A large foundation of my study is Karl Polanyi’s idea of “substantivist economics.” To grossly paraphrase, it says that there are two sides to economics. The first side is the completely rational and real side of numbers, facts, and theories; this is formalist economics, the study of economics based on utility under conditions of scarcity. In my study, this is where free trade sits. It’s the best economic system for both individuals and the world as a whole, as far as cold facts and figures go. The flip side is substantivist economics, the anthropological aspect of it: some decisions which are not necessarily logical, made by humans based on their cultural perceptions. This, I write, is where the popular American perception of globalization is. Although the global free market is clearly superior by numbers, people are very hesitant to accept it as a good thing. Indeed, “outsourcing” and even “capitalism” are both words to which negative connotations are attached in popular culture. Why does this happen? Polanyi explains how religion, government, and socio-cultural values and obligations factor into these choices often. While from a cultural standpoint, many of these obligations may not be seen as irrational, but they do nonetheless detract from the factuality of formalist economics.

I want to clarify this a bit before moving on, because as I’ve said, this is grossly paraphrased. Polanyi’s book, The Great Transformation, refers to the divide between market-driven capitalist economics and centralized redistribution systems. Polanyi argues that the substantivist approach applies to both systems, but is the exclusive approach to the latter. But then, it could be easily argued that socialism isn’t really an economic theory anyway, but a social theory. As such, formalist economics cannot be used to analyze it. Market systems, however, are driven both by these substantivist means and rational decisions of self-interest.

What substantivist economics is not about, however, is saying “Oh well, that’s just culture. Guess we’ll go that way.” What it tries to do is understand why people veer from the most logical course and doom themselves in the process. In the case of outsourcing, it’s easy to see why one might oppose it, despite the truth behind what Greg Mankiw had to say about it. In fact, that incident is a fantastic example of the “substantivist shift” towards opposing logic. Mankiw committed a major Washington faux pas: stating the blatant truth. He committed political suicide because though what he had to say was absolutely right, it was not what people wanted to hear. But that’s not even the root of it. Why wasn’t it what people wanted to hear? Well, the general media, for one, greatly exaggerates the “problem” of outsourcing and puts a spin on the pro-business crowd. After Mankiw’s comments, headlines began to appear about the Bush-supported flight of “American jobs,” as if a job were an inherent right to an American, not to be stolen by a foreigner. The media can’t drill an idea into Americans’ brains merely by suggestion, but it’s sure a great catalyst. “Outsourcing” quickly became a buzzword in the early 2000s and turned into an easy scapegoat for economic discontents, though it’s hardly the cause of any real problems there may be.

America’s popular values based on need as opposed to pure merit combined with collectivist attitudes of American pride also contradict the ideas behind international free trade. Americans need steel working jobs to support their families, big soulless companies don’t need to increase their profit margins .06%. That’s probably true, but you know what else is true? Indians need jobs. Indonesians need jobs. Americans don’t necessarily deserve jobs any more than they do. This, of course, is never recognized, because the idol of need is only enshrined in America. Our collectivist pride fosters a social “obligation” to help our own, when by the numbers, the economic policies to support that are bad for us as a whole.

So what is it? What causes people to put up shields against the good to leave the way open for the bad? I can’t believe it’s only the greed or short-sightedness of the protected; I try to have more faith in man than that. My best guess is that people simply don’t know. Their leaders don’t want to say anything, because politicians can’t go against popular opinion. The media won’t say anything, because sensationalism is good television. No one will listen to businessmen or economists, because wealth is a soulless pursuit, obviously. Although people are very open to cultural globalization, global free trade is frowned upon as the cause of all the suffering of poor countries. That’s hardly true, so why is that the opinion? And how can people know otherwise? I hate to say it, because it is my paper, but if no one will listen to the only people willing to speak the truth, then I’m afraid I don’t have a solution. The best I can hope is that as time passes, this transition becomes more accepted and people will begin to become educated about what is truly going on.