A Globe of Villages
The tricky business of balancing community control
with the demands of an interconnected planet
an interview with David Morris, by Sarah van Gelder
One of the articles in Toward A Sustainable World Order (IC#36)
Fall 1993, Page 28
Copyright (c)1993, 1996 by Context Institute | To order this issue ...
All the controversy over free trade has raised interesting questions about
the kind of world we want. What are the trade-offs between community control
and a global culture? What's the connection between trade and sustainability?
We asked David Morris to share his perspectives on trade. He is vice president
of the Institute for Local Self-Reliance, a 19-year-old organization that
promotes humanly scaled, environmentally sound economies and institutions.
The author of four books and several dozen monographs, he is a consultant
to business and government in the US and abroad. His most recent reports
include: The Carbohydrate Economy, The Mondragon Cooperative, and The Trade
Papers.
Sarah: Can you tell me what you mean by self-reliance and how you
differentiate it from self-sufficiency?
David: Self-reliance is the capacity for self-sufficiency, not
self-sufficiency itself. Self-reliant communities are self-conscious and
self-confident. They extract the maximum value from local resources - labor,
capital, materials. Their diversified economies are characterized by a substantial
locally owned productive capacity. They satisfy a significant proportion
of their needs from their own resource base.
Self-reliant communities also possess the collective authority to make the
rules that influence their futures, and their members have access to the
information necessary to write these rules wisely.
Sarah: Why is self-reliance preferable to a system in which every community
specializes in one or two products that are traded and consumed elsewhere?
David: Classical economists like David Ricardo and Adam Smith - the
fathers of free trade theory - were absolutely correct in their belief that
efficient and innovative economies must rely on a division of labor. A division
of labor demands a system of exchange or trade.
But these 18th and 19th century economists also were clear that the benefits
of trade must be balanced against the need for security and community. They
did not believe, for example, that we should make ourselves defenseless
by becoming totally dependent on distant resources even when we might make
money by doing so. They opposed foreign ownership of key resources or productive
capacity.
The fathers of free trade lived during an era in which capital was not very
mobile, transportation systems were primitive, and advanced communications
systems were non-existent.
Today all resources, except for land, are mobile. The heirs of Adam Smith
now seem to argue that the most efficient and perfect economy is one in
which the productive capacity of communities is absentee owned and everything
produced in these communities is exported while everything consumed is imported.
And the authority of citizens to regulate commercial behavior is extremely
limited.
Such a future has many hidden costs. For one thing, it heavily depends on
physical transportation systems, which, by definition go through somebody
else's backyard. Within this country, the government has the authority to
seize private property to build roads, ports, airports, and it does so regularly.
Interestingly, this is the only governmental authority both liberals and
conservatives stoutly defend.
Outside of the country we don't have a legal right to seize property, but
we do so anyway. The US invasion of Panama in the beginning of this century
and the repeated invasions since have had as their sole purpose the construction
and defense of a short-cut canal between the East Coast and Asian markets.
The Gulf War was fought to protect our transportation routes to Middle Eastern
oil. When you build economies that depend on long-distance physical transportation
systems, you build economies that depend on invading someone's territory.
Physical transportation systems not only invade our space with their bulk
but also with their pollutants. Transportation is the single most polluting
sector, and the use of heavy trucks and highways is the most polluting system
of all.
Another cost of the planetary economy as currently envisioned is that it
separates the producer from the consumer, the employer from the employee,
the investor from the investment. The end result is undemocratic and inefficient
decision-making.
Consider what might happen if this were to change. Today we separate the
producer, the consumer, and the waste dump. The result is to encourage pollution.
Imagine if we were to pass a national or international law that required
households or industries to dispose of their wastes within two miles of
where it was generated. I think they would quickly use their genius to design
technologies and techniques that dramatically reduce waste, especially hazardous
waste, and maximize recycling and re-use.
Sarah: Presumably, even with increased self-reliance, there would still
need to be some kind of trade. You mentioned in "The Trade Papers"
that part of that trade might be electronic. Can you expand a little on
that?
David: Albert Einstein once observed, "Perfection of means and
confusion of ends seems to characterize our age." Trade agreements
illustrate his point. They perfect means, such as mobility, and simply assume
the ends will take care of themselves. Indeed, trade discussions rarely
include any mention of ends, except for the vague end of increased growth.
We need to agree on a set of goals and design the means with an eye toward
achieving those goals. The following goals seem to me relatively uncontroversial:
rootedness, a sense of community, a high level of psychological peace of
mind, national security, environmental protection, a meaningful level of
participation by members of the community in decision-making, and a dynamic
and innovative economy.
Trade discussions apply the same philosophical and regulatory approach to
all factors of production. That simplistic and simple- minded approach burdens
the discussion. Trade in each factor of production - labor, raw materials,
finished goods, information and capital - has a very different impact on
our sense of community, our national security, and our natural environment.
Let me briefly address each:
- Raw materials. From an environmental perspective the goal is
to minimize materials consumption and substitute renewables for non-renewables.
Improving efficiency and increasing reuse and recycling can dramatically
reduce consumption. Doing this, as well as shifting to renewables like wind
and direct sunlight and plant matter for fuels and industrial materials,
encourages a miniaturization of economies. The higher the efficiency with
which we use materials, the fewer materials we use and therefore the fewer
we import. The more we recycle or reuse the more we rely on local products
or materials. And renewable resources are widely available and easily harnessed
on the decentralized level.
Trade rules should maximize efficiency and recycling and the use of renewable
rather than non-renewable materials. The result will be a dramatic reduction
in long-distance trade.
- Finished goods. Ten years ago, our economies were still based
on mass production systems. The bigger the production unit the lower the
unit cost of production. Factories that produce tens of thousands of a product
must sell to national and even global markets.
Today business leaders use the term economies of scope rather than
economies of scale. Flexible manufacturing and other techniques allow
factories to produce small batches of many kinds of products at the same
cost as producing large quantities. These factories could, in theory, serve
smaller markets. When it comes to finished goods, trade rules should encourage
distributed, decentralized, and flexible production systems. The result
will be to significantly reduce long-distance trade.
- Labor. A true free-trade regime would open its borders to unlimited
immigration. Doing so, in the long term, might equalize the wealth of poor
and large countries. However, in the process it would disrupt communities,
breed a violent backlash, and destabilize democracies. The rules of trade
should foster development that doesn't encourage or force people to leave
their homes and communities and doesn't subject other communities to a wave
of immigration.
- Capital. Once upon a time money on the international level was
simply a medium of exchange. Up until 1970, the amount of currency exchanged
on the international level was about equal to the amount of world trade
in goods and services. People changed currencies when they visited a foreign
country or bought or sold foreign goods. Today the value of currency exchanges
in one day is about equal to the value of world trade in one year. And as
currencies change hands, the comparative value of currencies changes and
with it the comparative prices of goods and services.
Free traders believe this global sloshing about of waves of currency fosters
economic efficiency. It may be that one can now borrow money at a slightly
lower interest rate because one can borrow globally. But the consequence
has been increasingly volatile exchange rates. Business executives now spend
much time tracking currency exchanges or buying financial instruments called
hedges, which lock in a given exchange rate. The cost of these insurance
policies offsets the benefit of the marginally lower interest rates derived
from global financial markets.
Another consequence of the globalization of money is the diminished ability
of governments to manage their economies. The real economy of goods and
services is now driven by the artificial and even mystical economy of currency
exchange, an economy dominated by a few very large currency speculators.
In the 1970s the US passed the Community Reinvestment Act. It said that
banks had to lend at least a part of their deposits generated within their
communities back to all segments of their communities. Trade rules should
encourage the reinvestment of wealth generated by a community back into
that community.
Capital can also translate into ownership and control. Communities should
be able to develop rules that encourage local ownership and discourage absentee
ownership.
- Information. Digital highways, unlike concrete highways, are
not polluting And information, for the most part, is non-invasive. We should
design rules that accelerate the flow of informational products. However,
these rules should not only encourage increased flows but also encourage
an increasingly horizontal rather than vertical transfer of information.
Today planetary corporations beam messages to people who they view solely
as consumers. In the future information systems could allow neighborhoods,
households, and small businesses to produce informational goods and services
and market (for example, broadcast) them directly to the final customer.
We could become, in Alvin Toffler's words, a world of prosumers.
In addition, we should take into account the needs of low-income communities
and countries and strive for universal, low-cost access to basic information
systems.
The end result of developing trade rules with social, environmental, and
political goals in mind might be a new kind of dual economy, a global village
and a globe of villages. A globe of materially self-reliant villages would
produce a significant portion of their materials and energy and perhaps
even finished goods within their regions, while a global village trades
informational products along a planetary electronic network.
Sarah: I'd like to ask you about the province of Kerala, which is one of
India's most highly populated provinces and which has done a lot to alleviate
poverty and increase literacy, and so forth. But one thing they haven't
been able to do is to become self-sufficient in food, and it doesn't sound
like they are likely to do so. Given that there are parts of the world in
that situation, under what circumstances should trade be encouraged?
David: Let me repeat that self-reliance doesn't mean autarchy or
complete self-sufficiency. Very high density countries like Singapore are
not going to grow a significant amount of their own food.
Having said that, I should also add that agriculture has been heavily distorted
by the demands of trade. Countries and regions that once grew food for their
own consumption are now growing export crops, usually because of external
pressure from international financial institutions that want these countries
to earn hard currencies to pay back their debts. One result is that they
have become increasingly dependent on remote and unstable customers for
their crops, while in many cases lowering the overall nutritional levels
of their own populations.
Sarah: Some people claim that free trade will bring greater prosperity to
parts of the world that aren't now prosperous.
David: The level of inequality both within nations and external to nations
has increased every decade since we began the free trade regime. In the
mid-19th century, richer countries were about twice as wealthy as poorer
countries. That ratio went to 5 to 1 and then 8 to 1 and now I think it's
something like 12 to 1. Inequality has also increased inside many countries.
So I don't think that one can argue that increased trade has made us all
more prosperous.
When you look outward for development you tend to overlook your local capacities.
In Latin America, where I lived, when they have shifted to exports it has
enriched a segment of the economy, but the overall living standards have
not increased.
In Mexico, where exports have soared in the last 10 years, real manufacturing
wages have been cut in half. So I don't think that one can make an argument
that increasing trade lifts up countries.
Sarah: Since there will be some level of trade, what's your sense about
how that trade can be structured so that it doesn't have the kind of environmental
effects and impacts on workers and local communities that our current trade
system has?
David: First, we should encourage fair trade rather than free
trade. That means we should compete on the basis of quality, reliability,
productivity, customer satisfaction or turn-around time rather than simply
on the basis of price, especially when price is determined by how much workers
are paid or how lax or rigorous the environmental standards are.
Second, we should allow communities to impose the same rules on imports
as they do on domestic producers. Eighteen months ago, a GATT [General Agreement
on Tariffs and Trade] panel concluded that parts of the US Marine Mammal
Protection Act constituted unfair trade practices. US law banned the sale
of tuna caught by fishing techniques that slaughtered dolphins. The GATT
panel ruled that the US could impose such a law on its own fishing fleets
but not on foreign fleets that sell fish in the US. Complying with that
ruling could force US companies out of business.
Recently, the European Commission issued a report identifying unfair trade
practices in the US. It specifically cited California's requirement that
glass containers sold in the state contain a minimum proportion of recycled
content. California had vigorously encouraged recycling and its residents
had responded, and it had accumulated a mountain of materials in search
of markets. The state passed the recycled-content law to force manufacturers
to use these materials. The EC agreed that the environmental objectives
were worthy, but argued that since such a law would favor local bottlers
it constituted an unfair trade practice.
Third, we should establish minimum, not maximum international labor and
environmental standards. Consider our own history. In the 1930s, low-wage
states aggressively pursued northern manufacturers. In 1938 the nation enacted
the Fair Labor Standards Act. It established minimum wages and maximum hour
standards, but allowed states to exceed these standards. In the 1970s and
1980s national environmental standards, in most cases, also allowed states
to do better.
Fourth, we should adhere to the principle of subsidiarity. We should delegate
authority and responsibility to the lowest possible levels and impose a
significant burden of proof on higher levels of government to justify any
pre-emption or intervention in the affairs of cities or states or regions.
Remember, free trade agreements are super-constitutions. They pre-empt national
and state constitutions and laws. Yet unlike Constitutions, these agreements
do not include a structure of government, a process for citizen participation
in decision-making, or a bill of rights. They have only one goal - the increased
mobility of all resources - and few if any safeguards. We need global rules
that allow us to manage the international and subnational flow of resources,
but they should be rules that reflect our core social and political values.
Sarah: What are the most promising things you see happening in this arena?
David: One is the debate over free trade itself. Free trade discussions,
whether about the US-Canadian free trade agreement or GATT or NAFTA, or
the Single European Treaty are about the rules we design to manage our futures.
Increasingly, numbers of people are using these debates as an opportunity
to begin thinking about the kinds of rules they would enact. Creating global
rules that enable strong communities, preserve natural environments, defend
local cultures, and encourage innovation and resource efficiency is one
of the most important challenges of our time.
Another reason for optimism is the debate around sustainable development,
which also offers us the opportunity to envision a different kind of economy
and society. Once again, it invites us to write the new rules that will
guide investment capital, entrepreneurial energy, and scientific genius
in different directions.
A third reason for optimism is the new debate over the transportation system
itself. The recently enacted Intermodal Surface Transportation Efficiency
Act for the first time lets us spend gas tax money on bicycles, compact
communities, mass transit, telecommunications, and a host of non-road alternatives.
Hundreds of communities are now engaged in a healthy and at times wide-ranging
debate about the very design and layout and function of their areas.
My optimism does not mean I ignore the fact that in all of these debates
there is an extraordinary inequality of power and resources between those
who believe the future should be a simple extrapolation of the present and
those who believe we can and should dramatically refashion societies and
economies.
On the other hand, the fluidity of the current situation, the clear inability
of conventional ways of doing things to satisfy our basic needs, the overwhelming
disenchantment with what is, affords those of us who propose bold and even
radical solutions an unprecedented opportunity to be heard.
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