The Encyclopedia of Libertarianism

Globalization

Globalization is the term used to describe the condition that prevails when communication, people, goods, services, and capital move more freely across borders. Often globalization is the result of technological improvement that facilitates communication and transport and economic liberalization that gives people the freedom to make use of them. It is the most important international phenomenon of the early 21st century, touching almost all aspects of life, politics, and business.

Libertarians have traditionally promoted globalization because of its liberating effects on people’s lives. Globalization is an international extension of free markets and open societies. In effect, it is capitalism without borders. In closed societies, people are limited to what is developed locally; they buy locally made products from a local supplier, they work for local employers, and they have to borrow money from the local bank. Globalization permits us to interact with whomever we choose, and to buy from, to work for, or to borrow from others than the local employers and suppliers. These greater horizons permit people the freedom to look for alternatives and the dignity to set their own terms for cooperating with others.

Globalization also increases material progress. When consumers are able to choose alternatives, domestic businesses are exposed to competition from the world’s most efficient alternatives, which forces them to look for ways to make their products and services better and cheaper. It also means that each business and nation is in a position to specialize in producing what it does best, importing other goods from countries where they are more cheaply produced, thus increasing total world production. The corollaries to this material progress are that ideas and technologies are easily transferred across borders and capital is free to move to the places with the most promising ideas and innovations.

Globalization is particularly important for poor countries. In an open world, they can employ technical and business solutions that took richer countries generations and billions of dollars to develop, they can attract investment from richer nations, and they can sell goods in wealthier markets. This ability to leapfrog entire stages of industrial development explains why countries with open economies governed by the rule of law have grown faster as wealth in the rest of the world has increased. From 1780, it took England 60 years to double its national income. However, Sweden was able to accomplish the same feat in the 40 years following 1880, 100 years later. Yet another 100 years later, it took Taiwan and South Korea just 10 years to do the same.

One can make a reasonable argument that classical liberalism as a political movement was born in the campaign for free trade in the 19th century, which the liberals saw as a way of promoting international peace, individual freedom, and material progress. In the mid-19th century, liberalism was able to consolidate almost the whole of Europe into a free trade area, marked by freedom of movement for capital, goods, and people. Liberalism’s success in this area accelerated the Industrial Revolution and caused an economic convergence among European nations. This first era of globalization was not completed inasmuch as the greater portion of the world was forced into monopolistic trade relationships through colonization. Unfortunately, the openness in trade that marked the last third of the 19th century collapsed under pressure from increased nationalism and protectionism that accompanied the period immediately prior to the First World War. The war, of course, marked the return of strong protectionist barriers between nations.

It was not until the end of the Second World War that globalization again reappeared. Trade barriers between the major trading countries were lowered, and technological breakthroughs in transportation and computer technology, combined with liberal reforms in the majority of countries in the 1980s and 1990s, allowed individuals greater freedom to travel, trade, and invest across borders. With the fall of communism at the end of the 1980s, one could again speak of a globalized world, made the more meaningful by the decision of developing countries like India and China to begin to participate in the global economy.

Libertarians disagree about the role of regional trade agreements like the North American Free Trade Agreement (NAFTA) and institutions such as the World Trade Organization (WTO), which promote free trade via multilateral negotiations and a system of rules regulating the use of trade barriers. The agreements that underpin these organizations follow a strange logic because nations agree to allow their citizens the freedom to buy from foreigners only on the condition that other countries extend the same rights to their citizens. However, these reciprocal agreements might be the only viable method of liberalizing trade in a world of illiberal governments, where influential special interests oppose imports. This notion is particularly true where protectionist sentiments predominate and where many voters want to repeal those liberalized policies that have already been enacted. However, the most important trade reforms in the last decades have occurred unilaterally by countries that have seen that it is in their best interest to reduce their barriers to trade regardless of what other countries do.

Today, about 3 billion people live in countries that can be said to be a part of the global economy. These countries have growth rates of about 5%, which means that their per capita incomes double every 15 years. Rich countries have growth rates of about 2% per capita, further evidence of the convergence of wealth among nations. Estimates are that, since the early 1980s, poverty in developing countries has been halved, child labor has almost been halved, and chronic hunger has been reduced by two-fifths. These improvements have been especially marked in countries that have opened their economies to world market forces.

Despite these clear indications of the economic improvement that follows freer trade, a strong antiglobalization movement emerged in the late 1990s—a movement that has staged several mass protests that have been given international publicity. Currently, thousands of influential organizations and pressure groups around the world continue to oppose various aspects of globalization. These groups are not homogenous, and some have incompatible views. A few who have participated in antiglobalization activities are protectionist corporations and unions who want to stop poor countries from exporting goods that would compete with home-grown manufactures. Other groups wish to stop richer countries from exporting their goods, thus forcing consumers to consume higher priced local products. In addition, nationalists and Luddites of all stripes want to shut the rest of the world out, and a few utopian socialists dream of a world government that will take control of all market forces. What they have in common is their opposition to globalization, which is often referred to as “neoliberal globalization” or “corporate globalization,” thus revealing that their real animus is not toward globalization as such, but free markets.

These groups give voice to the same hostility against competition and free enterprise as has been seen in domestic debates about free trade since the Industrial Revolution. However, many opponents of globalization also complain that a liberalization of trade allows individuals and companies to escape government rules and regulations by choosing the location of their activities, the home residence of their firms, and the nature of their investments. Many politicians and international political institutions, like the United Nations, the European Union, and the Organisation for Economic Co-operation and Development, view globalization as a threat to political control. They have often tried to administer the globalized economy by harmonizing domestic policies (e.g., on taxes) and to regulate markets. This attempt to internationalize political control is often called “political globalization,” but is in fact a movement that works against the spontaneous globalization led by voluntary decisions of individuals and businesses.

In many ways, the society in which we live is more globalized than ever. However, much remains to be done. In developing countries, the absence of the rule of law and property rights make it impossible for the majority to participate in large-scale economic activities. Even the policies in place in richer countries are far from ideal. Agricultural protectionism and multibillion-dollar subsidies make it impossible for poor countries to export their goods and develop their agriculture. Domestic government monopolies in health care and education prevent international competition and freedom of choice in those sectors. Finally, although goods and capital might flow fairly freely across borders, the restriction on the movement of people is still much alive.

 

Further Readings

Bhagwati, Jagdish. In Defense of Globalization. New York: Oxford University Press, 2004.

Cowen, Tyler. Creative Destruction: How Globalization Is Changing the World’s Cultures. Princeton, NJ: Princeton University Press, 2002.

Irwin, Douglas. Against the Tide: An Intellectual History of Free Trade. Princeton, NJ: Princeton University Press, 1996.

Norberg, Johan. In Defense of Global Capitalism. Washington, DC: Cato Institute, 2003.

Sally, Razeen. Classical Liberalism and International Economic Order: Studies in Theory and Intellectual History. London: Routledge, 1998.

Wolf, Martin. Why Globalization Works. New Haven, CT: Yale University Press, 2004.

Originally published .