Globalization
Donald J. Boudreaux
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Below one shall find a series of excerpts from Globalization (2008) by Dr. Donald Boudreaux. Use the Quick-Jump feature to quickly find that for which you’re searching.
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99999 00000 11111 22222 33333 44444 55555 66666 77777 One. Globalization: Yesterday and Today
Definition of Globalization (p. 1)
One good definition is offered by the Carnegie Endowment on its website Globalization101.org: “Globalization is a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology.” But a simpler definition is most fitting: globalization is the advance of human condition across national boundaries.
Example of Global Cooperation (p. 2)
[A]lthough a simple item by the standards of modern technology, [each shirt] represents a triumph of international cooperation. The cotton was grown in India, from seeds developed in the United States; the artificial fiber in the thread comes from Portugal and the material in the dyes from at least six other countries; the collar linings come from Brazil, and the machinery for the weaving, cutting, and sewing from Germany; the shirt itself was made up in Malaysia. The project of making a shirt and delivering it to me in Toulouse has been a long time in the planning, since well before the morning two winters ago when an Indian farmer first led a pair of ploughing bullocks across his land on the red plains outside Coimbatore. Engineers in Cologne and chemists in Birmingham were involved in the preparation many years ago. Most remarkably of all, given the obstacles it has had to surmount to be made at all and the large number of people who have been involved along the way, it is a very stylish and attractive shirt…. And yet I am quite sure nobody knew that I was going to be buying a shirt of this kind today; I hardly knew it myself even the day before. Every single one of these people who has been laboring to bring my shirt to me has done so without knowing or indeed caring anything about me.
The Marginal Product of Capital (MPK) Equalises Between Nations (p. 6)
That the market for capital today truly spans the globe is attested to also by recent findings that the marginal product of capital (MPK)—that is, the value contributed to total output by an additional unit of capital—varies little across countries. If MPK were much higher in, say, Mauritius than it is in South Africa, then investors could make more money by investing in the former country rather than in the latter. And as long as investors are reasonably free to invest wherever they choose, they will then, of course, invest in Mauritius rather than in South Africa. As Mauritius gets more capital, the MPK there falls. (The first factory in Mauritius generally yields output of higher value than does the second factory.) Investors will keep pouring funds into Mauritius and avoiding South Africa until the MPK in Mauritius falls down to the same level as the MPK in South Africa. So if the marginal product of capital is the same around the world, that fact would be compelling evidence that the capital market truly is a global one and that it is efficient. In their recent paper, “The Marginal Product of Capital,” Francesco Caselli and James Feyrer find that today the marginal productivity of capital indeed is pretty much the same all around the globe. This finding is further evidence that today’s economy is genuinely and highly globalized.
