Globalization: Random or Directed?
By Staff News & Analysis - March 21, 2013

How Globalization Went Pop and What It Means for Workers … How do you measure how fast the world economy has "globalized"? Borrow a concept from physics. Call it global economic entropy. Global trade is old — really, really old. But something new is happening to the world economy as software and container trade shrink the globe — the rate of "globalization" is increasing, allowing developing countries to hitch a ride on the capital of advanced economies and race forward. But how do you measure how fast the world economy has "globalized" in one figure? Perhaps, by borrowing a concept originally developed by physicists known as entropy. – The Atlantic

Dominant Social Theme: Globalism is irreversible.

Free-Market Analysis: This article in The Atlantic explains that globalism is an irreversible process because of a certain kind of entropy. The kind of entropy in question is called "information entropy."

The Atlantic article explains that it is "an abstract measure of diffusion. It tells you how spread out any distribution is, whether it's a distribution of people's heights or particles in a room." Here's more from the article:

The Atlantic article explains that it is "an abstract measure of diffusion. It tells you how spread out any distribution is, whether it's a distribution of people's heights or particles in a room." Here's more from the article:

Imagine a helium balloon tied to the floor of a room. If we took a snapshot of the distribution of helium in the room, we'd see trace amounts of helium floating around, but the overwhelming majority of helium would be concentrated in the balloon.

If you pop the balloon, the helium particles would burst out, spreading over an increasingly large area over time as they diffuse through the room. The information entropy lets us measure just how spread out the particles are, and track their diffusion over time.

In short, globalization popped the global GDP balloon, letting GDP escape to developing nations and spread out more uniformly across the world.

Similarly, we can take a snapshot of the distribution of global GDP among nations. For example, in 1991 total global GDP was about $22 trillion (in current U.S. dollars) and the United Kingdom generated about $1.013 trillion of that total, or 4.7%.

Calculating this percentage for every nation lets us build a distribution of each nation's share of total global GDP in a given year. We can then measure the information entropy of this distribution for each year over time. In doing so, we see that the distribution of global GDP among nations became more spread out over the last several decades.

Though there is no "GDP balloon," there are national boundaries and geographic distances that have historically restricted the movement of capital and goods. The infrastructure of globalization marginalized the importance of these national boundaries and collapsed distances, liberating capital by facilitating global investment, and unleashing truly globalized trade in goods and services.

As expected, these changes in trading and investment patters affected how economic activity is distributed among nations. In short, global trade is randomizing the location of economic activity – sending capital and resources flying around the world with an increasing indifference toward national boundaries and geography − and allowing more nations to participate meaningfully in the global economy.

This is an interesting explanation for how globalization occurred. To us it is a kind of circular reasoning. Globalism has occurred because globalism … created globalism. And once globalism was created it inevitably increased.

The article goes on to cite a number of statistics for globalism and for how it is changing the economies of countries around the world. And here is the article's conclusion:

The increasing entropy of economic activity gives us a precise metric for something we all know to be true − it takes more information to tell the story of the world economy than it did only ten years ago. The world has become a measurably more complex place.

Ultimately, we have trouble with this article. We think globalism is nothing like a spontaneous evolution. Every part of the current globalism seems to us to be the product of relentlessly detailed treaties, unions and corporate expansions. None of it is a free-market expansion so far as we can tell, or not initially.

There are globalists in the world, whether by conviction or accident of birth. And if the world is trending toward globalism is it is because of the relentless behind-the-scenes work of these individuals. Whether it is the United Nations, the World Bank, the International Monetary Fund or any other pan-regional entity, we find the hand of man.

A hundred years ago there were a handful of central banks. Today there are over 150 and many of them report to the Bank for International Settlements, another entity that was developed in the 20th century.

It is central bank money flows in conjunction with wars, multinational corporations, regional unions and other forms of geopolitical power that is creating the "entropy" that this article analyzes. But to indicate that this entropy was RESPONSIBLE for globalization is in our view a meme – inaccurate information being promoted to obscure the very obvious activism behind this evolution.

After Thoughts

The REAL question people should ask themselves is whether globalization is inevitable or whether the Internet itself has created so much controversy about its evolution that those hiding behind this "inevitable" movement will either have to present themselves more forcefully or take what we have often called "a step back."

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