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logo    Cheating in World Markets--The Fallacy in Globalization


'Don't buy a pig in a poke' is good advice. The advice being given is 'don't buy a pig until you have seen it'. This is enshrined in British commercial law as 'caveat emptor' - Latin for 'let the buyer beware'  A pig that's in a poke may turn out to be no pig at all. If a merchant tried to cheat by substituting a lower valued animal, the trick could be uncovered by letting the cat out of the bag. If you let the cat out of the bag you disclosed the trick and avoided buying a pig in a poke. The advice has stood the test of time and people have been repeating it for five hundred years, perhaps longer. The expression, "Don't buy a pig in a poke" has been used since at least 1530, more than two centuries before Adam Smith wrote The Wealth of Nations so he was surely familiar with it. The point is that cheating by merchants has always been a feature of free market economies.

In the sixteenth century, opportunities for such cheating were rather sparse.  Most products were fairly simple and could easily be examined. 'Caveat emptor' had some real meaning. Today, however, it is almost impossible for a buyer to exercise any real caution. Products are far too complex; the working parts of many are hidden from view and almost impossible to reveal. Claims of what products can do are impossible to verify before their purchase, and when they don't do what was claimed, the buyer has little or no recourse. Purchasing a product or service today is almost always a crap-shoot. Who knows whether the plumber or even lawyer you hire really knows what s/he is doing? Who can be sure that the car or any other product you buy won't turn out to be a lemon? So again the point is that although cheating by merchants was prevalent in the sixteenth century, it is even more prevalent today.

Make a list: pirated or counterfeit products (how even the businesses who themselves cheat complain about this cheating), contaminated or dangerous products which injure and kill, useless products (products that don't work at all), products designed to fail after short periods of use--any reader can contribute to this list.

And the situation is no different when commerce is international. Not only to the things mentioned take place within countries, they also are found in international trade. Twenty percent of the products imported from China are defective in some way. Who knows what the rate is from other third world countries? No amount of import controls or customs officers could ever identify them all. When such cheating is discovered, it is usually because some injury or damage has already been done, and then, at least for the persons injured or damaged, it's too late.

Economists, on the other hand, when applying their formulas derived from the model known as free-market global capitalism never take this cheating into account, even though the nations subjected to it pay its costs.

Cheating is associated with merchandising for one reason alone--it increases profits (wealth). Those countries whose international merchants are the best cheaters are the ones that will reap the greater rewards of globalization, while those with the worst cheaters, or those that allow themselves to become dependent upon imports, will suffer the worst consequences. In today's world, globalization will not lift all economies equally.

As Ken Couesbouc has put it quite plainly (see Why Global Trade is Rarely Fair, http://www.counterpunch.org/couesbouc06302007.html), "Over the past two centuries a small group of nations has stripped the planet of its productive investments, thereby reducing two thirds of humanity to a hand to mouth existence. This means that the new players of the 21st century can only capitalize at the expense of those nations who capitalized in the past. . . . By combining 19th century working conditions and 21st century financial tools, a nation comprising one fifth of humanity [China] could put most of the other industrial nations out of work."

How American businesses, even those deeply committed to cheating, believe that they can not only survive but thrive in such a world-wide economy is mind boggling. (7/7/2007)