Adam Smith and his Invisible Hand

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Adam Smith and the invisible hand

by Helen Joyce

...every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.

In this passage, taken from his 1776 book "An Inquiry into the Nature and Causes of the Wealth of Nations" Adam Smith set out the mechanism by which he felt economic society operated. Each individual strives to become wealthy "intending only his own gain" but to this end he must exchange what he owns or produces with others who sufficiently value what he has to offer; in this way, by division of labour and a free market, public interest is advanced.

Smith is often regarded as the father of economics, and his writings have been enormously influential. Nowadays, "invisible hand" explanations are invoked to explain all sorts of phenomena, from scientific progress to environmental degradation. In the modern context, mathematicians study "invisible hand" processes as part of Game Theory, the branch of mathematics that deals with payoffs and strategies (see Game Theory and the Cuban Missile Crisis) in Issue 13 of Plus.

Smith was profoundly religious, and saw the "invisible hand" as the mechanism by which a benevolent God administered a universe in which human happiness was maximised. He made it clear in his writings that quite considerable structure was required in society before the invisible hand mechanism could work efficiently. For example, property rights must be strong, and there must be widespread adherence to moral norms, such as prohibitions against theft and misrepresentation. Theft was, to Smith, the worst crime of all, even though a poor man stealing from a rich man may increase overall happiness. He even went so far as to say that the purpose of government is to defend the rich from the poor.

Here is a description of the way Smith imagined the universe operates:

• There is a benevolent deity who administers the world in such a way as to maximise human happiness.
• In order to do this he has created humans with a nature that leads them to act in a certain way.
• The world as we know it is pretty much perfect, and everyone is about equally happy. In particular, the rich are no happier than the poor.
• Although this means we should all be happy with our lot in life, our nature (which, remember, was created by God for the purpose of maximising happiness) leads us to think that we would be happier if we were wealthier.
• This is a good thing, because it leads us to struggle to become wealthier, thus increasing the sum total of human happiness via the mechanisms of exchange and division of labour.

It is clear why Smith says that moral norms are necessary for such a system to work - in order for exchange to proceed, contracts must be enforceable, people must have good access to information about the products and services available, and the rule of law must hold.

The modern "Invisible Hand"

Nowadays, something much more general is meant by the expression "invisible hand". An invisible hand process is one in which the outcome to be explained is produced in a decentralised way, with no explicit agreements between the acting agents. The second essential component is that the process is not intentional. The agents' aims are not coordinated nor identical with the actual outcome, which is a byproduct of those aims. The process should work even without the agents having any knowledge of it. This is why the process is called invisible.

The system in which the invisible hand is most often assumed to work is the free market. Adam Smith assumed that consumers choose for the lowest price, and that entrepreneurs choose for the highest rate of profit. He asserted that by thus making their excess or insufficient demand known through market prices, consumers "directed" entrepreneurs' investment money to the most profitable industry. Remember that this is the industry producing the goods most highly valued by consumers, so in general economic well-being is increased.

One extremely positive aspect of a market-based economy is that it forces people to think about what other people want. Smith saw this as a large part of what was good about the invisible hand mechanism. He identified two ways to obtain the help and co-operation of other people, upon which we all depend constantly. The first way is to appeal to the benevolence and goodwill of others. To do this a person must often act in a servile and fawning way, which Smith found repulsive, and he claimed it generally meets with very limited success. The second way is to appeal instead to other people's self-interest. In one of his most famous quotes:

Man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and show them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me what I want, and you shall have this which you want, is the meaning of every such offer; and it is the manner that we obtain from one another the far greater part of those good offices which we stand in need of. It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love.

For Smith, to propose an exchange is to attempt to show another that what you can do, or what you have, can be of use to the other. When you carry out the exchange, it means the other person recognises that what you can do or that what you have is of value. This is why so much of a person's self-esteem is bound up in their job - a well-paid job is supposed to be a sign that others value your contribution and find it worth exchanging their own resources for.

How wise is the Invisible Hand?

with permission from: The Warren J. Samuels Portrait Collection at Duke University

The theory of the invisible hand is certainly persuasive, and its simplicity is also very attractive. No doubt every reader can see that it describes the way that things really work on many occasions, and, whether we find it palatable or not, we probably all recognise the truth of Smith's assertion that paying for your dinner is a more reliable way to get it than appealing to the benevolence of others.

But, even assuming all the correct conditions, does the invisible hand theory really lead to the maximisation of human economic wellbeing in some sense, as Smith asserts? This is where mathematics, in the form of Game Theory, can provide us with some insights.

The Prisoner's Dilemma

The "Prisoner's Dilemma" is a very famous "paradox" in Game Theory. It describes two people in a simple situation, acting in an informed manner, both attempting to maximise their wellbeing, and yet making choices that lead to an unnecessarily poor outcome for both.

Two people, who are suspected of being accomplices in a crime, are held prisoner in separate, non-communicating cells. The police visit each prisoner, and tell both that if neither confesses, each will be sentenced to two years in jail. However, if exactly one prisoner confesses, implicating each other, the one who confesses will get off scot-free as a reward, and the other, who didn't confess, will receive a punitive sentence of five years. If each confesses and implicates the other, both will be sentenced to three years.

What should a prisoner in this situation do? Suppose that the other prisoner doesn't confess. Then the best course of action is to confess, and go free. Even if the other prisoner does confess, it will be better to have done likewise - at least the sentence will be lower. Both prisoners will reason thus, so both will confess and end up serving sentences of three years - even though, if both had remained silent, both would have served sentences of only two years.

It may not be immediately clear what the relevance of the Prisoner's Dilemma is to Smith's theory of the Invisible Hand. In fact, it has a number of implications for economic behaviour.

The Prisoner's Dilemma

The temptation to default

We can think of the prisoners as being asked to decide whether to keep a contract they have made with each other (remain silent) or to default (confess and betray the other). Similar choices have to be made all the time in economic society. When two people freely agree to exchange goods or services to their mutual benefit, each must decide whether to try to cheat the other by defaulting, or handing over counterfeit goods, or whether to act in good faith and risk the other party defaulting. Obviously, both parties are better off if neither default than if both default - after all, we suppose they willingly contracted with each other - but each would like to get something for nothing, and each is afraid the other will feel the same. The result may well be that the parties are unable to carry out the exchange as arranged, and both lose out.

The reason we don't see this behaviour too often is because we live in a society where courts can enforce contracts. This reduces the fear of the other party defaulting, and makes it easier to hand over goods ahead of receiving whatever is to be exchanged for them. In illegal exchanges, for example, receiving stolen goods, default is more common, and rather difficult for criminals to guard against.

Enforcing laws of contract requires cooperation and resources from someone else - in democratic societies, the courts on behalf of the government and the people. But courts and prisons and police cost money and most of the costs fall on people who were not party to the contract in the first place - who are therefore paying for a service that doesn't directly benefit themselves. Such courts fall into the category of "public good" - we are all better off in a society where the rule of law is upheld - but are not created and maintained by any invisible hand mechanism. Courts are set up deliberately to carry out a public good; and, although they may not always work the way they are intended to, there is nothing unintended about their use to enforce contracts.

Subsidy-seeking

In a democratic society, there is a strong temptation for "special-interest" groups to form and lobby the government to provide tax-payers' money to the group in the form of subsidies. Politicians find the prospect of buying the loyalty of the group attractive, and the group sees the prospect of getting other people's money for nothing. Clearly, everyone would be better off if no one sought subsidies - by definition, subsidies are only needed for unprofitable activities, that is, activities that other people do not value sufficiently to pay their own money for. However, if other people seek and gain subsidies, anyone who doesn't bother trying to do the same for themselves will end up subsidising others while receiving no subsidies themselves. This fear may force large numbers of people to spend their time lobbying the government for subsidies, rather than simply engaging in more profitable activities - a classic example of the Prisoner's Dilemma, and one over which no court has jurisdiction.

A very similar situation occurs regarding monopolies. Since pretty much every producer is a consumer, it is probably to everybody's benefit overall if no producers attempt to raise prices by monopolising their market; however, attempting to enforce a monopoly can be very attractive to individual producers. Smith rather sardonically observed that

"People of the same trade seldom meet together even for merriment and diversion, but the conversation ends in a conspiracy against the public or some contrivance to raise prices."

Arrow's Theorem

As explained in the Editorial of Issue 13 of Plus, Arrow's Impossibility Theorem says that, in a certain sense, it is impossible to produce a consistent group preference by aggregating individual preferences. It is normally stated in terms of votes and elections, and, in this format, says that is impossible to use information about individual voters' preferences to decide what is "the will of the people". Every voting system in current use throws up anomalies, such as "flip-flops", which occur when a third candidate enters the race and overturns the group preference between the other two candidates (think of Ralph Nader in California, splitting Al Gore's vote and handing George Bush the election).

The "will of the people"

Again, the relevance to allocation of public goods is not immediately obvious - until you recall that an essential part of the invisible hand process is that producers respond to an single signal that is meant to be an aggregate of all signals by consumers. Arrow's Theorem is often interpreted as saying that there is no consistent way to aggregate the preferences of individuals to give a single preference which can be regarded as the preference of society - or "the will of the people".

An economic version of the flip-flop could occur if a majority of customers would prefer to buy Product X to Product Y, but some of that majority actually like Product Z even better (the equivalent of splitting the vote); the producer may end up producing Product Y even though more people would have liked Product X, and presumably it would have been more profitable to produce it. If this happens, then the invisible hand cannot be said to have worked to maximise economic wellbeing.

In a centralised society a few individuals make decisions on how to spend everyone's money and direct everyone's effort.

How far does the invisible hand reach?

How economic systems work and what can be done to improve them is still very much a live area of research for economists. Mathematicians are currently grappling with the implications of game theory for all sorts of social choice, in particular, what meaning, if any, can be attached to the expressions "the will of the people" and "the public good".

The results of such analyses will not be the only factor in deciding whether societies move towards or away from laissez-faire economics ("laissez-faire" means "let alone" and is shorthand for leaving things to the invisible hand). Political will, whether the world becomes more peaceful or less, and the practicality of any alternatives will also be factors. Alternative systems tend to require much more intervention and more stringent rules. In the real world, such rules automatically introduce more and more opportunities for mistakes and corruption, which might mean that another system, even if better in principle, would be worse in practice.

Perhaps the strongest reason for leaving the allocation of effort and reward to the invisible hand is that when it misappropriates goods, it is likely to be on a small scale. More centralised methods of allocating goods are more prone to corruption and waste. Smith described people given the spending of other people's money thus:

..being the managers of other people's money than of their own, it cannot well be expected that they should watch over it with the same anxious vigilance with which partners in a private copartnery frequently watch over their own. Like the stewards of a rich man, they ... consider attention to small matters as not for their master's honour and very easily give themselves a dispensation from having it.

It is useful to remember the context in which Smith developed his theories - that of a heavily planned and rather dictatorial society, where some individuals were above the law and others were effectively without any rights. In a centralised society a few individuals make decisions on how to spend everyone's money and direct everyone's effort. As Smith said

It is the highest impertinence and presumption, therefore, in kings and ministers to pretend to watch over the economy of private people, and to restrain their expense...They are themselves always, and without exception, the greatest spendthrifts in the society.

About the author

Helen Joyce is one of the assistant editors on Plus magazine.

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Van 't Hoff de Hannekemaaiers

Hoe Duitse Niels een poepekrús kreeg

JITSKE VEENSTRA

Bakkeveen – Het poepekrús aan de Duerswaldmerwei in Bakkeveen wordt opgeknapt. Het monument - dat een eerbetoon is aan een vermoorde Duitse hannekemaaier ( poep) –krijgt een facelift van 6.500 euro. Dit tot grote vreugde van Willem Dolstra van de commissie hannekemaaiers Wandelpad in Bakkeveen. Nu kan het poepekrús tenminste met goed fatsoen dienen als start- of eindpunt van een nieuwe kuiertocht: de driedaagse hannekemaaierswandeltocht.

Hannekemaaiers – hanneke is een afgeleide van Johannes, wat vroeger een gebruikelijke benaming voor boerenarbeider was - waren als het ware de eerste gastarbeiders die Nederland kende. Tussen 1600 en 1900 kwamen uit het armoedige Duitse Nedersaksen arbeiders naar mid-Fryslân om de boeren in de Greidhoeke te helpen met het grasmaaien. Iedere hannekemaaier nam zijn eigen zeis mee. Na de hooioogst keerden ze weer te voet huiswaarts.

Alle hannekemaaiers verzamelden zich in Bakkeveen bij de poepedobbe om gezamenlijk de honderd kilometer lange reis via het Groninger Boertange terug naar Duitsland te ondernemen. ,,Het verhaal gaat dat hannekemaaiers nogal stonken’’, vertelt Dolstra. ,,Bij de dobbe wasten ze zich voordat ze de reis ondernamen.’’

Struikrovers

De reis terug naar huis was niet zonder risico. De arbeiders hadden immers hun loon op zak, en waren een gewilde prooi van struikrovers. Het poepekrús in Bakkeveen herinnert aan een van deze overvallen. De jonge Niels uit Nedersaksen werd hier beroofd van zijn geld en daarna vermoord. Omwonenden maakten voor hem in de berm een graf in de vorm van een kruis. Ieder jaar werd hier nieuw witzand ingelegd.

Later heeft de gemeente Opsterland het onderhoud van het poepekrús overgenomen. Het zand werd vervangen door stenen. De laatste jaren raakte het onderhoud een beetje in de slop, weet Dolstra. Onkruid groeit lukraak en bij hevige regenval laten de stenen los. ,,Daarom hebben we gevraagd of Opsterland wat geld wil steken in het opknappen.’’ De fundering wordt onder meer verbeterd, er komt een informatiepaneel en misschien nog wel een picknickbankje.In het dorp komen er ANWB-wegwijsborden voor het poepekrús.

Wandeltocht

Dolstra wil het poepekrús volgend jaar als start- of eindpunt laten fungeren van een driedaags wandelevenement. ,,De wandelvereniging Te Voet is bezig met het uitzetten van een wandelpad langs de route van de hannekemaaiers en lapkepoepen. ,,Onze commissie wil een eenmalig wandeltocht over drie dagen organiseren. De route gaat dan van Bakkeveen naar het poepekrús in Neurhede, net over de Duitse grens. Of andersom natuurlijk, dat mag de wandelaar zelf bepalen.

Het poepekrús in Duitsland is een gedenksteen voor een onbekende hannekemaaier die op weg terug was naar Duitsland. ,,Hij verdronk echter in het moeras’’, aldus Dolstra. ,,Van het geld dat hij verdiend had, hebben de overige hannekemaaiers een kruis gemaakt. Later is hier een gedenksteen voor in plaats gekomen.’’

Lapkepoepen

Anno 2002 is nog altijd de (indirecte) erfenis van de hannekemaaiers aanwezig in Fryslân en Nederland. ,,Na de hannekemaaiers kwamen al gauw de handelslieden vanuit Duitsland hier naartoe’’, weet Dolstra. ,,Dat waren mensen die het maaien allemaal leuk en aardig vonden maar liever hun geld verdienden met handel. Zij volgden de sporen van de hannekemaaiers met bijvoorbeeld lappen stof om hier aan de man te brengen. ,,Die mensen werden ook wel lapkepoepen genoemd.’’

Winkels als Vroom en Dreesmann en Schweigman zijn nazaten van de lapkepoepen . Maar ook de supermarkt Poiesz is ontstaan uit Duitse poepen die hier hun waren verkochten.
Link naar meer Hannekemaaiers informatie

Globalisation/Globalization pro/con

Globalization

By
Cate Malek
July, 2005

On September 9, 2003, thousands of protesters gathered in Cancun, Mexico to protest the World Trade Organization. During the protest, Lee Kyung Hae climbed the police barricade separating the protesters from the meeting place of the WTO. He addressed the crowd and then plunged a small Swiss Army knife into his chest. He was wearing a sign that said: "The WTO Kills Farmers." [1]

The news of Lee's violent death quickly spread across the world. He was alternately depicted as either insane or heroic. People's opinions tended to depend on which side of the globalization conflict they were on. Lee's suicide was just the tip of the iceberg. Globalization can be linked to thousands of conflicts around the world from the debate over Nike's use of sweatshop labor to Russia's troubled oligarchy. Most of these conflicts appear to be highly intractable.

The very idea of globalization, like many intractable conflicts, tends to overwhelm people. The economic processes behind globalization are complex, involving many different factors and individual disputes. Plus, there is so much anger, fear and misunderstanding on all sides of the issue that many people try to ignore the topic. However, since globalization now significantly affects everyone in the world, it is necessary for us to be able to think clearly about both its positive and negative aspects. To reap the potential benefits of globalization, we have to make wise and equitable decisions for people on all sides of the conflict. This will require constructive debate and a clear understanding of the conflict processes behind globalization.

South Korea's Story

The definition of globalization is essentially that because of technology, people around the world can now interact faster and less expensively than ever before. It is not the actual phenomenon of globalization that causes conflict; rather, it is the organizations and treaties set up to regulate and promote it. In the late 1980s, South Korea got its first taste of globalization. The country accepted recommendations from the Uruguay Round (which later became the WTO) to open their economy to free trade. These recommendations required South Korea to gradually reduce subsidies to its rice farmers. In return, the Uruguay Round promised South Korea aid and, even more importantly, entrance to the new world economy. The South Korean government believed it had put its country on the fast track towards development and prosperity and, in many ways, it had. But, the reforms were devastating to South Korea's rice farmers. Other countries, such as the United States, had continued to subsidize their farmers and the Korean farmers could not compete. In twelve years, the number of farmers in South Korea dropped from 6.6 million to 3.6 million. In 2003, U.S. subsidized rice exports to Korea were four times cheaper than the rice produced by Korean farmers. [3]

Many analysts would argue that South Korea's rice industry is inefficient and that it should be replaced with more profitable ventures. This may be true, but rice also has deep roots in South Korean culture. Mexican journalist Luis Hernandez Navarro writes:

Korean culture is based on rice. In Mesoamerica we say we are the "people of maize" - thus we can say that Koreans are the "people of rice." Rice is much more than a commodity for the rural people of Korea: it is an ancestral way of life. The Korean word "bap" is used both for cooked rice as well as for food in general. If you ask a Korean child what they see on the Moon, they will tell you they see rabbits milling rice in a giant mortar. A large proportion of the total labor force in Korea is dedicated to the cultivation of rice. Because of rice, rural villages are located in the midst of the very rice paddies where villagers work. Rice represents 52% of agricultural production. [4]

For many Koreans, rice is part of their identity and thus, very difficult to give up.

This is where Lee comes in. Lee had spent his life advocating for South Korean farmers. He built a demonstration farm attempting to show farmers they could survive despite falling crop prices. But when the farm went bankrupt in 1999, he began to protest. He went on a hunger strike 30 different times. He was elected to his state legislature three times as a farmer representative. His older sister, Lee Kyang, said, "the most important things for him were the farmers, his parents, and his three daughters." His suicide in 2003 was the only way he could think of to bring the South Korean farmers' plight to the attention of the world. In his will he wrote, "It is better that a single person sacrifices their life for ten people, than ten people sacrifice their lives for just one."[5]

But did Lee's suicide do anything to help the farmers? Lee was caught up in a debate that is raging all over the world and his death changed very little.

The Pro-Globalization Side

Eighteenth century economist Adam Smith described the capitalist economy as an invisible hand bringing order to an otherwise chaotic world. [6] This theory defines the pro-globalization side of the conflict. Thomas Freidman, a New York Times correspondent, argues that globalization has replaced the Cold War as the dominant international system. He writes:

The driving idea behind globalization is free-market capitalism — the more you let market forces rule and the more you open your economy up to free trade and competition, the more efficient and flourishing your economy will be. Globalization means the spread of free-market capitalism to virtually every country in the world. Therefore, globalization also has its own set of economic rules — rules that revolve around opening, deregulating and privatizing your economy, in order to make it more competitive and attractive to foreign investment. [7]

Globalization's believers argue free-market capitalism is not always kind or easy, but it is the way to raise the standard of living for the most people. Furthermore, they say, this new international system has given new economic opportunities to people all over the world.

Of course, along with open markets comes an increased mixing and clashing of different cultures and people. This can also be a good thing because it creates increased interdependence, which, in theory, reduces conflict. For example, free-market capitalism increases the costs of war because warring countries lose markets and investors and then their economies plummet. Friedman has a theory that the crisis between India and Pakistan was diverted in part because the Indians were afraid of losing tech jobs from American companies like GE, Microsoft and American Express. [8]

Joseph Stiglitz, a Nobel Prize winner in economics, gives a long list of the benefits of globalization. He writes:

Opening up to international trade has helped many countries grow far more quickly than they would otherwise have done...Because of globalization many people in the world now live longer than before and their standard of living is far better...Globalization has reduced the sense of isolation felt in much of the developing world and has given many people in the developing countries access to knowledge well beyond the reach of even the wealthiest in any country a century ago. [9]

This is the theory the WTO and the South Korean government believe in. While they acknowledge that globalization is not painless, they hope that the end result will be more prosperity for everyone. However, there are some who are skeptical. Joseph Stiglitz, a former chief economist for the World Bank, is one of them. He writes, "Those who vilify globalization too often overlook its benefits. But the proponents of globalization have been, if anything, even more unbalanced." [10]

The Anti-Globalization Side

Stiglitz writes, "Protestors see globalization in a very different light than the treasury secretary of the United States, or the finance and trade ministers of most of the advanced industrial countries. The differences in views are so great that one wonders, are the protestors and the policy makers talking about the same phenomena? Are they looking at the same data?" [11]

Twentieth century economist Kenneth Boulding recognized the crucial role played by Smith's "invisible hand," but he also argued that the story was more complex than that. He described an "invisible fist" consisting of the perverse dynamics of market interactions, which have to be controlled if capitalism is to benefit average citizens. It is this invisible fist that defines the anti-globalization side of the conflict.

The protesters center their criticisms on the World Bank, the WTO and the IMF. Critics argue these institutions have pushed hypocritical policies that push poor countries to eliminate trade barriers while allowing rich countries to keep them. Furthermore, critics question whether these policies will, in fact, create prosperity in the long run. Stiglitz argues that countries that have opened themselves up to free trade have not received the promised benefits. He cites statistics from several Latin American countries that show that after opening themselves up to free trade, their growth rates have fallen to barely more than half of what they were pre-globalization. [12]

Stiglitz, is extremely concerned with the plight of developing nations in this "new world order." He argues that developing countries have been pushed to liberalize their economies before they were ready, forcing many of their citizens into poverty. Furthermore, Stiglitz argues that the World Bank, WTO and IMF are undemocratic and that their policies boil down to taxation without representation.

Apart from this progressive opposition, there is also a more conservative opposition. Various religious groups, including Islamic activists and fundamentalist American Christians, oppose globalization because, to them, it represents a threat to their values. Culture clashes are making it difficult for many to maintain their moral clarity.

Stiglitz sums up the globalization conflict when he writes, "Globalization itself is neither good nor bad. It has the power to do enormous good. But in much of the world it has not brought comparable benefits. For many, it seems closer to an unmitigated disaster." [13]

This conflict is not going to disappear overnight. It calls into question difficult issues of justice, identity and equity. In many ways, globalization has made the world smaller by allowing people around the world to interact faster and at lower cost than ever before. However, in other ways, globalization has made the world bigger. In the past, when people had disputes they could appeal to their government or community for a solution. However, because of globalization, disputes now transcend the boundaries of towns, cities, even countries. Now, when people complain, nobody is listening. When someone has a dispute with the WTO or a multinational company, it can be almost impossible to get these institutions to listen. This gives those who feel victimized by globalization an intense sense of frustration, anger, and powerlessness. History has shown that those who feel they have no recourse often to turn to violence. Lee Kyung Hae is a case in point.

More Constructive Approaches to Globalization

Although globalization conflicts will probably never be neatly resolved and forgotten, there are incremental improvements that can be made. Like a flash flood, globalization can't be prevented, but it can be controlled and directed.

The most important way to address globalization conflicts and to prevent further deaths is to continue to develop, refine, improve and promote international dispute management systems. These could take many forms. One possibility would be international laws and courts, which would protect people's basic human rights. For relatively powerless groups such as the South Korean farmers, effective conflict resolution systems could give them leverage against their more powerful opponents. Hopefully, if powerless groups had an outlet for their frustration, they would not feel the need to resort to violence to get their message across. Whatever methods are used, it is clear that this "new world order" is going to require new institutions to smooth interactions between people around the world.

Furthermore, groups who feel frustrated by globalization, such as the South Korean farmers, can learn to empower themselves to meet their needs. They can do this using techniques like non-violent protest and by building coalitions. These methods may ease some of the power inequities caused by globalization.

The mass media will become more important than ever before. While the media is capable of exacerbating conflict, it can also help to humanize people and draw attention to injustice. Because globalization conflicts operate on such a large scale, mass media will be vital to help different groups communicate effectively with each other.

Fact-finding is also extremely important for globalization conflicts because they often concern highly technical information. In Lee's case, it is vital to know whether the WTO's recommendations were actually benefiting South Koreans more than they were hurting them. It will be necessary for experts to collect trusted, thorough research on the effects of globalization in order to avoid misunderstandings and poor decision-making that will further escalate conflict.

Whatever we can do to divide the world's resources more equitably will help to reduce intractable globalization conflicts. Humanitarian aid and development activities, such as building roads, schools, medical centers and other infrastructure could possibly help developing nations struggling to keep up in a newly globalized world. Also, some economists argue that the World Bank, WTO and IMF have the power to make policy changes that could ease the economic burden for poor countries.

Finally, globalization is closely tied to identity. Because people around the world are interacting more, they are being forced to consider foreign lifestyles and worldviews. In many places, people feel their traditions and culture are being eroded. This mixing and clashing of culture can be deeply threatening to people if they feel they are losing their identity. Thus, threats to culture and identity tend to create particularly intractable conflicts. Improving cross-cultural communication between different groups can help clear up misunderstandings and avoid conflict, as long as one culture doesn't try to impose its views and values on another. When dealing with cultural conflicts, it can also help to understand that different cultures frame the world differently. For example, whereas Americans value self-confidence, South Americans see it as arrogance. [14] Understanding that people from different cultures have fundamentally different understandings of the world can prevent conflict and help people around the world work together more effectively.

---

[1] Luis Hernández Navarro, "On the WTO Suicide of Lee Kyung Hae," La Jornada, September 23, 2003. http://weblogs.utne.com/tradewatch/archives/000105.html

[2] Damien Cave, "The New Gilded Age and its Discontents," Salon.com, July 3, 2002. http://archive.salon.com/tech/feature/2002/07/03/stiglitz/

[3] ibid.

[4] ibid.

[5] ibid.

[6] Adam Smith, "The Wealth of Nations," reprinted in Plus Magazine, March 2001. http://plus.maths.org/issue14/features/smith/

[7] Thomas Friedman, The Lexus and the Olive Tree, (New York: Anchor Books), 1999, p. 9.

[8] Thomas Friedman, "Tom's Journal," PBS Online NewsHour, March 9, 2004. http://www.pbs.org/newshour/bb/asia/jan-june04/friedman_03-09.html

[9] Joseph E. Stiglitz, Globalization and its Discontents (New York: W.W. Norton and Com

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