The Economics of Happiness

A hyperbolic film misdiagnoses the issues of the global economy... but with an interesting point worth raising.

Last week, I went to see a screening of 'The Economics of Happiness'. This is an interesting film that raises some really important issues about the state of 21st Century capitalism. For one, it asks whether globalisation has helped create ethnic conflict. Similarly, it raised issues about cultural self-rejection through the exposure of once autonomous peoples to western culture - the potential drifting towards an ever-more unified global culture (a homogeneous culture, if you will). 

But the film gets its analysis wrong time and time again. It suggests that globalisation is creating ethnic tensions and conflicts in the world, without making any attempt to consider the pre-globalised world. Had they done so, they would appreciate the relative levels of peace we are experiencing today (perhaps surprising considering we are aware of all the countries and cultures with which we can find reason to fight). And the film is wrong too to suggest that it is bad for other countries to be too heavily exposed to Western culture and want to emulate it. I could not Tweet from my iPad, text from my smartphone or blog from my laptop whilst looking others straight in the eye and say "you wouldn't want this." I wouldn't give it up; why should they not have the chance to experience it? (I realise this is an intense and complex issue, so will address it in a future blogpost).

But this misguided and sentimentalised documentary makes one outstanding point about the current state of global political economy. The first is this; we have got the balance wrong between deregulation at the international level and regulation at the domestic level. Over the preceding decades, geographical regions around the world have sought free trade agreements (most notably the European Union's single market and the North American Free Trade Agreement). As I type, the EU and the Republic of India are in negotiations for what would be the largest free-trade bloc, in terms of population, in the world. Broadly speaking, this is a good move for the world economy. 


But at the same time, paradoxically, states have increasingly regulated their domestic economies. The reasons for this are hard to explain, but the effects are easy to detect - an easing of the practicalities of trade for big Multi-National Corporations whilst making it tougher for local small and medium sized businesses in domestic markets, the exact sort of companies that government's so often feel are key to their economic success.

The trend, to me, feels pretty clear. Its the solution that is going to be the difficult bit. International systems of regulation struggle to get as much support as they would need to be enacted (as discussion of the Tobin tax demonstrated, irrespective of the case for or against the tax itself). But something has to be done to offer small companies the level-playing field that they need to compete domestically and in foreign markets. Failure to do so will lead to even larger companies that begin to achieve monopolies. Such would be the destruction of the global economic system by the success of its own actors.