
Peak Globalization - alanthonyc
http://blogs.hbr.org/cs/2010/12/peak_globalization.html
======
A1kmm
The author seems to conflate all opposition to the current flavour of
globalisation with nationalism. Nationalism in this context basically means
thinking that your country and their people are best and so things made there
are better - and if someone's only reason for believing that is that they were
born there, or that they were brainwashed to believe it, that is irrational.

There are examples of nationalism in the United States holding back some forms
of globalisation. For example, in a truly global world every country would
have open borders to anyone who wanted to immigrate there, and saying that
someone can't come to your country because that would take jobs from 'more
deserving' locals is a form of nationalism.

However, "local food, DIY, sustainability" are not examples of nationalism.
Instead, they are an expression of growing discontent about inadequate price
signals for externalities like climate change and peak oil, and that much
global trade is focused around avoiding environmental and labour protection
laws, and exploiting third world countries, rather than genuine comparative
advantages and economies of scale.

~~~
fleitz
Local Food, DIY, and Sustainability are not about inadequate price signals for
climate change and peak oil. They are about creating consumer surplus via PR,
and nostalgia for early 20th century farming techniques. Admittedly, most
people in the industry have no idea that this is what they are doing, but
thats the beauty of good PR and healthy dose of nostalgia.

That is to say the reason most people pay the price premium for organo-
locavore food is that it makes them believe they are better people, not
because they believe that futures contracts for degree days are mispriced.
Walk into a Whole Foods and ask what the appropriate prices of a heating
degree day is once climate change and peak oil are priced in and they will
give you a blank look. <http://en.wikipedia.org/wiki/Weather_derivatives> Hell
I bet you could phone up John Mackey himself and he wouldn't have the
slightest idea.

Believe me there are a lot of guys in hedge funds trying to price in peak oil
through futures contracts and in the pricing the long term value of certain
stocks, various forms of insurance, risk swaps.

Both climate change and peak oil can easily be traded on the various global
futures markets. People who believe that climate change and peak oil are
mispriced in the market not opening organic rooftop urban gardens, they are
opening trading accounts (and will make a killing if they are right)

~~~
_delirium
But the point is to actually do something about it, not just get rich off the
prediction. Trading climate change on futures markets does not mitigate it,
unless those futures are somehow tied to something else that would cause them
to be priced in (like a carbon tax, or tradable emissions caps). To remove it
as an externality, you have to somehow price it into the products that are
causing the problem, either via decentralized consumer action, or via
centralized governmental action.

I'm skeptical decentralized consumer action will succeed, and I agree that
much of it is poorly targeted, but it's at least the right idea of how to
tackle things: if something is not priced in, you have to take action that
will force it to be priced in somehow, like preferring one product to another,
boycotting some products, banning products, or internalizing the externality
via a tax/fee. Just trading bets on it in a futures market doesn't do
anything.

~~~
fleitz
The point of getting rich from the prediction is to have the money to create
the change, not idiotically growing vegetables on your apartment roof,
thinking that your building's roof contains 40m2 of arable land per occupant.

Generally people use futures markets to mitigate risk. Therefore if you
believe that oil is mispriced you can use a futures contract to mitigate the
effects you have with regard to peak oil (increased prices). Similarly, those
who may be affected by rising sea levels (coastal areas) can trade risk with
those who will be insulated (inland areas).

The reason why environmentalists don't use these markets to put their money
where there mouth is, is because they are much better at scaring people than
predicting the future. Hence, if Greenpeace were to buy the futures contracts
reflecting its peak oil predictions it would likely lose a lot of money that
could better be spent scaring people and collecting membership dues.
Greenpeace's expertise is fear mongering, not making accurate predictions with
regard to the future price of oil, or climate. If it had such an ability it
would have more than enough money to fund its operations, and would not have
people on the street collecting money and talking about global warming / peak
oil.

Most rational people know that we will eventually see peak oil and that prices
will gradually rise making alternative forms of energy more economical in
comparison. Buying expensive local food now is a waste of money, it's better
to save that money in an interest bearing account and use it in the future
when local and non-local food equalize in price. (Note: Shipping an apple
across a continent actually uses less gas than to drive it home, note never
let a locavore know this, it ruins their girl-meets-tractor fantasies of urban
farming.)

See the Simon-Erhlich wager for examples of environmental stupidity with
regard to economics.
<http://en.wikipedia.org/wiki/Simon%E2%80%93Ehrlich_wager>

------
mixmax
An artist did a very interesting thing a few years ago: He made a pencil from
scratch.

He cut the wood, mined the graphite, melted the lead, and created the eraser
from a rubbertree. His pencil ended up costing thousands and thousands of
dollars. Yet you can go to the nearest office outlet and buy ten pencils for a
dollar. This is because of globalisation. Someone somewhere has specialised in
making pencils and churn out millions of them a year, driving the cost down to
almost nothing. The same is true of almost all other products.

This is the primary reason our standard of living increases, most economists
agree on this.

Protectionism usually comes around when times are bad and countries need a
scapegoat and a bad guy whose fault it is. For the US it used to be Mexico,
now it's China. But the fact is that open trade helps both them and us (they
get to sell goods, we get cheaper pencils), besides it works both ways.
Denmark, for instance, specialises in hearing aids and container shipping both
of which we have a more than 50% global share of. The world gets cheap hearing
aids because Denmark massproduces them, and in return Denmark gets cheap
pencils and other stuff that someone else somewhere produces.

Politicians. thoughtleaders and policy makers across the world are aware of
this mechanic but often use protectionism as a political weapon, knowing that
it's bad for their economy.

Nations are more economically intertwined and trade more than ever before, and
it's not going to stop anytime soon. There might be a bump in the road, as
there often is when times are bad, but it's not going to stop.

Globalisation is here to stay, and you should be happy for it. It means that
you can get a Wii for the price of a digital watch ten years ago.

~~~
Create
This all makes sense. But. Given the high degree of specialization,
livelihoods and economies get very exposed to change, which, according to the
cliché is coming at an ever accelerated rate. Some people and economies get to
choose how and when to switch, and according to the mantra, innovation plays a
role* (some call it here wealth creation). Some don't, and this mostly applies
to colonies (especially economic ones). So people loosing their living in
places where they are coerced into submission become protectionist (in the
form of nationalism -- one of the root causes of national socialism was, that
Germany and Italy were left out of the colony pie, and didn't get what they
thought they deserved to match their status).

I think everybody would agree, that in a European country, being perfectly
capable of producing pears (i.e. suitable climate), it is unsustainable to
have over 20% jobless, more debt than a country could ever repay in a
generation, and yet import pears from China. And pumpkin seeds. With the usual
socks and cutlery and electronics. Worse, this is a real example I have given.
Globalization, in this current form is not here to stay. You can only get your
WII for the price of a digital watch ten years ago by externalizing more and
more costs (like shipping in your example). Out if sight, out of mind. This is
a very important pillar of globalization, which oddly enough is turning
against itself (better communication, though less true of the _active concern_
of people, which one might think as a consequence).

* This reminds me of a Russian children story. Once upon a time there was a pencil factory. Somebody had the obvious innovation, that since _nobody_ uses the last inch of lead of a pencil, because it would be too small to hold and sharpen anyway, so it makes sense to make some profit by leaving it out. Great savings, management promotion. Soon after, seeing the success, comes a new innovation: everybody knows, that the essence of a pencil is writing, and if there is no graphite, there is no need for the wood either. Cutting the useless piece of wood from the pencil would save forests and make huge profits. This cycle of logical, rational and economically sound innovation continued and iterated, until the pencil was gone. Everybody got prizes and promotion everywhere. But then came along the new innovator, who thought about putting a piece of graphite embedded into a wooden straw. Brilliant invention, huge prizes, and the pencil was reborn. The article is saying, that it is becoming readily apparent, that the pencil is about to be gone.

~~~
thwarted
What are the chances that the 20% unemployed can produce pears that are price
competitive with the ones shipped from China or with substitute products?

------
Umalu
I get suspicious when articles talk in terms of "the Chinese" and "the
Americans" and "the Germans." That is painting with such a broad brush. You
know you are not the same as everyone else in your country, but it is so easy
to fall back on the assumption that people in other countries must all be the
same. It is really hard to write insightfully about the variety and complexity
of real life, so instead we get articles like this.

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trevor99
China is a scary place, we're screwed in the US.

