Trading on empty

Here are a few thoughts about free trade (when I’ve had time to reflect and research a bit more, I plan to publish a more high-brow version on The Thinking Pot; this post reflects primarily my first responses and gut reaction).

Free and famous

There is a lot in the media just now about free trade, together with repeated expectation that it will re-invigorate prosperity. Although increasing trade has in the past helped bring income to impoverished parts of the world, I suspect this was mostly because there had been little trade. New production, packing, manufacture, and even recycling, meant expansion of a region’s economic activity into a unused portion of possible economic activity. Imagine a country which is primarily subsistence. The development of urban centres with jobs ranging from packaging to customer service, means new possibilities. However, it certainly does not mean any possibility of endless expansion. We have a certain population in the world: the only ways to increase the numbers of refrigerators sold are 1. to sell to those who have no fridge as yet (a ever-dwindling population), 2. to ensure old refrigerators need upgrading or replacement, or 3. to persuade people they must have more than one refrigerator each. Should people stick to having only one refrigerator, the market depends on replacement. By definition, it will not then grow but will remain stagnant. No new jobs.

The same can be said of all consumer items, whether they be cars or houses, furniture or clothes. Yes, I realise that some people buy a lot of clothes, and I read recently that poorer people buy more clothes (I think the poorer quality cheap clothes have shorter use-lives, which means they must be replaced more often). However, there is still a limit to how many clothes a person can store: new purchases tend to be in the replacement or upgrade (to this season’s style) category listed above.

In fact, to a certain extent, the success of economies growing has been due to people in the poorer countries entering the consumer class and being able to finally purchase something like a refrigerator, or new (rather than used) clothes.

Low cost inputs

A central idea in globalisation is that a business may choose to establish parts of its manufacturing or business process in different places around the world. The idea here is that the business can – and should – make choices that keep their costs low. Some countries have deliberating tried to create low-cost environments. (This is one reason Ireland has appealed against the EU judgement that it should be charging appropriate taxes of Apple. Ironic, really, that a government would protest a requirement to collect funds which support… the government!)

Two of inputs which are often the focus of cost-cutting, are labour and materials. People and the environment, to put it another way. I remember a 1990s ad in an Irish in-flight magazine inviting businesses to establish in Ireland, where, the ad noted, the workforce was well-educated, native English-speakers, and accepting of low wages. Traditionally, corporations push to reduce labour costs, while governments (representing the people of the country), some international organisations (like the International Labour Organisation, and some like the Council of Europe and United Nations which keep an eye on human rights), and sometimes trade unions act as counter pressures. (This is one reason why being a businessman is not necessarily good preparation for being a politician, as the goals with regard to other people are very different.) It is also why free trade may not be beneficial to a country: removing barriers to trade may directly or indirectly damage conditions for workers. The push of the corporations to cut costs related to labour – wages, or health-and-safety, or other costs – in free trade areas lack many of the possible protections.

And it is not only the expense of the labour that may attract business or create a barrier. It is the expense of the process, too, whether the input material or streamlining the manufacturing process. Thus the concern over chlorine-washed chicken with US and European trade deals (whether EU together, or UK on its own). Volume of output has been the focus of the US business model for a long time. Thus, we hear about chickens who cannot stand up as their weight is more than their legs can bear, and we hear about chickens crowded in and managed in a way to ends in fresh-looking, tender flesh in large amounts. Chlorine apparently can do away with a multitude of problems at the end of the growing process, meaning that cost of solving issues during the growing process can be avoided. The output: cheap and large volumes, albeit possibly lower-quality. In my own field of photography, this also occurs: one can order a very affordable print on canvas, but it is printed with inks and resolution that are the minimum standard. Doing it well, costs.

The environment is subject to the same pressure. It is not only the resources, like timber of paper or land for oil palm, but the less obvious parts of the natural world: antibiotics being used routinely in cattle feed in the US, for example, which may help create anti-biotic-resistant superbugs which, in turn, might threaten human lives.

Volume of outputs

So, it is a specious idea to promote more production and trade just for its own sake. It does not follow that, if some globalisation reduced some poverty, more globalisation will reduce it more. A system which seeks to reduce the costs of production, comprises a pressure on wages and standards for labour (e.g. people’s lives) and on the environment. In addition, producing more is often tied to using more natural resources, at least energy, and producing more waste, whether material or carbon dioxide. As George Monbiot already pointed out in The Guardian, it may be that more trade will bring more pollution rather than human well-being. Promoting trade over human well-being may mean damaging health, using up natural resources, or even the EU decrying US sanctions out of fear it will cause a barrier to a gas pipeline. It may mean governments who claim to honour human rights, being silent in the face of others’ transgressions.

We are rushing up a blind alley because the street previously was open and seemed an improvement. But the past does not dictate the future. We must slow down and consider the destination for our whole human population.