Why free trade and globalization aren't quite the same thing

Okay, I can buy that the movement of capital is somehow different than the movement of goods. But how is Intel building a fab in China different than Toyota building a car plant in the US?

I have always challenged those who thought both terms were interchangeable.

When talking about letting the "market decide", our business leaders and politicians will always find exceptions to the rule:

S&L crisis
Bear Stearns

What productivity occurs when a hedge fund manager collects his 2.5% fee for managing the fund, regardless of the results?

What value (something I am will to pay for either goods/services) is created by those who manipulate capital?

I get value if I buy something that I want that's made in China or the U.S., or if I eat at a restaurant.

I get some value from my cable provider (the channels I watch, versus all those shopping channels I never watch).

I would prefer to buy and pay (more) for items produced in the U.S., but those are few and far between.

What a good definition for productivity? P/E ratio? CEO bonus? Stock options?

Hey, Baumol wrote my Econ 1 textbook, too! And that was this spring! (Though the book was an edition from like '97... it seemed a little too focused on Bill Clinton and a Republican Congress...)

@Curmudgeon: I guess the argument would be that there's more technology transfer (that is, a greater "shift in comparative productive capability") going on when you put an Intel fab in China than when you put a Toyota plant in the U.S.

Hello...new to this blog but the headline on the main page caught my eye.

I am the least-economically-minded person I know, but this really seems like a no-brainer. Was there ever any doubt that "globalization" benefits the American superrich, exploits the exporting-country poor, and negatively affects non-wealthy Americans? And that when something assists the superrich while harming everyone else, that's going to be bad for the general economy?

to curmudgeon: toyota builds cars in the u.s. to sell to americans, not to ship back to japan. intel and many other u.s. manufacturers send production overseas then ship the results back to american consumers.

@Justin - It's not entirely clear to me that a microelectronics fab results in more technology transfer than an auto plant. A fab is largely self-contained (beyond the human skills needed to operate it), while an auto plant spawns a community of suppliers who become knowledgeable in aspects of the technology.

I do know that the technology behind a fab has a much shorter shelf life, typically 18-36 months before it's outdated.

Sounds a lot like new age mercantilism to me. It's taking trade, which is generally, as mentioned in the excerpt, thought of as a win-win, and turning it into a win-lose based on who's making what.

Comparative advantage says it doesn't really matter who's making what where as long as everyone is making something. (well, not exactly, but that's a simplistic rendering of it) The authors seem to have placed relative values on different types of manufacturing and are arguing that whoever controls these "key" manufacturing industries is winning while everyone else is losing.

I disagree. Even using the example given, it doesn't really matter if Intel builds their next plant in China because the number of consumers is rising so fast. Win-Lose economics systems only occur in set, stable markets that are experiencing minimal growth, that isn't the case with worldwide consumers at all.

It looks legit on the surface, but really its just neo-malthusian, neo-mercantilism dressed up with an aura of respectability.