Globalization as a Sign of Insufficiently Advanced Technology
Marcelo Rinesi
2011-01-17 00:00:00
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Early 21st century globalization does not require early 21st century technology. The same capital that financed Thomas Edison could have been deployed in other countries, but it was clearly more profitable to electrify the United States than to invest in gas and coal technologies in China. If development capital began to pour into China nearly a century later, it was because there were — and still are — no comparable productivity returns to be gained by investing in the developed world.

As an investment, globalization is something of a one-off opportunity. People in China, Brazil, and India (or, to also mention the newest half-trend/half-bubble, Africa) aren't intrinsically more productive, given the same capital endowments, than their counterparts in the developed world. They demand less of a salary because of historical differences that the usual market effects are even now beginning to erase. In metaphorical terms, globalization is the equivalent of having a surprisingly large influx of immigrants into "Planet Industry." It's potentially beneficial for everybody over the long term, but beyond the gains of trade, living standards are bound by productivity, and productivity is itself bound by technology.

Here we see that, despite the visible and in some senses unprecedented scientific and technological advances of the last few decades, we haven't matched the relative productivity gains of either the Industrial Revolution or the technological leap of the early 20th century, or at least not enough to soak up the available capital. Otherwise we would have seen huge investments in the developed world, instead of massive infrastructural development in China, Brazil, and India and an aging infrastructure in the United States.

Of course, the planet is finite, and if we are lucky, smart, and focused enough to figure out how to deal with potential disasters associated with climate change and the post-oil economy (just to mention two of the known unknowns of the century), we will soon — as historians see time — run out of potential immigrants to "Planet Industry," and hence "easy" investment opportunities. Until that happens, those of us who believe a technology-driven leap in economic productivity is either happening or close to happen have a clear indicator to pay attention to: only when the world's most advanced economies go back to being a better investment target tham still developing countries, will we be justified in thinking that a significant enough productivity revolution is under way.