By JIM GENARO

Globalization has many positive and desirable effects on the worldís economies, such as increasing standards of living and bringing greater access to products from around the globe. However, the benefits of globalization are not enjoyed universally, and the ideology of free-trade capitalism that drives it is not thoroughly examined, according to Jeff Konz, chair of the UNC Asheville Department of Economics.

Konz addressed about 150 people at UNCAís Owen Conference Center on Dec. 3 in a lecture titled ìGlobalization 101: Explaining and Understanding the Nature of the Global Economy.î The talk was sponsored by the World Affairs Council of Western North Carolina.

ìWe consume cultural globalization, and we love having these experiences in our lives,î Konz said. Access to foods and other goods from around the world is greater today than ever before, and many Americans take for granted the ability to eat Thai, Mexican, or Chinese food in almost any town in the country.

Whatís more, he said, American culture is pervasive.

ìWhen you travel, particularly to Europe, you donít have to feel like youíve left home if you donít want to,î Konz noted. The ubiquitous presence of American products and fast-food restaurants globally is both ìcomforting and terrifying ó the double-edged sword of globalization,î he remarked.

The logical end of this development, Konz suggested, is the creation of a global economy in which political borders are rendered meaningless.

In some ways, this is nothing new, he said. Globalization has its roots in the Renaissance, and by some indicators, the 18th and 19th centuries saw a more truly international economy, Konz told the audience. Then, as now, corporations such as the British East India Company traded goods from all over the world.

But what has changed, Konz noted, is the volume of trade. Today, 22 percent of all goods produced worldwide are consumed in a different country from where they are made. And the scale of financial flows relative to the economy has more than quadrupled in the past 30 years, he said.

However, the impact of this is sometimes misrepresented by critics of globalization, he said. Specifically, in terms of jobs, it is not clear whether trade liberalization has been good or bad for the U.S. ó or how much it matters at all.

In the first five years after the U.S., Mexico and Canada ratified the North American Free Trade Agreement, the U.S. lost 110,000 jobs, Konz said. But he added that in that same time period, the increases in exports to Mexico and Canada resulted in 140,000 jobs added in the U.S.

Furthermore, these figures represent a minuscule percentage of the American economy, he said. Only about one-third of one percent of the U.S. job market was affected by NAFTA.

In the functioning of the global economy, two organizations hold the greatest importance: the International Monetary Fund and the World Bank.

These institutions were established in the closing days of World War II to create a coherent structure for international trade, Konz said.

The IMFís purpose is ìproviding liquidity to countries in times of crisis,î he said. It is the ìlender of last resortî for developing nations.

Countries can use it like a credit union, investing in a regulated fund from which they can draw in times of need.
However, if they need to draw more than they have invested, these countries can take out loans, upon which the IMF places conditions.

ìThe conditionality is seen as a kind of medicine for countries,î Konz explained. And the main ingredient of that medicine is free-market capitalism.

ìOver time, the IMF has become, perhaps, the strongest advocate for free markets,î he noted. In the 1980s and 90s, the organization promoted these policies with ìdogmatic fervor,î he said. In the past decade, however, it has become somewhat more pragmatic and less ideologically driven, he added.

The World Bank, on the other hand, is a fund for developing nations based on bonds, which is ìa whole lot less ideological about free markets,î Konz said. The World Bank is increasingly focused on human development, as opposed to strictly economic development.

However, the force most successful at breaking down barriers to trade was not an organization, per se, but a treaty: the Global Agreement on Tariffs and Trade, established in 1947.

The treaty was ìimmensely successful at diminishing tariffs,î Konz said.

In 1995, GATT was replaced by a new entity, the World Trade Organization.

ìIt works kind of like GATT with teeth,î Konz explained. ìIt has the authority to judge trade disputes and approve retaliatory sanctions.î

For instance, in 2004, a dispute between Europe and the U.S. over steel tariffs was brought to the WTO. The U.S. lost the case and Europe got to make up the sanctions it wanted imposed on the U.S.

Cleverly, Konz said, the European negotiators devised sanctions that would specifically target economies in swing states in the upcoming presidential election. President Bush, accordingly, backed down and dropped the offending tariffs.

Underlying all of these organizationsí activities is a commitment to the idea that free markets are the best way to organize countriesí economies. Such a belief is based on several arguments, which Konz outlined.

First, advocates of free markets see them as the most efficient, mechanistic device by which to create the greatest good. The most common metaphor for this idea, Konz said, is Adam Smithís concept of the ìinvisible hand,î which holds that every person seeking his or her greatest benefit will ìmaximize social well-being.î

Others say that free markets are based on natural law ó that trade is intrinsic to human nature.

However, Konz pointed out, anthropologists have found that few indigenous cultures engaged in trade for gain prior to their exposure to Westerners.

Another argument is that markets enable all transactions and hence ìmaximize utility,î Konz said.

Finally, there is the argument that free markets are morally justified on the basis of liberty, Konz said.

Konz then presented what he said were valid critiques of free-market capitalism.

First, there are situations in which the supply-and-demand dynamics that drive markets do not function properly because of hidden costs that are not paid by the buyer.

Pollution is the classic example of this, he said, as the people consuming a product are not necessarily the ones who will pay for the environmental impacts of its production.

Another issue is that the optimality created by free markets is generated over long periods of time. In the short run, there are always winners and losers, Konz noted.

It is also debatable whether utility is really what we want, Konz said. The assumption that more trade is better overlooks the subjective value of things like human rights and quality of life.

Furthermore, while markets maximize utility, this utility is not shared fairly. From the perspective of the free market, one person having $1,000 is better than nine people having $100 each. If distribution matters, free markets have to be reconsidered, Konz argued.

Finally, the outcome of a market depends on the distribution of resources. Those who have little to trade likely never will, Konz said.

Unfortunately, such considerations often are overlooked because so many people have assimilated the ideology of the free market without examining it fully, he told the audience.

ìI worry that that utility part has become so deeply ingrained ... that it has become the end itself, rather than the means to an end.î

Konz then answered questions from the audience.

ìYouíve said that globalization has been good for the U.S.,î a woman noted. She asked if it has been good for other countries as well.

ìFor the aggregate economies of other countries, it has been a good thing,î Konz answered.

However, he acknowledged that those benefits have not been fairly distributed within those countries.

A man said he ìcannot separate globalization from greed ó it goes together for me.î

Konz replied that free-market ideology rests on a psychological model of humanity.

ìThe fundamental premise of that is that humans are self-interested and thatís what they pursue,î Konz said. ìThatís disconcerting for those of us who believe that we are motivated by other things.î