Free Trade and Globalization are centred on the concept of maximizing consumption. They strive to narrow the base of national economies to the few sectors in which they are most competitive internationally. Although consumption and international trade are both maximized under the current approach, globalization increases social and economic instability along with international interdependence.
On a planet with diminishing natural resources, sustainability can only be achieved by reducing consumption levels and by enhancing the political and social stability of nations. Stability and complete utilization of domestic labour potential should be the goals of a trade structure rather than maximum consumption. This can be achieved by making it easier to transfer knowledge among nations and harder to transfer physical goods through an approach known as Cooperative Development..
Cooperative Development will increase equality and preserve natural assets.
Wrong Terms, Wrong Goals, Destructive Results.
The term competition is used to imply vitality, efficiency and progress in a business environment. When applied to the issue of free trade it is lauded as allowing the most efficient supplier to prevail hence maximizing the benefits of the division of labour. It assumes a level playing field.
But large human systems rarely function in the manner that theory suggests and the word “competition” is highly misleading when applied to the realm of international trade.
Different labour practices and environmental regulations make fair comparison of cost structures extremely difficult. The factor which makes fair comparisons impossible is the international exchange of fiat currencies. Exchange rates of national currencies which can and are easily manipulated puts paid to the concept of genuinely efficient and progressive trade.
Even when deliberate manipulation of exchange rates is not present the rates determined by the market fluctuate due to considerations of domestic interest rates and the presence of large exportable commodities.
Why should certain sectors of an economy be made internationally uncompetitive by high interest rates, currency manipulation or a strong outflow of a commodity driving up the international value of their domestic currency? Those affected industries might be extremely efficient and their workers extremely productive but the goods they produce cannot be sold due to the pricing distortions caused by exchange rates.
The consequences of globalization for industrialized countries are as follows:
- productive and well-paid jobs out
- cheap labour in
- monetary instability and inflation from speculative and unproductive financial activities
- income polarization as the middle class disappears and debt swamps the poor
- pressure to reduce working and environmental standards
In other words, globalization and free trade dictate a race to the bottom. Cooperative Development encourages a race to the top.
The world economy should be a matrix of robust national economic units following their own national priorities rather than a homogeneous, interdependent and unstable monoculture structured as a house of cards.
By encouraging nations to develop broad based economies which fully develop their human potential and preserve their environmental assets, Cooperative Development will foster greater international stability and slow environmental decline.
Cooperative Development would build on the international cooperation used to implement free trade and revise its goals and methods. A set of rules and common objectives would produce the following structure:
1. All nations place a 30% tariff on all imports.
2. A Progress Indicator is calculated for each nation based on per capita income, equality and environmental sustainability.
3. Nations can trade with nations which are in the same strata of score, say a window of + or - 5 points with no additional tariff.
4. The tariff goes up by 10% for each differential step in strata.
5. Nations would want to trade in a higher strata which would contain wealthier buyers.
Therefore national economies would have an incentive to upgrade their environmental performance, social equality and invest in their people to boost productivity and per capita incomes. It would be a race to the top, not a race to the bottom for cheap labour and resource exhaustion. It would foster self-sufficiency and not interdependence.
This protects domestic industries, encourages innovation and prevents competitive tariffs, arbitrary trade restrictions and currency devaluations. That road to chaos is the one we will be on once the pain and damage of globalism becomes too much for national governments to bare.
The 30% import duty levied on all international transfers will encourage industry to develop at home. This would lead to greater stability with longer investment windows and broader bases for domestic economies. It would encourage protection of environmental resources and maximize development of human resources.
What kind of markets will evolve in a world of Cooperative Development?
The likely trends would be fewer goods available at higher prices with higher quality. Durability would be much higher and therefore overall resource consumption would decrease while long term consumer costs would remain the same or decline.
Consumers would also be producers with higher wages and a greater variety of skills. Hours worked would decline and productivity would increase. With much lower transportation inputs, energy per unit of consumption would decline.
This tracks better with the consumption reductions we will have to face in the coming decades as well as with the trade disruptions which are inevitable with declining resource bases and a climate which is going dynamic.
Building broad based national economies with a huge variety of employment and learning possibilities would reverse the trend to inequality present in many societies. It would eliminate the massive instabilities inherent in the huge flows of printed financial instruments through international transfer mechanisms which are plaguing every economy on the planet.
All international currency exchange would be done with real goods – the most liquid and saleable being energy and energy certificates. No printed fiat currencies or debt instruments would cross an international border. By elimination counterproductive speculation, financial systems of every nation would be able to re-connect with the real productive mechanisms which actually create real wealth.
Cooperative Development goes beyond a simplistic devotion to ever greater economic growth and consumption and deals with the human, environmental and national issues which are fundamental to human progress.
“I sympathise, therefore, with those who would minimise, rather than those who would maximise economic entanglement between nations.
Ideas, knowledge, art, hospitality, travel….these are the things which should of their nature be international.
But let goods be homespun whenever it is reasonable and conveniently possible and above all, let finance be primarily national."
John Maynard Keynes Circa 1945