Globalization and Free Trade

It's important to remember that with most, if not all, major changes, there are those who come out ahead and those who come out behind. In some of those cases, people will choose to act rationally, but in a way that, on a societal level, seems irrational, like many of the reactions to other changes that we've explored in this blog. One great example of this is what happened with globalization and free trade.

As someone who loves economics, it always rustles my feathers when I hear about the "merits" of protectionism and the pitfalls of free trade. The whole point of free trade is to free up our resources to do things we are most efficient at doing while letting others do what they are most efficient at doing.  Of course, while free trade helps societies, it can hurt individuals.

The most well-known example of this comes from the United States manufacturing sector. After the Second World War, most of the world's economies were in ruins, leaving the United States as the manufacturing giant, and it quickly grew, employing many Americans and supplying the world. That lasted for a while, but in the 1970s, the Germans and the Japanese started catching up with their rebuilt economies, and then Deng Xiaoping opened up the Chinese economy.

The United States manufacturing sector started falling, and the United States economy started shifting to a postindustrial footing, which was good for America, so long as you weren't a blue-collar manufacturing worker. To those workers, however, power started slipping away. Technology and outsourcing of manufacturing jobs served to erode the economic standing of the blue-collar worker.

Protectionism has a long history, most notably taking form in the Smoot-Hawley Tariff, which is now credited with worsening the Great Depression. Then and now, it exists virulently because some people want to reverse the change that occurred due to globalization. They want to "protect" the United States economy, and in that way, try to get back some of the standing that they had before. Of course, regardless of how high tariffs go, the United States economy is not going to go back to what it was before. However, many people who lost jobs or standing because of the globalization choose to oppose the change because the change puts them at a disadvantage and because reversing the change would be best for them. For those harmed by the economic changes involved with globalization, promoting protectionism is something we haven't much examined in this blog: a rational response to a change.

However, if one looks at this reaction on a macroscopic level, this is far from a rational choice. Protectionism tends to reduce efficiency and increase scarcity, which is the fundamental problem that economic policies try to solve. By implementing protectionist policies, the government would be sacrificing the best interests of the many for the change-reversals of the few. And yet, that is exactly what the pro-protectionism lobby has managed to accomplish, especially with the recent debate over the Trade Promotion Authority. By responding rationally to the change, the pro-protectionism lobby has caused an irrational response to the change by society and government.

The point of all this, however, isn't to simply say that protectionism is bad and that free trade should be the government's policy (although that certainly is a point of this post), but rather, to look at a situation of a change that we haven't explored much: when a rational response to a change by one set of actors results in a terrible reaction for the society as a whole. Nonetheless, the outcome, sadly, is the same as many situations we have examined: an irrational response to a change that hurts people.

Stress, Panic, and Illogic: The College Application Process

For the last few weeks, I’ve been thinking a lot about college. And it’s not just me – many of the people around me are going through the same thing, to the point where I (quite literally) can’t even have a conversation about the weather without talking about college. So I suppose it’s only fitting that this post be about that topic.

Of course, all of that agony is making me wonder: why are we all so worried about college? Of course, there are the obvious reasons: a major step away from home, a very important part of our future, will likely determine our careers, very competitive, and so on.

But I’m always reminded of what my biology teacher mentioned last year. When he was in high school, just a few decades ago, he never thought much about the standardized tests, the top colleges didn’t have such low acceptance rates, the cost of tuition wasn’t so high, and in general, the process was not as stressful as it is for us now. That’s a sentiment I’ve heard from more than just him. So the question is: why do we find the process so much more stressful?

The simple answer, many say, is supply and demand. Over time, the number of people trying to enter college has increased significantly, while the number of seats, especially at the top universities, have not increased nearly as significantly, resulting in far lower admission rates. There are many reasons, of course, for this, but regardless, college is becoming more and more necessary for today’s workforce, and thus, demand for a college education continues to skyrocket.

Of course, that’s a major change, and like with all major changes, there are people who have to deal with them. In this case, that’s mostly the people who now have to deal with applying to the schools. We see that the situation has changed and that getting into college will be much harder for us than for students in the past. So how do we react to this change?

In large part, the reaction is an increase in stress. A great example is the online forum College Confidential, in which people largely seem to come together to have a constant and collective freak-out about the entire admissions process. People go ahead and do the craziest things to get into these schools. Test prep suddenly becomes a big deal, and being well-rounded doesn’t happen for the sake of being well-rounded, but for looking good to the admissions staff.

And, as with many of the changes we’ve discussed in this blog, this reaction can also lead to an overreaction; people who get rejected from their top choices start thinking that there’s no good place for them and that there must be something inherently wrong with them. Of course, as with most overreactions that we’ve seen, this simply isn’t true, but the idea takes root.

Unlike the other changes we’ve talked about in this blog, this is a reaction to a major shift in society that I can’t step back from and look at objectively, simply because I’m so caught up in it right now as well. But it is interesting to note once again that a major change invites reaction and overreaction.

Changes and Nukes

Most of these posts have been about people who have failed to adequately respond to changes, but today, we'll be discussing a man who has managed to adapt to changes far better than the people before him. That person is the new President of Iran, Hassan Rouhani.

Iran, of course, is hardly a liberal, change-embracing state. Far from it. It is ruled by a very conservative Islamist theocracy, and it resists changes. Nonetheless, even by those standards, the previous President, Mahmoud Ahmadinejad, was conservative. And his policies, predictably, were far from great for the country. Between denouncing Israel as illegitimate and the widespread election fraud, especially in 2009, President Ahmadinejad made many enemies and hurt his country's image. But nowhere was that more apparent than in his unyielding support of Iran's nuclear program.

The clash over Iran's nuclear program may be one of the most famous (or infamous) struggles that Western countries have faced in dealing with the Middle East. The Western powers say that Iran is building nukes, while the Iranians say that they want nuclear technology for peaceful purposes. After Iran began accelerating its nuclear program, the West began imposing crippling economic sanctions on Iran. Their supply of money essentially froze up, and the country's economy started falling.

And here's where the story of change (or rather, the lack thereof) comes in. By experience, most of us would probably know that it's very difficult to force people to change their behavior. That's just human nature, and it's what happened in the case of Mr. Ahmadinejad. He decided to stick to his guns and keep pressing forward. He continued to antagonize the Western nations, causing flare-ups such as the tensions in the Strait of Hormuz and continued support for the nuclear program. These sanctions were devastating the Iranian economy, but Mr. Ahmadinejad didn't seem to recognize how significantly the situation had changed against him, and he kept going. Even in the face of protests, attack from the Parliament, and the fact that he had to rig an election to win a second term, he kept on going.

However, when he got term-limited out this year, a new President took power. This was the moderate President Hassan Rouhani. Of course, compared to Mr. Ahmadinejad, most people would seem moderate, but this new President, to a great degree, has actually been more moderate, and one of his crucial recognitions thus far is that the current situation is unsustainable. And so, he recognized the change that had occurred, and unlike his predecessor, he took steps to change the course of the country. He stopped denouncing the Holocaust as false and started attempting to mend relationships with the Jewish community around the world through simple gestures, like wishing them all a happy Rosh Hashanah.

Most recently, and probably most significantly, he sat down in Geneva with the P5+1 and hammered out a deal regarding Iran's nuclear program that will, in the long run, hopefully help all countries involved. The deal calls for some sanctions to be eased while the Iranian state made some significant concessions regarding its nuclear program, concessions that they had not indicated considering under the previous administration. In other words, unlike President Ahmadinejad, President Rouhani recognized a change and reacted appropriately. And that has made the country look better, helped ease some of the sanctions, and, with luck, helped stabilize the situation for now and the future.