Globalization’s Enabler: Mobility
How do we make people as mobile as money?
Mobility for capital has been a major driver of globalization. The end of the Cold War, digitalization of financial transactions, loosening of cross-border capital flows, all of these things have made capital more mobile. This in turn frees it up to find places where it can get the greatest return. Left behind in this conversation is how much more difficult it is for labor, that is, people to move just as easily.
In a game where you can move capital with mouse clicks, but people require airplanes, cars, trains, or ships to relocate, capital will always have an advantage. Is this an acceptable feature of the global trade game? Or should freedom of movement for people be a more important consideration when discussing trade liberalization?
Two elements serve as barriers to mobility. The first are procedural barriers. These relate to the legal process needed to move. Getting permission to move out of where you currently live, obtaining a visa to enter the new country, finding a way to become a permanent resident; these represent the procedural barriers to mobility. Free Trade Agreements as they currently exist often touch on, but don’t remove all of the major procedural barriers to immigration. The popular aversion to open immigration often makes politicians wary of liberalization immigration policies as part of trade liberalization.
The second are substantive barriers. Even if it’s easy to pass the procedural hurdles, how difficult is it to actually obtain the necessary resources to move? Is having an open immigration system worth anything if airfare to the destination still costs an arm and a leg? At certain levels of scarcity, we know that capital is willing to shell out the relocation costs for people. The problem for most people is that they don’t fall into this category of labor and have to shoulder the relocation costs themselves. In reality most unskilled, and even skilled labor falls into the category of substantively unable to move.
Globalization, then, is currently a situation of mobility for me, but not for thee. Freedom of exit for capital to choose the rules most favorable for it, but not labor, which more often than not is constrained geographically. The procedural hurdles for labor mobility remain high, but perhaps more crippling is the substantive one: For the vast majority of the world’s population, airfare is out of the question. So for that matter is a ticket by the sea. Oh, sure they can get a bus pass or a rail ticket a certain distance, but even then they’re constrained by movement restrictions of one sort or another.
Some method of making transportation cheaper for a much larger proportion of the human population than we’ve managed so far is going to be the necessary precondition to putting labor and capital back on the same footing. But where is that innovation? Will it ever come to pass where we can hop on a super rapid transport from Mumbai to New York or vice versa to take advantage of a fast food job opening? Will energy restrictions just keep that from being feasible?
The asymmetry of mobility is translating substantively into economic asymmetry between those who provide capital and those who provide labor. Some of the biggest problems regarding the localization of costs and the globalization of profit in the world economy today could probably be solved if people were more mobile. So what’s the solution?