N.B. It’s been getting a bit heavy around here these days: between my serious excitement about the new President Elect and my late-night reflections on ideas, my purpose to poke fun at globalisation has been put aside recently.  So here to restore my light-hearted intent is a post about whether globalisation is actually pulling the wool over our eyes.

Remember when the spirit of immigration was captured by these stanzas: “Give me your tired, your poor / Your huddled masses yearning to breath free / The wretched refuse of your teeming shore / Send these the tempest-tossed homeless to me…”?  Immigration these days would be better described by inserting a negation at the beginning of each line of the above.   In the UK, which enjoys one of Europe’s most liberalised immigration policies (which isn’t saying much), an elaborate system has been put in place to “score” potential immigrants and determine whether they should get a visa.  “Highly skilled” workers get top priority (tired, poor, huddled masses need not apply).  But there are also specific places opened up for less highly skilled workers: so called “tier two” applicants.

Today, the UK has released a list of the professions it is making special places for in this year’s tier two intake.  They include: sheep shearers, ballet dancers, math teachers, and horse trainers, along with a number of workers in hard sciences such as chemical engineering, physics and biology.

It is one of the great ironies of globalisation that a nation which spends so little time thinking about the content and origin of, say, its capital, takes so much time to micro-manage the content and origin of its labour force.   Sheep shearers and ballet dancers are not professions that immediately pop into ones mind when trying to identify labour needs, so I imagine that the Home Office spent a great deal of time and money to come up with this (very) specific list.  Indeed,  I imagine that they spent a lot more time and money compiling this list than is dedicated to identifying the most profitable and stable asset classes composing inflows of Foreign Direct Investment, even after the recent financial crisis.

Also ironic that we must turn to global flows of labour to solve a labour shortage in what is probably the world’s oldest, least globalised industry: sheep.  Before there was even agriculture, there was pastoralism.   Friedrich List, great mercantilist thinker of the 1800s, categorised pastoralism as the first of three stages of development for countries in “temperate” climates.  His writing was about the openness or closure of trade policies in these various stages of development, but he didn’t even bother to hypothesise about the pastoral phase.  It was too primitive.  And yet the British have managed to globalise their economy, open their borders to trade and capital, while imposing a quota to service the unmet demand for British sheep shearers through international migration.  It’s enough to make the globalised feel a bit sheepish (I couldn’t resist).


The Daily Planet: Ahoy, Matey!

September 30, 2008

There’s so much to write about: the failure of the US Congress to pass the bail-out plan, the more general collapse of the international economy, the upcoming debates between Sarah and Joe, etc.  And on at least first two, I am well qualified to comment.  But I figure you’re reading enough about the financial crisis, so I’ve decided to cover something a bit different in today’s Daily Planet: pirates.  Yes, really, pirates.  Though not those of the Caribbean, those of the Horn of Africa.

Most people don’t know that in this age of global trade and commerce, the shipping industry, which moves almost all of the goods traded internationally, is still susceptible to pirate attacks.  In fact, there are an estimated 300-400 pirate attacks a year (a 75% increase over a decade ago), most of which happen in a narrow strip of water between Malaysia and Indonesia called the Straits of Malacca.  At its narrowest point, the Straits are only 1.2km wide, and yet 50,000 ships a year, carrying 1/3 of all international trade (i.e. many things from China destined for Europe), pass through it.   Basically the ships are sitting ducks and are extremely susceptible to pirate attacks.  Billions of dollars a year are lost via piracy.

Before we proceed, let’s talk about modern pirates for a sec.  Do they have hooks instead of hands?  Eye patches?  Parrots perched on their shoulders?  Not that I know of.  They are mostly people from poor, and poorly governed, countries, like Somalia.  In fact, I wanted to report on pirates today because a story in the Financial Times caught my attention: rival pirates were killed in a shootout off the coast of Somalia.  They were fighting about what to do with a Ukrainian ship they had captured.  They disagreed, fought and killed several pirates in the process.  With guns though… nobody walked the plank.  Pirating off the Horn of Africa has increased dramatically in the past several years, in no small part because of the collapse of the Somali state and other political problems in the region.  The inability of the Somalian government to patrol its waters increases the ability of pirates to operate.

Pirate attacks range from unsophisticated methods like holding the crew ransom long enough to steal the cash on board, to more sophisticated attacks where ships are commandeered, moved into port, repainted and flown under an alternative flag.   This is possible because modern pirates are well armed (with rocket propelled grenades, mines, automatic weapons, etc).

All of this to say that globalisation has its contradictions: while short-selling, over-leveraging, unwound derivatives and other sophisticated risks to the global economy dominate the news, the globl economy is still suspetible to unsophisticated risks like piracy, a practice which has been around as long as boats.  So as they say, the more things change

N.B. Another new column where I report on news relevant to the global economy, which in practice means just about anything in the news!

What do a high school teacher, a stock broker and a computer analyst have in common?  They all lost money today when the American stock market closed another 450 points down after Lehman Brothers filed for bankruptcy and AIG needed the government to give them $85 billion to avoid the same fate.  Several decades ago, none but the wealthiest Americans would be affected by a change in the value of the stock market.  But as the process that political economists including Robert Wadeof the LSE call “financialisation of the economy” progresses, more and more “average” people have their retirement funds and other investments tied up in the stock market.  Which means that more and more people are subject to the wild ride of what one of the founders of the discipline of international political economy, Susan Strange, called “Casino Capitalism.”

The Wall Street Journal comments today that “…Market turmoil translates into emotional turmoil for many people.  Some are experiencing sleepless nights and random bouts of crying, while others hope for a miraculous windfall.”  But all of this is new.  A careful study by a political sociologist at UCLA argues that along with the transition to a post-industrial economy where the service industry dominates, financialisation (defined “as a pattern of accumulation where profit-making occurs increasingly through financial channels”) is the most important change in the American economy since the 1980s.  American firms increasingly generate profit through their financial portfolio rather than through productive activity.   Additionally, financial firms make up an increasingly large segment of total profits in the American economy. 

Finacialisation of personal income and investments has followed these broader trends in the political economy with the conversion of retirement income and other investments to the stock market rather than more risk-free or traditional investments (like bonds).   This has a broader implication for the political economy: in times of global downturn, citizens will put pressure on politicians to bailout firms and regulate the markets.  However, the counter-veiling strength of corporations, whose business models are increasingly reliant on the financialised economy and where financial firms make up a larger part of the economy than ever, will resist such regulation.   Thus bailouts will be more common, but regulation no more so.  All of which implies a greater cost to taxpayers, who finance the bailouts in question, with no more responsibility on the part of firms.