Naked Economics Chapter 12: Trade and Globalization

John Botterbusch

Anderson

AP Macroeconomics

18 January 2013

Wheelan , C. (2010). Naked economics-undressing the dismal science. W. W. Norton & Company.

Free trade and globalization are often controversial topics discussed in modern debates, with one side believing in its benefits to society, the world, and human development while the other sees globalization and capitalism as needless exploitation of the weak and destitute in order for developed societies to make their lives better. But are such topics truly black and white? In Chapter 12 of Naked Economics by Charles Wheelan, the author discusses how free trade overall creates more winners than losers in the long run. Whelan writes the chapter in sub-topics to try and reinforce the notion that the phenomenon of globalization and free trade are not ones of despair and exploit but rather ones of new opportunities and chances. Previously, I believed that Capitalism and globalization had benefits in improving the lives of others, but I always had a firm notion that sometimes protectionism is absolutely necessary to protect domestic jobs. However, in learning about the differences between comparative and absolute advantage and what the author discussed, my views changed from being one to question the act of globalization to endorsing it more. Countries like the United States can specialize in skilled labor rather than countries like Mexico, India, and China, who are responsible for much of the unskilled labor in the world to help provide goods and services to the rest of the world. Unskilled workers can provide most goods cheaper since the opportunity costs to do so are small compared to skilled workers, who are better off working on things they themselves can produce at a lower opportunity cost compared to the unskilled workers, like robots, machines, and more. In specializing in what countries are good at and allowing for trade to exist, each country wins in being able to get what they need and want when they themselves could not have done so (or at least not as cost efficiently). Although more developed countries have absolute advantages in being able to produce most good at lower direct, countries with large amounts of unskilled laborers can use those people to have the comparative advantage in providing goods for the skilled countries. Trade can be made between nations of poor and rich and overall wealth will be generated for both. Although some would argue that globalization has created a new advent of exploitation of workers with unsafe working conditions and poor wages, and although Wheelan acknowledges this, he does provide a crucial counterexample. He discussed how protectionism made the lives worse for those in poor countries when instead of letting kids work in sweatshops and earning an actual wage, child laborers went out onto the street with no way to provide for themselves and almost all of them turned into prostitutes and child sex slaves. Although both situations are not good, the latter is worse. When nations can trade with one another, they are able to get more of what they need or want when they themselves could not have done so in the first place since resources are scarce and production possibilities are limited, especially in poorer countries. Another argument against globalization is that it causes the outsourcing of jobs from hard working people and has no overall benefit. The author addresses that there is no such thing as a zero sum game situation in global economic trade and that although outsourcing does take jobs from people and gives it to others, it overall makes more jobs than it eradicates. Take for example the case of the North American Free Trade Act, where trade restrictions were lifted between the US, Canada, and Mexico and that even though the original outburst was that it would take away more jobs than create, in the end it allowed for economies to grow and create many new opportunities for jobs and lives for everyone in those societies. Such is the idea of free trade and markets, where letting people choose what they could do with their resources with someone else across the nation and world can create a brave new world for all. Although globalization is not a perfect system, I believe that with the opportunities it provides for everyone, it far outweighs the consequences it develops. And although mankind has ways to go till it is close to tranquility and harmony, the creation of a global market can help create stronger bonds between people and nations and hopefully create a global friendship and cooperation to help make the world a better place.