15 October 2005

Long Live Globalization!

Our family outing to IKEA today sparked introspection on the numerous benefits of globalization and successful domestic businesses. There can be a good deal of charm in a local mom & pop business that is friendly and well-run, but when a local shop becomes popular and successful enough to grow into a regional, national or international conglomerate, many other people can benefit from that business in addtion to the local neighbourhood of the first store.

It is bewildering to me that there is so much animosity towards successful large coprorations. Organizations like Walmart -- that started as a well-run local Arkensas store -- now bring economies of scale, excellent customer service, low prices and jobs to literally millions of people around the world. We don't have to hope that our local merchant is as efficient as Sam Walton, we can have one of Sam's own stores on our street. Whether local workers labour for Joe's local food store or the local Walmart, they still have a good job. In fact, they can likely get better benefits by working for Walmart because it can negociate better deals with health insurance providers due to its size.

We sometimes forget that these big corporations are really just groups of normal people like ourselves who want to buy a little house, have a family, send their kids to good schools and maybe even go to church on Sundays. The nature of the workers doesn't change with the size of the company for which they work. Each Starbucks, for example, has an ambiance heavily influenced by the workers therein. Further, anybody can be an part-owner of such businesses and share in profits by simply buying shares of their stock. In fact, many of us own shares of Walmart indirectly through the investment holdings of our retirement savings plans.

There is often particular antipathy toward foreign companies and products made abroad. That foreigner, however, is a normal human being like the rest of us. If you met him on a train, you might even become close friends, but somehow when a product he made is anonymously labelled as being from a foreign country, it is somehow less desireable than a locally made product. Political borders are arbitrary and often ephemeral. To take a simple example, it might be far more "local" geographically for somebody in Alaska to trade with British Columbia or Yukon Territory, but those are 'foreigners' because arbitrary events in history caused Alaska to become part of the U.S. rather than Canada.

The favoritism for locally produced items is perhaps the most absurd when taken to their logical extreme. Why settle for products from your state or country as being 'sufficiently local' when you could insist on products from your town or street. How many cars or bananas are produced on your street? Personally, I would be sceptical of buying coffee or bananas produced locally here in Glasgow, Scotland.

In short, it is as arbitrary as being racist to choose products based on the proximity of their origin to your place of residence or the nationality of their producer rather than their quality or price. When such preferences for local goods become enforced by government in some form of legal protectionism, it results in inefficiency, encouraging locals to produce inefficiently what could be far mroe efficiently produced elsewhere and exchanged for products in which your region has a competitive advantage. Can you imagine what would happen to the population of Hong Kong, if the government mandated that all food consumed in Hong Kong could not be imported from outside the city?

Globalization translates to better, cheaper products, made easily available to more people. When I walk into IKEA, I can purchase products designed by a skilled foreigner and produced in economies of scale from every corner of the earth (we purchased two bowls today, identical in every way but color; one came from Portugal while the other is from Turkey). Thanks to IKEA having sufficient size, efficiency, and global production facilities, I can buy a host of things to make my life far easier or more comfortable that would simply not be available or would be prohibitively expensive if everything had to be produced in Scotland. I gleefully traded with producers in a dozen different countries during my single visit to IKEA. If those producers could only sell to their local market, we would all be the worse off for it. When two traders of any origin voluntarily come together -- even indirectly through merchants like IKEA or Starbucks -- to trade, both sides benefit, otherwise the trade would not occur.

The next time you hear demonstrations against globalization, ask yourself what those demonstrators would be wearing, driving and drinking for breakfast if they had to produce everything they consume themselves, for that is the ultimate outcome of non-trade. Does it make sense not to trade with somebody simply because he lives somewhere else?

I can hardly wait until more of my favourite shops like Trader Joes and Togos spread to other regions of the country and world.

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