I Was Wrong: Globalization

Impossible or inevitable?

I subscribe to a handful of Substacks but so far have only paid for one, the excellent Noah Smith. I've been following him for a long time, since the golden age of econ-blogging. A recent newsletter presented arguments against degrowth philosophy - the idea that we have to halt or reverse economic growth to avoid running out of natural resources.

In the article he points out that freezing gross world product would, unless we want to also freeze the income distribution and keep the global poor extremely poor, require everyone in rich countries would have to reduce their incomes to the global average ($16/day). Poor countries could get richer to this point and then stay there. This is presented as an obvious non-starter, "political suicide".

This reminded me of a lost decade or so where I had deep despair because I thought this was not only possible, but inevitable!

The flawed logic

I've referred to the basics of this in this post. It seemed a logical consequence of free trade - best case, global incomes converge to the average, worst case, they converge to the lowest. In the worst case of frictionless capital flow, incomes would be pinned to the lowest - if any country got richer and wages went up, a giant sucking sound would ensue, immediately removing all the jobs until wages came back down.

Since free trade, low-cost offshoring etc. is in the short-term best interest of approximately all the money in the world, it was obvious to me that nothing could stop this outcome, despite it of course being bad for everyone including the rich (long-term - in those days (early 2000s) it was common to think short-term thinking was literally legally required of businesses).

Ensuing despair

From today's vantage point I can see that I'm predisposed to fear inescapable abject poverty and so should treat any predictions of such as suspect. But back then it was Serious Business. I literally didn't want to have kids because I didn't want them to starve. I treated my job as though the industry would evaporate any day, not bothering with any career planning or growth, and generally being hostile. I agonized over when the right time to jump ship would be, e.g. I interviewed for entry-level mechanic at a newly-opening AAA car care center (didn't get it, which long-term is for the best).

Aside: There's probably another whole post in the job-related related memeplexes that ensnared me then. Obviously programming (and all knowledge work) would soon leave the US entirely. Obviously precarity would continue to increase as risk kept shifting from employer to employee (haven't entirely convinced myself out of that one yet).

I figured we'd still have notional economic growth by focusing on aggregates (Bill Gates walks into a bar, now the average patron is a millionaire). Why wasn't everyone so despair-y? I figured they were convincing themselves this wouldn't happen because they had to, to preserve sanity. There's conventional wisdom that people have to be over-optimistic to be properly motivated, it's what "Scout Mindset" pushed back against.

Climbing Out

Part of this (~2004 on) was aided by actual treatment for actual clinical depression. It helps! I remember describing my issues to my first psychiatrist in a sentence as "I have a good life but can't enjoy it because I'm convinced the Invisible Hand will snatch it away anytime now", which of course prompted the question "what kind of invisible hand?"

Since the job was easy, I had plenty of time for Internet research, which is how I got into following econ bloggers. I wanted to try to learn whatever I must have been missing about economics such that economists weren't so sour. So I followed Paul Krugman, Brad DeLong, Noah Smith, and others here and there (Matt Yglesias sort-of counted back then). I gathered some data to try to figure out where that average GDP-per-capita was (at the time around Brazil's, 1/4 of America's), hoping that would be reassuring - life is still worth living in Brazil, after all. Of course then, in classic depressive "skeet-shooting" fashion, I convinced myself that wages would not converge to the average but to the lowest, by analogy to prices of goods.

The big insight that helped was one I posted about in the linked "over-modeling" blog post - DeLong asking students to calculate when the USA and China's GDP per capita would converge. Running those numbers showed me that growth was faster enough than convergence that we Americans didn't have to get poorer!

Some tangentially-related stuff helped: after 9 years at that job, it started feeling a bit silly to treat it as so temporary. I did get laid off though, but the job I landed in and have been at for several years is a much better fit. From the start, I could treat this job like normies do (as something long-term), and am building a career of sorts.

Hopefully this can be a nice cautionary tale for others who might be tempted to succumb to nihilism? Your obviously inevitable predicted future might instead actually be impossible.