Too much global trade

Being provocative: there is too much global trade. The world needs more sensible trade, not more trade.?

Trade in hydrocarbons, food, and even water across the world are adding to the volume of trade across national boundaries, adding to global GDP and to GDP of countries. It is also adding more carbon to the atmosphere and sucking water out of the Earth making life unsustainable. Ground water is disappearing in?Punjab, and in Arizona on opposite sides of the world.?

Countries should be concerned about sustaining their own ecologies and the well-being of their own citizens. It is time to rethink some fundamentals of economic science, I explain in my op-ed in the Tribune on 4th January 2023. (Link and text below).

https://www.tribuneindia.com/news/comment/for-a-new-paradigm-of-growth-466764

RETHINKING SOME FUNDAMENTALS OF ECONOMICS

?“Arizona is Racing to Its Last Drop of Groundwater”, is the headline of a report in the New York Times (December 29, 2022). It reminded me of the Punjab. The report said:

“Arizona’s water is running worrying low. Amidst the worst drought in more than a millennium, which has left communities with barren wells, the state is depleting what remains of its precious groundwater. Much of it goes to private companies nearly free, including Saudi Arabia’s largest dairy company.”

?Arizona draws most of its water from the Colorado river, which it shares with seven other states, who are unable to come to an agreement for sharing it fairly. Punjab shares the water from its rivers with Haryana, Rajasthan, and Delhi, and they too have been unable to come to a satisfactory agreement. Like Arizona, Punjab’s ground water has been overdrawn to support farms producing crops for export. Punjab’s wheat and rice is exported all over India and to other countries. Alfalfa, grown in Arizona feeds cows in the US and even in water-scarce Saudi Arabia.

?Both Arizona and Punjab are suffering from the globalization and corporatization of agriculture. Punjab’s green revolution was propelled by US agricultural technology. The US also provided modern dairying technology to Saudi Arabia, spawning the giant Saudi agricultural company, Almarai. Needing more fodder and more water to feed its cattle, it looked for sources in the US. In return for a large investment of FDI, Arizona state leased 3500 acres of land at a very low price to Almarai to grow alfalfa, and water usage charges that were one-sixth the market rate. Almarai’s “ease of doing business” has turned into difficulties in ease of living for citizens of Arizona who are running out of water for their own needs.

?US technologies, and the size of its economy, give it global power. Its economy grew very large in the twentieth century with the mechanization of its farms and industries. Its’ citizens ease of living also improved with ownership of automobiles and home appliances. The growth of the US economy and improvements of its citizens’ lives was powered with hydro-carbon energy. The US way of life became an aspiration for people around the world.

?The problem with the American way is that it does not sit well with Nature. Scientists estimate that, if all citizens of the world were to attain the standards of consumption of an average of American, humanity would need three Earths to provide sufficient resources for everyone. We have only one Earth, and it is running out of water, which is fundamental for life for everyone, even in the US. We clearly need a better model of what a good life is, and a better way of enabling everyone to live good lives wherever on the planet they are.

?Change is essential in fundamental concepts driving economic policies. One is the measure of “productivity”. The productivity of enterprises, and the entire economy too, is measured as the output of a unit of labor. Therefore, when the amount of human effort used in an enterprise, and used for overall economic growth is reduced, productivity thus measured is improved. To improve the productivity of the agriculture sector, fewer persons should be employed in the sector. They should be replaced by machines (which requires financial capital), and their energy should be replaced by other energy sources—hydrocarbons being the most efficient so far. Humans displaced from agriculture to improve “productivity” must find employment in manufacturing or services. When human effort in those sectors is also being replaced by machines and artificial intelligence (which requires other sources of energy and investment of capital), no wonder the economy has an overall employment problem.

?The second concept is “value”. When the value of an enterprise’s output is measured purely in money terms, and decisions must be made about fairly sharing the value amongst contributors to it, it is convenient to measure contributions in financial terms too. Therefore, the intrinsic values of human labor (and environmental resources), which are qualitative in nature, are stripped off for the ease of mathematical calculations. Qualitative values become “externalities” to the economy; and money becomes the only currency for evaluating the worth of human beings and Nature.

?The third concept is “efficiency”, which business managers and economic policy makers strive to improve. Efficiency (like productivity) is the ratio of the output (or outcome) produced by an input. The philosophical question is: what is the outcome that people within a society value the most? Can workers value the stock market valuation of a business enterprise as much as investors and senior executives whose compensations are directly tied to it? What worth is growth of GDP to common citizens when they cannot earn enough to provide for their family’s needs for shelter, nutrition, health, and education?

?The fourth concept is “equity”—a measure of fairness in sharing the outcomes. Economists and managers duck this question, as mentioned before, by their mathematical computations of the inputs and outputs of an enterprise in money terms. Fairness and trust are essential qualities of good enterprises and good societies. They enable enterprises to perform more efficiently, and to become more productive, by reducing costs of supervision, policing, and dispute resolution, which do not add any intrinsic value to the production of the desired outcomes.

?The fifth concept is “growth”. Growth is good, provided it is not a cancer that saps the life out of its host. The pursuit of relentless growth of global and national GDP, has become a cancer that is sucking water out of the earth, and life out of the planet, as the stories of Arizona and the Punjab with which I began illustrated.

?Humanity needs a new paradigm of growth: growth of equity and social trust along with growth of environmental sustainability. The curriculums of economics and management schools, as well as models of business and the economy, must be changed urgently. They must be built upon new foundations: with new concepts of productivity, value, efficiency, equity, and growth.