as companies make huge profits.

In addition, shipping the products from one place to another is not only costly but also polluting which is not only bad for the environment but has become even an additional cost. And thus, president Trump is right when he said that his people, the poor Americans, should be able to produce products that are sold in the USA, something that is also more environmental friendly. And thus, while today products are sold too expensive in Western countries compared with the production costs in poor countries (although the transport and pollution costs reduce profits), in general mainly wealthy investors gain while everyone else loses as the products are too expensive for the people living in countries where they are produced while in Western countries people and countries become poorer when companies relocate and money is used to buy the foreign products.  

However, when products are produced locally, in developing countries where wages are low, the products can be sold at a lower price because the production costs (including transport and pollution) are lower while in richer countries the products can be sold at a higher price (as is already the case) because people earn more. Gradually the prices and wages will move towards each other so people can buy products and still travel around the world in a truly globalised world. This doesn't mean that each country produces its own products. Still, the USA, Mexico, China, India, Russia, Brazil and some other countries are large enough to produce products, not so much for export but mainly for their own markets while in Europe with its many small countries there can be cooperation to decide where what can be produced so all countries benefit. In addition, this can even solve traffic problems when companies are advised to settle in one or another country with less traffic while also solve a migration problem when people don't need to immigrate to find work unless they want to live somewhere else. This globalisation is thus not based on the exploitation of people to make a few extremely rich while the rest loses but on people who have jobs so they can travel to see other parts of the world and meet different cultures while companies can still be multinationals with products produced around the world for local markets. In addition, the environment will benefit as transport will be over shorter distances. And as every company needs to obey the same rules in a certain region, even multinationals, competition will be fairer between companies while one region can even influence the production process in another region or refuse to import certain products and this can further stimulate fair production and trade.

Because, of course, each place is different and thus the same rules can't apply everywhere but instead regions need rules that are adjusted to the local situation. And thus, although some general rules are needed, each country or region should be able to set its own rules that can be stricter than the general rules such as protection of workers' rights or stimulation of more advanced technologies such as renewables versus fossil fuels. Indeed, a region should even be able to block the import of products that are made below a certain standard, for instance from regions or companies that exploit workers or are environmentally unfriendly. This already applies for instance for medicines where companies have to proof the products are safe.

In addition, an endless growth is impossible as people, when they have all they want, will stop buying unless to replace things that are broken. This should be taken into account if people don't want that the system collapses after profits go down or stagnate. And of course, companies can export to regions with shortages. When this is taken into account, governments and companies can adjust without panicking when a year is less successful than the previous years because today, if a company makes less profits, often investors panic so shares go down and this can be more damaging than a (short-lived) reduction in sales.

In summary, I think globalisation can only work if certain international and local rules are followed that prevent exploitation of workers and the environment. Local governments should check that companies follow local and international rules. International organisations should act as judge during major disputes whereby they can force companies and governments to follow the rules and thus companies can't ignore the rules of the place where they are located while it protects governments against corruption. This also means that company headquarters can't be located in one country to avoid paying taxes in another as today happens (still, I think companies should not have to pay taxes on their profits as that is a second taxation but pay taxes (set by governments) on the products and services they buy and sell in each region; still, when companies make too much profits because their products are too expensive than governments should be able to intervene, forcing companies to sell reasonably priced products; this also means governments no longer have to invent tax reductions). If countries don't agree with certain rules in certain places, they can always move somewhere else. Still, when they want to sell their products in other regions, they still need to follow the rules of those regions where they sell and not the rules of the place where they are localised so every government where the products are sold wins. And thus, to explain via the example in the article, when countries want to buy shrimps only from countries that try to prevent the capture of turtles, than this should be possible and not reversed by an international organisation, certainly not because it doesn't block import from specific countries but only from countries that don't follow the rules and thus it doesn't violate free trade as those countries can decide to catch shrimps without killing turtles so they can export.


Guru Indonesia said…
hi there,
thanks and greetings from jakarta..
best regards,

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