Content-type: text/html ~ Stephen's Web ~ Information, Globalization, and Capital

Stephen Downes

Knowledge, Learning, Community

Dec 30, 1997

Posted to HotWired 31 Dec 97

This thread got complex in a hurry. Let me begin by sorting out three major topics: the move toward an information economy, the move toward globalization, and the primacy of capitalism.

Much of the debate above has concerned the merits of capitalism. The essential principle of capitalism is that there ought to be no restriction on the flow of capital. Under such circumstances, capital will naturally flow to the support of the most efficient production of goods and services. By definition, inefficiently cannot exist in a purely market economy.

The admittedly incomplete definition offered above shows how capitalists and globalists are natural allies. The move toward globalism has been, in essence, a move toward removing restrictions on global trade, and hence, removing restrictions on the flow of capital.

Opponents of capitalism point out with more or less effectiveness that capitalism is immoral. As Jack London wrote a century ago in The Sea Wolf, looked at from a market point of view, human life is cheap. There is an inexhaustible supply, and very little demand. In an era of increasing mechanization and efficiency, London's words ring even more true today.

The problem opponents of globalism point to most frequently is the use of cheap labour in underdeveloped countries. It is not surprising to see capital flow toward those economies. They are locations in which labour may be purchased most cheaply, and replaced most easily. Advocates of capitalism are correct to point out that even underpaid workers benefit when the alternative is no employment at all. The flow of capital is toward those economies, which results in the gradual raising of those economies. And unless the global supply of capital increases enough to offset those losses (which, recently, it has not), the result is a decline in available capital in wealthier economies.

This is why we see such an unusual alliance opposing globalization. Nationalist thinkers look at the balance of trade and see the outflow of capital from thier homeland. Labour activists see wage reduction, layoffs, and less favourable legislation which results from the loss of jobs. Religious thinkers and moralists compare working conditions in developing economies to the sweatshops of the 1800s.

The argument offered by those who oppose globalization is that capital will always flow toward economies where wages are lowest, and that consequently, economies will compete against each other in a spiral of lower wages. This slippery slope argument is not entirely without merit, especially when offered against the downward push in salaries found in more developed economies today. But overall, it's not a good response because the capital has to go somewhere. The slushing around of capital from economy to economy is in itself not a bad thing - somebody always benefits.

But let's return to the point that capital is not moral.

Pure capitalism proposes no restriction on the flow of capital. But under such a scenerio, the free market activities of the highwayman or privateer waylaying travellers constitutes part of the free flow of capital. We recognize that some transfers of capital ought to be restricted: specifically, those in which the tansfer is obtained by theft, fraud, coersion, and the like. The rule of law protects people in the free ownership of capital by prohibiting certain sorts of transactions (specifically, those which transpire at the point of a gun).

Now we get to the heart of objections to globalism: much of the flow of capital in less developed countries is the result of coersion rather than free exchange.

Let's look at that much-discussed starving child in the Sudan. A victim of poverty, civil war, religious and politcal intolerance, disease and famine, this child has very few choices. If a job assembling microchips for fifty cents a day is offered to this child, she will leap at the chance because she has no other choice. The labour thus obtained from this child is not a free exchange of goods and services. It is a transaction elicited by coersion just as surely as if the child was forced into a labour camp at the point of a gun.

The capitalists' argument thus begins to sound like the apologies for slavery in the early nineteenth century: the slaves are better off under slavery than they would be as free people (the writings of British explorer Sir Richard Burton offer a fascinating exposition of this point of view).

But capitalism helps these people, right? As they obtain wealth - however minimal - people obtain more choices. They begin to demand freedoms. And eventually, democracy results.

Well - yes and no. Mostly no. It is true that in some nations some people have obtained enough freedom to begin demanding better workplaces, civil and moral rights. But it is a stretch to hold up such nations as South Korea, the Phillipines or Singapore as shining examples of democracy. Nothing like the living conditions and freedoms found in the traditional western economies can be found in these nations.

And the attempts of individuals to improve their own standards of living are most often set against the interests of the corporations which hire them. For the most part, corporations have no interest in seeing democratic reform in less developed countries. With democratic reforms come laws which restrict these corporations' activities.

But this points to a second danger of globalization: many corporations are more powerful than most nations. Add to this the fact that corporations are not democratic, and we have a situation in which corporations can actively prevent democracy from rising in impoverished nations. Thus, the child in the Sudan has no way out - and we, in the more developed countries, will find our freedoms eroded.

Some writers in the posts above quite rightly object to paying 45 percent of their income in taxes. They wrongly blame this on the welfare state. In fact, most of the money they pay in taxes either flows directly into the hands of corporations in the form of contracts for goods and services, or indirectly as corporations are subsidized with tax incentives, loopholes, write-offs, and outright gifts. Corporate power has already flexed its muscle in the western economies with remarkable success.

Neither capitalism not globalism are inherently bad. But both must be regulated by the rule of law.

Rule of law means that people have security of person and property. It means on the one hand that nobody has the right to seize what they already have. These are rights we are familiar with (but which remain notoriously elusive in less developed economies).

But more to the point, it also means that all people must have a fair chance to obtain the necessities of life. Extracting cheap labour from an economy by denying access to the basic means of life is extortion. Just as the rule of law means that transaction must be limited, it also entails that ownership must be limited.

Under such conditions, capitalism and globalism are fine. Indeed, I would argue that the rule of law is a necessary condition for the successful flourishing of capitalism and globalism.

I think the argument from the left needs to shift. It makes no sense to decry the immorality of entities which are by definition immoral. Rather, proponents of the left should dedicate themselves to instituting moral agencies (which I depict here as the rule of law) which hold immoral agencies in check. To do anything else is not only futile, it is irresponsible.

Stephen Downes Stephen Downes, Casselman, Canada

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