capitalism

Globalization 207
Further Readings
Jenkins, Roy, Gladstone. London: Macmillan, 1995.
Matthew, H. C. G. Gladstone 1875–1898. Oxford: Clarendon
Press, 1995.
Morley, John. The Life of William Ewart Gladstone. 3 vols. New
York: Macmillan, 1903.
GLOBALIZATION
Globalization is the term used to describe the condition that
prevails when communication, people, goods, services, and
capital move more freely across borders. Often globalization
is the result of technological improvement that
facilitates communication and transport and economic liberalization
that gives people the freedom to make use of
them. It is the most important international phenomenon of
the early 21st century, touching almost all aspects of life,
politics, and business.
Libertarians have traditionally promoted globalization
because of its liberating effects on people’s lives.
Globalization is an international extension of free markets
and open societies. In effect, it is capitalism without borders.
In closed societies, people are limited to what is
developed locally; they buy locally made products from a
local supplier, they work for local employers, and they have
to borrow money from the local bank. Globalization permits
us to interact with whomever we choose, and to buy
from, to work for, or to borrow from others than the local
employers and suppliers. These greater horizons permit
people the freedom to look for alternatives and the dignity
to set their own terms for cooperating with others.
Globalization also increases material progress. When
consumers are able to choose alternatives, domestic businesses
are exposed to competition from the world’s most
efficient alternatives, which forces them to look for ways to
make their products and services better and cheaper. It also
means that each business and nation is in a position to specialize
in producing what it does best, importing other goods
from countries where they are more cheaply produced, thus
increasing total world production. The corollaries to this
material progress are that ideas and technologies are easily
transferred across borders and capital is free to move to the
places with the most promising ideas and innovations.
Globalization is particularly important for poor countries.
In an open world, they can employ technical and
business solutions that took richer countries generations
and billions of dollars to develop, they can attract investment
from richer nations, and they can sell goods in
wealthier markets. This ability to leapfrog entire stages of
industrial development explains why countries with open
economies governed by the rule of law have grown faster
as wealth in the rest of the world has increased. From
1780, it took England 60 years to double its national
income. However, Sweden was able to accomplish the
same feat in the 40 years following 1880, 100 years later.
Yet another 100 years later, it took Taiwan and South
Korea just 10 years to do the same.
One can make a reasonable argument that classical liberalism
as a political movement was born in the campaign
for free trade in the 19th century, which the liberals saw as
a way of promoting international peace, individual freedom,
and material progress. In the mid-19th century, liberalism
was able to consolidate almost the whole of
Europe into a free trade area, marked by freedom of
movement for capital, goods, and people. Liberalism’s
success in this area accelerated the Industrial Revolution
and caused an economic convergence among European
nations. This first era of globalization was not completed
inasmuch as the greater portion of the world was forced
into monopolistic trade relationships through colonization.
Unfortunately, the openness in trade that marked the
last third of the 19th century collapsed under pressure
from increased nationalism and protectionism that accompanied
the period immediately prior to the First World
War. The war, of course, marked the return of strong protectionist
barriers between nations.
It was not until the end of the Second World War that
globalization again reappeared. Trade barriers between the
major trading countries were lowered, and technological
breakthroughs in transportation and computer technology,
combined with liberal reforms in the majority of countries
in the 1980s and 1990s, allowed individuals greater freedom
to travel, trade, and invest across borders. With the fall
of communism at the end of the 1980s, one could again
speak of a globalized world, made the more meaningful by
the decision of developing countries like India and China to
begin to participate in the global economy.
Libertarians disagree about the role of regional trade
agreements like the North American Free Trade Agreement
(NAFTA) and institutions such as the World Trade
Organization (WTO), which promote free trade via multilateral
negotiations and a system of rules regulating the use of
trade barriers. The agreements that underpin these organizations
follow a strange logic because nations agree to allow
their citizens the freedom to buy from foreigners only on the
condition that other countries extend the same rights to their
citizens. However, these reciprocal agreements might be the
only viable method of liberalizing trade in a world of illiberal
governments, where influential special interests oppose
imports. This notion is particularly true where protectionist
sentiments predominate and where many voters want to
repeal those liberalized policies that have already been
enacted. However, the most important trade reforms in the
last decades have occurred unilaterally by countries that
have seen that it is in their best interest to reduce their barriers
to trade regardless of what other countries do.