Localism and free trade


Erik Kain

Erik writes about video games at Forbes and politics at Mother Jones. He's the contributor of The League though he hasn't written much here lately. He can be found occasionally composing 140 character cultural analysis on Twitter.

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9 Responses

  1. Avatar North says:

    Great post E.D.
    We should keep in mind also that in the very long term (barring some global disaster) we may see a return to localization as well. As the countries that manufacture for us today continue to rise in their standard of living they will add their demand for goods to our own and their rising living standards will pressure wages to rise as well. Manufacturers will then move out of their countries into other low labor cost countries repeating the process. We’ve seen just this happen in Japan, South Korea and Taiwan where the lowest rungs of manufacturing have moved to continental China and other cheaper locations. It’s like a wave slowly washing along leaving prosperity in it’s’ wake. In theory when standards globally reach a certain point the cheapest labor won’t be cheap enough to merit concentration in one location (or the global demand will outstrip the ability of the cheap labor areas to produce the goods) and then the manufacturing sector will disperse to situate manufacturing centers closer to their markets.Report

  2. Avatar E.D. Kain says:

    P.S. I had put greater than or equal to signs in this post, but they show up now as question marks.Report

  3. Avatar Kevin Carson says:

    I share your skepticism re the possibilities of removing subsidies and protection through political action, Erik. The trucking and highway lobby is pretty much the third rail of politics in any Congressional district, and pulling Excalibur out of a rock would be child’s play compared to separating the RIAA/MPAA/Microsoft from their bipartisan political support.

    The good news is that the system of subsidized inputs and protections is unsustainable. Subsidies are unsustainable by reason of the very dynamics generated by the subsidies themselves. It’s Free Market Econ 101 that when you subsidize something, people want more of it. It’s a positive feedback mechanism, like when you leave a candle under the thermostat until your house freezes. When you subsidize inputs to business, you generate demand for more inputs from the subsidized sectors faster than you can appropriate money for them, until the state bankrupts itself (a la James O’Connor’s Fiscal Crisis of the State). And subsidies to transportation and access to cheap foreign energy sources are hitting the wall of Peak Oil.

    Jeff did a study on the effect of oil prices on world shipping last year and came up with something very like your formula: $140/barrel oil was equivalent to raising the tariff from 3% to 11%. What will happen when it’s $400/barrel, as it almost certainly will be?

    Same goes for the international IP law regime, which technological developments are making increasingly unenforceable. The MPAA/RIAA’s increasingly desperate efforts to command the tides to retreat are just pathetic.

    The truth is, most manufacturing TODAY is small-scale (with over half of production shifted from old-style mass production industry to small job-shops), but it still takes place within a corporate legal framework with global markets. Fuel prices will destroy the global markets and compel a shift to serving local markets, and the job-shops will be increasingly motivated to engage in their own networked production and simply cut the Western corporate HQ out of the loop (simply ignoring their trademark). Interestingly, most of the corporate suppliers in China today run a third shift producing identical knockoffs of the trademarked stuff they make for corporate patrons.

    So basically mass production industry and economic centralism is already dead–the corpse just hasn’t yet started to stink.Report

    • Avatar North says:

      Possibly Kevin, but what will be the cost per barrel of some artificial liquid hydrocarbon produced using electricity from nuclear plants or some similar technological substitute? I think at our level of technology that the demise of oil won’t necessarily spell the demise of global trade. Heck, we could go the other way and say that the demands of global trade will almost mandate the replacement of fossil fuels with an alternative source once fossil fuels become scarcer.Report

  4. Avatar Kevin Carson says:

    North: You mean biomass, algae, coal liquification, etc.? I’ve looked into them and, while there is some disagreement about the specific numbers, it’s pretty clear they all produce much less net energy (i.e. have a much lower EROEI, or cost more in energy to extract a given amount of net energy). I just don’t think there’s any getting around the fact that a model of economic expansion based on extensive addition of cheap inputs is coming to an end, and that future growth will depend on doing more with less.Report

    • Avatar North says:

      I respect that position. In my pessimistic moments I share it. In my more balanced or optimistic times though I imagine that once oil actually begins to become scarce (rather than when the eco-warriors say it should become scarce) that with all the ingenuity and technical prowess we posess as a species that an alternative fuel source will pop up.Report

  5. Avatar Sam M says:

    “This brings real competition between local governments into the picture. Local governments compete for citizens and businesses.”

    If this is the case, I suspect big-box wins regardless. People love them. I tend not to, but I think that if had a completely democratic process of city planning, most cities would look a lot loke Northern Virginia’s sprawl, rather than something out of a Frederick Law Olmsted book. Drives me crazy… but people my age, with families, seem to want a McMansion and a two-stall garage.

    I would just argue that government should play as non-interventionist a role as possible, by laying some of the ground work to create a competitive and attractive city… If local governments want to keep big box stores out of their dense urban areas and in more drive-intensive spots, I see no reason to argue against that.”

    “I would just argue that government should play as non-interventionist a role as possible, by laying some of the ground work to create a competitive and attractive city…”

    Again, who defines attractive? I guess we could have a laboratory of Democracy and see who wins. But again, I suspect I will lose, hands down.

    Ever been in a McMansion? I agree that they are cold and sterile and whatever. But they are awesome in so, so many ways.Report

  6. Avatar Bruce Smith says:

    Local states competing sounds reasonable for evolutionary purposes but how much better they’d be if they compete like trusts with prescribed rules democratically decided and updated democratically on a regular basis. This would help prevent politicians being “captured” by business interests. For example, when as a voter were you last consulted about the principle of allowing “Rob Peter to Pay Paul” tax subsidies to lure out of state businesses to your locality?Report