Article Review: Martin Wolf – ‘The Market Crosses Borders’

 ‘The Market Crosses Borders’ – Martin Wolf, from Why Globalization Works.

The excerpt titled ‘The Market Crosses Borders’ from Martin Wolf’s 2004 book Why Globalization Works focuses primarily upon the conflict between the ability and desire of markets to cross territorial borders; and the role states and governments play in regulating the movement of goods, services, labour and capital across these borders. Wolf discusses this conflict with reference to the following key factors of global economic integration; trade, capital and labour, before considering the further implications of geography and policy.

Wolf is a strong proponent of globalisation and economic liberalization. His intellectual origins – and the economic principle of comparative advantage which permeates this work – are heralded with an opening quote taken from Adam Smith’s …the Wealth of Nations. In this extract, Wolf expounds the thesis that ‘conflict between the natural tendency of markets to cross borders and the need for the states that define those borders to support markets is at the heart of all the challenges created by a global economy.’[1]

Revealingly, the recognition of this fundamental challenge comes in the introduction to this passage, wherein Wolf subtly assembles a disparaging view of the role of states in a global economy.

Wolf does this by explaining his own role in the global division of labour, and his own experience of markets crossing borders, largely in the form of consumer items available to him that are made elsewhere. The positive view espoused is no doubt informed by his favourable geographical situation, a determinant that Wolf returns to in more detail. He then creates a reasonable sounding implication that the operation of markets is fundamentally good, because those who engage in transactions ‘expect to be made better off’ by them.[2]

It should, however, require no debate that the reality frequently falls short of the expectation, and that these transactions are not engaged upon by equal parties. But at this point, Wolf’s preference is to discuss the inequalities of states, rather than that of other economic actors. Indeed, his emphasis on the statistics put under the heading of a country’s external transactions having little to do with the state itself serves to further sideline for the reader the role of the state in the operation of markets.

Wolf’s subsequent claim that ‘political institutions behave as if the welfare of foreigners counted for far less than those of nationals and residents’[3], when read with his analysis of inequalities in the capacities and efficacy of states domestically and internationally – which, he says, ‘makes for black holes in the world economy’[4] – completes this somewhat biased view. That is, that the opportunities and benefits of cosmopolitan markets are inhibited by states seeking to distort the operation of markets in the favour of its citizens, often at the expense of foreigners.

But although Wolf is certainly in favour of  liberalization of  markets and of controls imposed at borders, Wolf does not see liberalization as an all-or-nothing pursuit, nor even as an end in itself.[5] Rather, he is in favour of that which facilitates the freeing of movement of the elements of production between different jurisdictions. Herein, using examples of  South Korea, Taiwan, Chile and China, Wolf perceives a causal link between economic liberalization, economic growth and democratization, a contention which he cannot resist following with an unsupported reference to western leftists’ admiration for totalitarian China.[6]

This coincides with one of the more contradictory ideas explored in this article. Like Sachs et al.,[7] Wolf sees geography as being the main determinant of poverty, and muses that perhaps the ‘simplest thing we can do to alleviate mass human poverty is to allow people to move freely or their labour services to be traded freely.’[8]

Yet, in light of Wolf’s discussion of the increasing returns compounded by ‘agglomerations of skills,’[9] he does not seem to be seriously advocating an acceleration of the drain of skills from the poorer countries to the rich (which already occurs, as he rightly points out). In any case, this would not be the market crossing borders, but rather people crossing from one labour market to another; a subsumption of the poor into the wealthy societies of the rich.

It is in this area of people and labour that Wolf seems to struggle to find a standpoint as neatly anti-regulation and anti-government as he managed with his sections on trade and capital.[10] But despite his lack of surety, this freeing of labour seems to be the strongest recommendation in Wolf’s conclusion. Thus, while his convictions are well argued, it is the paramount role of people in a world economy on which Wolf finds himself confounded by the fundamental challenge he earlier identified between markets and states.

 

References:

Sachs, J., Mellinger, A., and  Gallup, J., ‘The Geography of Poverty and Wealth’, in Sharad Chari and Stuart Corbridge (eds.), The Development Reader, Abingdon, Oxon, Routledge, 2008, pp. 9-13.

Wolf, M., ‘The Market Crosses Borders’, in Sharad Chari and Stuart Corbridge (eds.), The Development Reader, Abingdon, Oxon, Routledge, 2008, pp. 401-9.

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[1] Martin Wolf, ‘The Market Crosses Borders’, in Sharad Chari and Stuart Corbridge (eds.), The Development Reader, Abingdon, Oxon, Routledge, 2008, p. 402.

[2] Ibid., p. 402.

[3] Ibid.

[4] Ibid., p. 403.

[5] Ibid.

[6] Ibid., p. 404.

[7] J. Sachs, A. Mellinger, and  J. Gallup, ‘The Geography of Poverty and Wealth’, in Sharad Chari and Stuart Corbridge (eds.), The Development Reader, Abingdon, Oxon, Routledge, 2008, pp. 9-13.

[8] Wade, p. 406.

[9] Ibid., p. 407.

[10] Ibid., pp. 404-6.