Blog Archives

Globalization Has Hollowed Out Rural America

What do we make of an economy in which a handful of bubblicious urban areas are magnets for jobs and capital while rural communities have been hollowed out? The short answer is that this progression of urbanization has been one of the core dynamics of civilization for thousands of years: opportunities are greater in cities, and so people move from rural areas with few opportunities to cities with greater opportunities.

But that’s not the only dynamic hollowing out America’s rural communities: globalization plays a key role, too. Rural economies can rarely muster economies of scale that enable globally competitive enterprises. Rural communities generally lack the capital, expertise, global supply chains and cheap transportation costs that are the building blocks of successful global production and distribution.

In a global economy characterized by over-capacity, over-production and mobile capital, localized rural economies can’t compete with the low cost of commoditized products distributed by finely tuned global supply chains and cheap transportation.

Pre-globalization and cheap transport, local bakeries imported bulk flour and baked bread that was lower in cost than loaves shipped in from afar. The local bakeries held the competitive price advantage, and so local bakeries could pay local labor and local taxes that then supported the rest of the local economy.

But in today’s economy, commoditized bread can be delivered rural communities at prices local bakeries cannot match.

The same holds true for virtually all globally tradable goods– foods, clothing, etc. The only economic sectors with a toehold in rural communities are corporate farms, the occasional small specialty corporate factory making non-commoditized components and non-tradable services such as hair salons, motels, thrift shops, cafes, etc.

(more…)

Tagged with: , ,

The Odds of a Global Food Crisis Are Rising

Given the current abundance of food globally, confidence in permanent food surpluses and low grain prices is high. Few worry that the present abundance of food could be temporary. But the global food supply is more fragile than we might think, despite historically low grain/agricultural commodity prices.

Both corn and wheat have plummeted in price due to current demand/supply:

(more…)

Tagged with: , , ,

Globalization’s Few Winners and Many Losers

I often write about the Tyranny of Price, the rarely examined assumption that lower prices are all that matters.

Thanks to the Tyranny of Price, the quality of many goods has plummeted.Obsolescence is either planned or the result of inferior components that fail, crippling the entire product. As correspondent Mark G. has observed, the poor quality we now accept as a global standard wasn’t available at any price in the 1960s– such poor quality goods were simply not manufactured and sold.

There is another even more pernicious consequence of the Tyranny of Price: globalization, which makes two promises to participants: 1) lower prices everywhere and 2) manufacturing work that will raise millions of poor people in developing economies out of poverty.

Globalization is presented as a win-win solution: the developed countries get cheaper goods and the developing world get the benefits of industrialization.

But now a new study, Poorer Than Their Parents? Flat or Falling Incomes in Advanced Economies, finds that globalization has been a bad deal for 80% of the people in developed economies, as their income and wealth has stagnated or declined.

A Cheerleader for Globalization Has Second Thoughts: A new study from the McKinsey Global Institute finds that changes in the world economy have left many people worse off..

The McKinsey report focuses on the 540 million residents of developed nations who have lost ground in the era of globalization. But if we look at the terrible pollution in China, we find that rapid industrialization hasn’t been as win-win for developing nations as advertised.

The mainstream cheerleaders of globalization have been forced to accept that globalization exacerbates wealth/income inequalities by boosting the rewards for the 20% who benefit from global markets and capital-friendly central bank policies (zero interest rates and quantitative easing) that have pushed asset valuations to incredible bubble heights around the world.

Domestically, the American ruling class and the mainstream punditry are struggling to square the circle, that is, defend the globalization of the U.S. economy that has greatly enriched corporations, the wealthy and the top 5% of the work force but also alleviate the stagnation in the incomes and wealth of the bottom 80%.

Correspondent Graham R. summed up the situation very succinctly in a recent email:

“Focusing on the minimum wage is a false flag. The society as a whole is now stressed at every level because Globalism has promised us cheaper prices at the cost of destroying societal structures and their meaning for its members.”

Graham identifies a key consequence of globalization that the mainstream media has ignored: the erosion of social/economic structures that supported communities and provided purpose, meaning and stability to their residents.

When price is all that matters, factories and offices are closed overnight and the work is shipped elsewhere. When production costs go up, the production is moved to another locale.

In this environment, employees are competing with workers globally, which suppresses wages everywhere. Since global corporations have gained political power in globalization, they can buy lobbying and political influence that raises the cost of commerce for small businesses–a process known as regulatory capture that erects walls that stifle competition.

Regulatory capture is the inevitable result of globalization’s rewarding of capital and erosion of labor.

Price is not the sole absolute good. Price is only one kind of information. Since price is easily quantified and converted into any currency, it has achieved total dominance in markets and mindspace. Quality, quality of life, and well-being are not easily quantified, so they are ignored. Stagnation, insecurity and a loss of social cohesion are the inevitable result once price is all that counts.

This essay was drawn from Musings Report 29. The weekly Musings Reports are emailed exclusively to subscribers and major contributors ($5/month or $50 annually).

My new book is #10 on Kindle short reads -> politics and social science: Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle ebook, $8.95 print edition) For more, please visit the book’s website.

Tagged with: ,