Is globalization behind the recession?

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...that's what's wrong with Capitalism... it's powered by greed.

At this point in our evolution we should be trying to change our inherited bad traits, not reward them.

And greed is good.

ruveyn

Yeah... along with sloth, envy, lust...

Well, I don't think that dependency is an issue, however, you are right economic events can spread from one country to another if a problem emerges, but the idea that if one country falls they all fall seems a rather ridiculous extreme because even within a nation there are large variations in the well being of local economies, and even now as some parts have unemployment rates of over 10% other parts are 5% or lower, so I think your view is an overstatement.

I think you are right - and that is why all schools of economics fail. They are all technical, when the problem is humanistic. While arguing about things like when to tighten or loosen the money supply or when to change the interbank lending rate is all well and good, it doesn't get to the heart of the matter.

When there is a bubble and people are convinced that housing (or dot-com stocks or tulips) will keep going up in price, there is no real technical way to analyze that problem or fix it. Someone should step in and tell the drunkards the party is over, but no one ever does ... because there is no foolproof way to spot a bubble, and capitalists are loathe to interfere with the freedom of others. So the foolishness continues until the house of cards gets knocked over or falls of its own weight and poor design.

I don't think greed is the reason that the downturn is hard to reverse ... the problem is fear and debt. When a bubble pops, a lot of value disappears. One could argue that this value was never real, but the debt that was incurred in the name of the inflated assets certainly is real. The debt leads to a tightening of money and failed businesses and unemployment, which breeds fear, which reduces spending, which causes further contraction.

Last edited by monty on 12 Jul 2009, 5:21 pm, edited 1 time in total.

Well Ag, if you'd leave a small percentage of the industry towards local needs (and i mean more than just the tertiary sector) and the rest towards international trade, do you think that'd solve the issue? =/

And meh, about the above post, the way i see the recession is precisely like the word says, you go back down to where you were before (kinda like snakes and ladders <.<). Then again, i always wondered why they think that going "forward" would always be good and have no drawbacks, meh.

(And huh, despite the few classes in economy i've had, it's not really my forte, so please bear with me )

Especially lust.

ruveyn

Well, to be honest, I think the issue is just the assumption that something in China will affect all actors the same way is just questionable. Not all groups in an economy will have equal ties to China and as such, not all people will be affected the same way, and some groups might be significantly less affected than others. I don't think this is a matter of "leaving a small percentage of the industry towards local needs" but rather just a matter of letting the economy pursue it's own path full of heterogeneous actions, as it is doubtful that everyone and everything will do exactly the same thing.

Umm... not really. I mean, the major school of economics that is technical is the neo-classical school, which is dominant. I mean, the Austrians are all about unpredicted entrepreneurial actions, and G.L.S. Shackle of the post-Keynesian school has denied the scientific elements of economics to argue that it is a humanity based upon subjective human elements, so I am not sure that your statement is technically correct. In any case, "greed" is a bit of a black box, but rather you seem to have to track an attitude through the business cycle and show based upon evidence that at certain points greed is a bigger factor than other points.


I'd bet that you are a fan of Minsky's financial instability hypothesis.

Never heard of it.


On a separate note, here is a review of a book called "Flat Broke in the Free Market: How Globalization Fleeced Working People "

http://www.dailykos.com/storyonly/2009/ ... Flat-Broke

Then you really must not be paying attention to the different economic schools of thought. Minsky's financial instability hypothesis is one of the major ideas that has come to prominance from the post-Keynesian school of economic thought. The idea is that the business cycle is mostly endogenous as it is the result of profit-seeking companies increasing the complexity of financial markets in pursuit of greater profits, the problem is that this increases the fragility of these financial system which causes it to be more likely to succumb to mild exogenous shocks, and that results in an economic downturn.

Here is a paper written by Minsky if you are interested.
http://www.levy.org/pubs/wp74.pdf

Charles Kindleberger is also an economist known for promoting this view in his book "Manias, Panics, and Crashes", where he provides a number of historical events and interprets them through this view, and provides his recommendations for actions that should be taken.(in case you want to read a book or have a local library)

The reason I said that was simply because your account of the matter sounded rather like Kindleberger, as he also claims that bubbles are too hard to predict without a technical way to fix the problem, and so the house of cards collapses. He then argues that for reversing the downturn, what is needed is a lender of last resort in order to deal with the devastation to the financial system and keep it from utterly collapsing.


Sounds like a stupid book to be honest. I usually ignore journalistic efforts, simply because I typically do not consider journalists to be intellectuals so much as dilettantes and being the latter they may easily not know much about the ideas they are criticizing or be able to address these ideas in a worthwhile manner. I mean, I do realize that I am perhaps not giving enough benefit of the doubt, but I generally do distrust journalists and other non-experts a lot on these issues.

That is correct - economic theology is not a big interest, and my experience from taking 3 semesters of economics in school in the 1980s is that economists tend to have debates that are reminiscent of the Linux/Mac/Windows war. Thirty percent technology, ninety percent ideology.

The link to the book review was simply something I came across - I have no opinion on it, but thought it relates to the original post.

As far as "Intellectuals or dilettantes?" ... I don't make a distinction - and I have a Ph.D. (in a different discipline). I've seen narrow minded people get credentialed, and I've read really good books (even in my field) written by people who don't have a degree but who are willing to do lots of research and synthesize a picture of the world. Certainly someone can come to strange conclusions if they are speaking about a topic they don't understand, or when they are agenda driven (the creationists are typically good examples of both). But George Bernard Shaw was on to something when he said "If all economists were laid end to end, they would not reach a conclusion." Economics is the far from being a hard science, but that doesn't stop the economists from pretending.

Read an interesting quote in the last few days - I think it was the Pope talking to economists and businessmen, and the latter were justifying their behavior, saying that sometimes, the market forces them to act immorally. In response, the Pope asked them if they were marionettes.

They're probably being manipulated by Adam Smith's "Invisible Hand". Proof that ghosts would exist?

You mean economic studies. Theology is too unkind to give to almost any subject, including theology.

Yes, I will admit that economic debates are somewhat ideological, however, at the same time, there are real fundamentals that are involved and there is at the core a positive economic study which is based upon fact and analysis rather than being aimed at just opinion.


Well, honestly, to some extent it does not make a difference whether a person has a degree or not. I mostly draw the distinction because there are public intellectuals that I really do not respect, and as such I consider them to be dilettantes because I have doubts that they are engaging the real arguments so much as just blowing hot air.

Well, to some extent Shaw was correct, however, I would imagine that he is more incorrect than correct as the average economist has a number of things that they have in common with other economists, as the field of economics is more homogenous in their ideas then I would imagine most other social sciences are, and agreement on a few core issues is very high. The issue is that there are issues where a genuine disagreement on information does exist, and as such there is variation based upon that. I mean, most of the major lines of thought are variations of classical economics or Keynesianism from what I've seen, rather than the odd variations found in most other social sciences.

Yes, I will admit that economics isn't a hard science, however, I do think that economists try more to make their study useful than other fields do, despite the complexity of what they deal with. Even though the math isn't everything, the high focus upon math and logic and empirical data is not a terrible feature for a field of study.


The answer is to some extent, yes. The reason being that arguably they are immoral going either direction, as most businessmen are accountable to higher masters (and thus arguably morally so) but the Pope wants these people to go against the best interest of the people they have already agreed to serve. In any case, I don't usually consider popes to be great sources of economic ideas.

Those aren't the definitions I'm familiar with. You can't just make up definitions in order to straw-man my argument. Not everything is black and white. Besides my claim was that the current recession is a failure in corporatism not a failure in capitalism.


I don't think the chance of gaining massive amounts of wealth is the biggest motivator for innovation. Besides, there are many extremely wealthy people who got where they are more through their skills in politics and marketing than by creating anything particularly new or useful. Having a large pool of educated people is the most important factor in generating wealth.


Can you back this up? Firstly, most developed nations are a mix of capitalism and socialism. The US happens to be the most capitalistic of the large developed nations but it isn’t necessarily the wealthiest. Secondly outsourcing has nothing to do with socialism. It's simply companies moving their production to locations with the cheapest labor. Having the government preventing companies from moving their production base to another country would be more socialistic but that's not happening anywhere anymore.


Nobody is being punished. Before the recession hit American businesses were profiting from building industry overseas. It's just that most of the profit wasn't used to expand and create new jobs within in the US. Nope, it was mostly invested in bubble markets and then it all went down the toilet when the bubbles finally burst.


It just wasn't as feasible in the past.

My example is familiar to those who are aware of Henry Ford and his justifying paying his workers well... in general, if businesses pay their workers well there's more demand and more sales... if people are not paid then no one can buy things. But with globalisation, you can not pay your workers if there are enough other people around the world buying them, or so you think. In the end, of no one pays their workers no one will buy these things... or they need to borrow money to buy things and have to pay it back eventually...