Walmart‘s latest push to Buy American and Hire Veterans is irrational. In a world of interconnectedness in which products from pencils to airplanes are produced with parts and components made all over the world the “buy American” argument falls into pieces.
In today’s world mass consumption economy there is not a single product that can be claimed to be “national” or “unique” without ignoring the intertwined network of global production. If your argument is “yes” there is such a thing as “100% national” or “100% American” then I will still be able of arguing against your position. Why? Because the economy of the United States of America is not only part but dependent on the global economy.
By 2012, only about 32 cents for every dollar of U.S. debt, or $4.6 trillion, was owned by the federal government in trust funds, for Social Security and other programs such as retirement accounts, according to the U.S. Department of Treasury.
The largest portion of U.S. debt, 68 cents for every dollar or about $10 trillion, is owned by individual investors, corporations, state and local governments and, yes, even foreign governments such as China that hold Treasury bills, notes and bonds.
Foreign governments hold about 46 percent of all U.S. debt held by the public, more than $4.5 trillion. The largest foreign holder of U.S. debt is China, which owns more about $1.2 trillion in bills, notes and bonds, according to the Treasury.
In total, China owns about 8 percent of publicly held U.S. debt. Of all the holders of U.S. debt China is the third-largest, behind only the Social Security Trust Fund‘s holdings of nearly $3 trillion and the Federal Reserve‘s nearly $2 trillion holdings in Treasury investments, purchased as part of its quantitative easing program to boost the economy. (Data via: How Much U.S. Debt Does China Really Own?)
So, the next time you think you are “Buying American“, I invite you to reconsider how irrational such an argument is.
A month ago the world’s richest woman made a comment that got everyone’s attention. Major sensationalist papers in the globe elaborated different arguments on Gina Rinehart case for a $2-a-day pay. But putting emotions aside, what was she really talking about? Well, she was explaining in very rough terms what globalization is about and what is the role of competition in the global political economy.
In order to understand what Ms. Rinehart referred to, it is necessary first to briefly evaluate the history of the word competitiveness. The term is historically rooted in the writings of classical economics. Its core is the theory of comparative advantage expressed by David Ricardo in 1819, in which he underlined how countries should/do compete. Later on, the term was used by Marxist economists starting with Marx’s “Capital: A Critique of Political Economy” where he emphasized the impact of the sociopolitical environment on economic development in a global perspective, and therefore the communist idea that changing the political context should precede economic performance. Later, in 1942 the term was integrated to the role played by capitalists and entrepreneurs in the writings of Joseph Schumpeter, who stressed their creative and economic (“economic” here refers to capital as a mean of production) role as a factor of competitiveness by underlining that progress is the result of disequilibrium, which favors innovation and technological improvement. Further, Israel Kirzner’s emphasis on the redefinition of entrepreneurship by highlighting how global competitiveness is more about the capitalist’s innovative abilities rather than just the capital accumulated and how he/she invests it.
Ms. Rinehart’s comment reflects both the impact she plays as an actor in the global sociopolitical environment and her role as a capitalist and entrepreneur capable of generating innovation and of inciting creative destruction.
A $2-a-day pay in Africa means that many capitalists and entrepreneurs as Gina Rinehart are considering the possibility of moving their investments from less competitive continents to places in which competitiveness allow them to produce at lower costs.
Unfortunately, the region Ms. Rinehart was referring to has disincentives to competitiveness and innovation. Competitiveness is more than just lower wages and a cheap offer of labor. By following Ricardo, Marx, Schumpeter and Kirzner in order for Africa to become competitive in global terms the regions will require also to achieve what Stéphane Garelli in the “IMD World Competitiveness Yearbook 2012” explains as the need to also A.) Create a stable and predictable legislative and administrative environment. B.) Ensure speed, transparency and accountability in the administration, as well as the ease of doing business. C.) Invest continually in developing and maintaining infrastructure both economic (road, air, telecom, etc.) and social (health, education, pension, etc.). And finally, D.) Strengthen the middle class: a key source of prosperity and long-term stability.
Ms. Rinehart’s comments were not a call for Australians to lower their wages to a $2-a-day pay since they have already achieved other of Garelli’s requirements for competitiveness. Her comments are a very clear example on how global economy works. If African governments manage to improve the rule of law in their territories, develop infrastructure and allow for a stronger middle class then the chances that investment will move to Africa are going to be higher. As such, economies as Australia’s should continue producing at the same efficiency rates or improve and innovate in order to avoid losing investors. Ms. Rinehart’s comment on how “her country’s mining industry couldn’t compete with nations that are willing to pay workers less than $2 a day for their sweat and labor” is as such partially truth. Australia’s economy has many other competitive assets to offer and as such do not require to compete by offering lower wages. The country has many other competitive assets to offer for investors. However, as time has passed since Australia’s boom in the last decades many other countries are also trying to spur competitiveness.
There is much more to be said about this topic and on how global competitiveness allows for rising standards of life and prosperity. Also there is much more to be said on how competitiveness in other regions of the world can destroy (remember Schumpeter’s work) the not-so efficient economies of other countries that have not managed to cope with a changing global economy.
The Water We Eat [angelamorelli.com] by information designer Angela Morelli is an infographic story that unfolds by the act of scrolling down the page.
Remember 1989? Well, as argued by many scholars, that years was the culmination of global interactions that “dynamized in many places of the world crisis phenomena and synchronized, the resulting transformation processes Had they been previously locates primarily in a national framework, now its global dimension is obvious. Thus began both reflect on the established order of the world is understood relationship with their respective areas of sovereignty in the resolution, as well, should be designed as the new world order.” (Read more on 1989 in a Global Perspective).
“The MIT Technology Review explains how CSI’s model works: “The evidence comes from two sources. The first is data gathered by the United Nations that plots the price of food against time, the so-called food price index of the Food and Agriculture Organisation of the UN. The second is the date of riots around the world, whatever their cause.” Plot the data, and it looks like this:……”
As The Japanese government’s moved to purchase the Diaoyu Islands (also known as Senkaku Islands) three days ago the government of the People’s Republic of China reacted energetically. Initially, Chinese media reporters influenced mediatic understanding of the situation by emphasizing the nationalization of the islands by Japan (ringing the history bells to Chinese people on how Japan had previously nationalized Manchuria and renamed it as the puppet state of Manchukuo during the WW2 period). And later, by making strong diplomatic statements on how Chinese sovereignty and control of the islands had been violated by the Japanese purchase.
The purchase of the islands is of relevance regionally and globally. Why China, Japan, and S. Korea aren’t backing down on this islands should be understood by taking a look at the map and see how the position of the islands is central for the passage of containers and oil that comes all the way from Middle East via the Strait of Malacca. A route that is of priority importance for China and which I explored in the essay “The Strait of Malacca as one of the most important geopolitical regions for the People’s Republic of China” which ca be read in pdf at Academia.edu for free.
Locally, the geography of the islands is meaningless. The island group consists of five uninhabited islets and three barren rocks which zooming out are located approximately 120 nautical miles northeast of Taiwan, 200 nautical miles east of the Chinese mainland and 200 nautical miles southwest of the Japanese island of Okinawa. And which zooming out are in the center of the route of all the containers that go to the ports of East and North East China, of which the most important is Shangai.
The Japanese central government formally annexed the islets on 14 January 1895. And after WW2 they were occupied by the United States. The islets were later returned to Japan during the 70s and it was only until the last two decades that they became of relevance as the People’s Republic of China started to project is New Economic and Global Plans for economic sustainable expansion. Plans in which they have invested billions of dollars in military expansion, naval trade/military shipbuilding, regional economic investment via state-owned companies and diplomatic sovereignty claims all over the region.
The islands are officially Japanese territory, but as Chinese official statements continue being broadcasted they claim a violation of sovereignty that could takes decades to be resolved via a diplomatic arbitrage and/or scalate to more direct military statements and naval occupations of the beaches of the islets.
Whoever said that trade is the most (or only) pacific way of organizing society should reconsider this evaluations when thinking about how global trade works and on how diplomatic and economic control of trade routes is sometimes more powerful and dangerous than a bunch of battleships.
Globalization & Capitalism 