The latest summit between G8 leaders brings with it the usual litany of complaints about globalization: environmental degradation, exploitation of sweatshop labor, and alleged Western capitalist hegemony. Some argue that globalization-induced increases in material well-being are superficial and trifling, sometimes quoting William Wordsworths statement that in getting and spending we lay waste our powers. The trade-offs include reduced cultural distinctiveness, increased social instability, and unsavory cultural by-products. The G8 protesters are correct that globalization has some costs; however, these costs are small relative to the benefits.
Globalization is an experimental process that produces a host of political problems because the process of creative destruction continually upsets the status quo. Incentives matter: if people can get rich by creating wealth, we are better off for it. However, if they can get rich by redistributing wealth, we are worse off for it.
These insights also apply to cultural globalization. In a 2004 article in the American Economic Review, Bryan Caplan and Tyler Cowen argue that global cultural competition is beneficial. By preventing it, we deprive ourselves of new cultural forms as well as exposure to what the rest of the world has to offer.
One concern is that increasing globalization creates winner-take-all markets for cultural outputs. Globalization might mean that California Governor Arnold Schwarzenegger will become the Last Action Hero, but it will also create niche markets in which everyones preferences, no matter how esoteric, can be satisfied. This is something the G8 protesters overlook.
Another concern is that globalization has undesirable moral consequences. At first glance, it appears that increased access to pornography is an identifiable cost of globalization and technological change. The actual effects are more subtle: as Clemson University economist Todd Kendall has shown, rates of sex crimes fell as internet pornography became more widespread. Those who are predisposed to commit sex crimes substitute such acts with pornography as it becomes more widely available. The moral costs of globalization and technology may in fact be benefits as people commit fewer brutal sex crimes.
The key to a robust cultural environment is to preserve the institutions that allow the search process to operate rather than trying to freeze cultural time. The market process is the process by which efficient modes of production are revealed. According to 1973 Nobel Laureate F.A. Hayek, we cant have that specific knowledge. Encouraging experimentationand therefore giving people the freedom to failis essential to the discovery process.
Data from various polls suggests that on the whole, people do not trust globalization. As Bryan Caplan argues in his book The Myth of the Rational Voter, people have systematically biased views of economic processes. One needs only to scan newspapers or magazines to find large photo spreads of people investing scarce resources in attempts to maintain the status quo. Socially, these resources are wasted.
Global commerce in culture and morality can also be ennobling. In an oft-quoted passage, 19th century economist John Stuart Mill argues [t]he economical advantages of commerce are surpassed in importance by those of its effects, which are intellectual and moral. He points out that as commerce has replaced war as the chief way in which cultures engage one another, the opportunities to improve our arts or practices as well as points of character continue to expand.
Economists are criticized for an alleged blind faith in the market, particularly among those who are likely to be represented among the G8 protesters. However, our zeal for market processes does not represent blind faith or ideological slavery but a humble admission that human knowledge is too imperfect to articulate ideal solutions to broad social problems. The market is not an end unto itself; rather, it is a means by which the most effective ways to solve problems are revealed, as Hayek has pointed out and as distinguished economists like New York University development economist William Easterly have echoed. As noted by 1986 Nobel Laureate James Buchanan, the very essence of the market process is to define the arrangements that produce order and to discard those that do not. In the final analysis, we should not fret about the alleged moral and cultural depravity of modernity. Rather, we should maintain and preserve the processes and institutions conducive to the development of art and culture.
Art Carden is a Research Fellow at the Independent Institute in Oakland, California, and Assistant Professor of Economics at Samford University.
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