Too much international trade?

The Economist (Jan 15) discusses China buying up Europe and the relative sizes and strengths of the Chinese and European economies.

I understand the general economic idea that importing and exporting can increase economic output compared to a closed economy. But it seems to me that is just a mathematical analysis and it doesn't take account of social issues such as personal welfare, regulation and control.

There seems to be a great danger of losing control to forces (economic or military) beyond the power of our own Governments.

It would be nice if the world were a single large "country" with no "tribal" divisions. But people are not like that, they seem to be most comfortable in groups and with insiders and outsiders. The upper size of these groups is relatively small - even the UK seems to be a bit too large if the wishes of Scotland and Wales to seceed are an indication.

And There are plenty of historical examples of where people have been drawn to commit atrocities on outsiders. It would be unwise to imagine those tendencies have been obliterated, or even diminished.

It would also be nice if everyone was content with his or her proportionate share of wealth or well being. But people are not like that either. Most of what we call progress has been achieved at the behest of individuals who wanted more for themselves - whether to profit from an invention, from the admiration of their scientific peers or simply to get rich from the labour of others.

Because greedy tendencies are such a normal part of human make-up it is essential to be able to regulate - otherwise society will degenerate into anarchy or opression. The recent upheaval in Tunisia is an example.

While it might not make much sense for small countries to erect economic walls (I am a strong supporter of the EU at its present size) I am not sure that there is a net long term benefit from unfettered multi-continental trade. Of course we have all enjoyed the benefit of cheap Asian goods such as computers (including the one I am using to write this) and electric tools. But would we really be worse off in the widest sense if we had not had access to them. What would be wrong with those goods being manufactured in Europe (or in USA for americans)? And would we really be worse off overall if the Chinese did not buy Rolls-Royce cars?

As we embrace multi-continental trade on the grand scale we automatically create even greater opportunities for the greedy to get even richer. And more importantly we lose regulatory control of their activities. They can claim to be operating under more favourable rules elsewhere. They will claim that our rules must be relaxed to compete with other countries. Or they will threaten to take themselves to a more favourable regime. Companies cannot be allowed to become so powerful that they can threaten a State.

The obvious recent example is the banking crisis. We allowed banks to become so big that we could not afford for them to fail. And now the people who caused the problems are again getting Lotto-sized bonuses instead of being left penniless as a punishment for their rash business decisions. And because we have created (or permitted) a multi-continental banking system we are now afraid to set down strict requirements to lend to small businesses or to limit bonuses. If European banking was confined to Europe (or British banking to Britain for the Europhobes) we would could regulate them effecively a tapayers and voters would want. And to argue against this simply because so much international banking is managed in London is, surely, the tail wagging the dog.

To return to China and Europe. At what point does China own so much of Europe that it becomes China? Look how Cadburys seems to be disappearing under the ownership of Kraft.