Globalization - the irrational fear that someone in China will take your job

Bruce Greenwald and Judd Kahn, Wiley, Multco 337 G816g 2009

As I write this, fear of job loss to China has been replaced by fears of job loss to robots, but the same paranoia is engaged. Don't be a robot (or worse), and a robot will not take your job. Nor will an unskilled Chinese peasant take your job, unless you do work that any unskilled non-English-speaking peasant can do. The cure? Learn something useful, and keep learning

• 002 Norman Angell The Great Illusion, 1909, claimed interdependence reduces state rivalry. WW1, oops. Thomas Friedman says the same in The World is Flat in 2006.

• 003 globalization peaked between 1910 and 1920, then declined for the next 30 or 40 years. 1920 peak at 18%, 1950 13%, 2000 30%

• 008 Employment Historical Statistics of the United States

• 011 Most services remain rooted
• 012 Foreign radiologists are very few, mostly off-hours stuff in Australia, Switzerland, and the US

• 105 profitability rises with local market share. Even Walmart restricts growth to regions it can take over and dominate; some foreign expansions failed, while expansion into Canada and Mexico did OK. In 2005, McDonald's return on assets was 26.9% in the US, 8.1% in Asia, and 1.5% in Latin America.

• 116 cross-border Foreign Direct Investment is small, and outsiders with less local knowledge fare poorly against locals

The book aims to dispel popular myths about globalization and jobs and trade, while introducing a neglected aspect of the global money supply in chapter 6, "A Genuine Global Economic Problem -Replacing the Consumer of Last Resort". At the 1944 Bretton Woods conference, the International Monetary Fund was established, and the US dollar replaced the British pound as the world's currency.

The prior gold standard was deflationary - the gold supply did not grow as fast as the volume of transactions, so prices declined relative to a dwindling supply of money. As wages were paid in advance of goods sold, that made simply holding gold (or its surrogate, cash) more attractive than running a business. The authors suggest this caused economic crises, which were ameliorated by foreign exchange, establishing currency trading. The perceived self-restraint of the Bank of England made the British pound the favorite exchange currency. To get pounds for reserves, other countries would have to sell assets to the British, borrow pounds and (requiring more pounds to pay interest), or import less real goods from Britain and sell more to the country. This lowered prices in Britain, but that disadvantaged domestic British production and employment.

• 155 The "current" (2009) US account deficit "leaks purchasing power overseas". To maintain full employment and high levels of output, internal investment booms (internet bubble, housing boom) soaked up some of the incoming money, but were unsustainable.

• 157 The authors propose making the IMF the global central bank, supplying currency to the world, as SDRs, special drawing rights . The IMF would be the lender of last resort for countries suffering currency crises. Not sure how the IMF would stay honest.

I wonder if some tool vaguely like bitcoin could stabilize the creation of SDRs. Perhaps they could be tied to pollution mitigation, or preservation of natural genetic diversity. However it is done, if it is not set by some objective physical standard, it can be gamed, and if there is a physical standard, it can be mismeasured.

Money is a surrogate for goods flowing the other way, an abstracted version of barter. We have computers and 24x7 global global communication to communication - perhaps we can return to gold and superhigh velocity trading, or develop a stable average measure of global wealth out of a hodgepodge of volatile real goods and purchased services. Whatever standard is chosen, them that has, gets.