Life in the Rear-view Mirror

Globalization

Globalization is what made the Chinese phenomenon possible. There are many technical definitions for the term globalization, but I will spare you them. The concept of globalization is simply the breaking down of trade barriers between countries and trading blocks. Why do we have it now, when we didn’t have it before? The reason is simple; it gives capitalists free range, anywhere in the world, to find the cheapest places of production, so that their return on capital can be maximized.

Why didn’t we have it before? There is a simple answer for that too. During my youth age we had numerous small local companies, each with a small share of the market. Only a few of them were large enough to compete internationally. The rest needed to be protected from foreign competition, by a system of tariffs. By the time I reached middle age, the number of small companies had shrunk considerably. They had amalgamated or were bought out by larger ones. The big fish were gobbling up the smaller ones. This happened until mostly big companies remained, and by then they were largely foreign owned. Tariffs were now protecting just a small number of small companies and hurting the profits of the large ones. The latter had political clout and they prevailed on governments to change the rules.

Retailing is a good example of what happened in all sectors of the Canadian economy, a microcosm of the global economy. Gone are all the familiar names that we had grown up with, such as Consumers Distributors, Beaver Lumber, Simpsons, and Eatons. In are the big American companies, such as Wallmart, Home Depot, Lowes, and Cosco, to name a few. Someone waking up from a twenty year long sleep would not recognize the retailing landscape. This is largely a result of globalization.

How did globalization affect consumption? It increased it almost overnight. The elimination of tariffs reduced prices across the board and consumption skyrocketed. All we need to do is look at global trade to get an idea of what happened to consumption.

From 1950 to 2010, the world’s population almost tripled, from 2.5 to 6.9 billion. In contrast, during the same period, world merchandise trade went up almost 250 times, from $62 billion to $15.3 trillion, or from $40 to $2,200 per person – a huge increase! The first growth spurt occurred between 1968 and 1980, when it went from $242 billion to $2 trillion. It coincided with the first phase of the consumer revolution. It was also the period during which Japan made its presence felt in the global marketplace. In a very short time it had become a major economic and trading power. I remember when Japanese goods debuted in Toronto, starting with the pocket transistor radios and walkie-talkies. At first they were treated with scepticism. The prices were so low, the quality had to be bad, or so people surmised. However, it didn’t take long for Japanese brand names to become synonymous with high quality. I suppose, those tiny transistor radios had the same fascination among the youth of my time as the smart phones have now.

The recession of the early 80s put a damper on trade; and it wasn’t until 1986 that the $2 trillion mark was reached once again. The second big spurt occurred between 2002 and 2008, when, in six short years, it rose two and a half times, from $6.5 to $16.2 trillion. This time it was the Chinese. The new millennium ushered in the era of globalization. The groundwork for it was done well before, with the establishment of the World Trade Organization, in 1995. The reduction in tariffs that came into effect by its creation set off a new trade revolution, which spurred consumption to new levels.

The year 2002 was a pivotal year for both China’s economy and world trade. In 2002, China’s energy consumption started increasing at a much more rapid pace than at any other period. This is when it became the world’s new manufacturing base. But, for that to happen, it had to become a member of the WTO, which it did on December 11, 2001. Throughout the ages, trade has been the driving force for peoples and nations. Nothing shows this better than the rapid increase that occurred in China’s trade with the world.

Globalization, the event linked to the establishment of the new trade order, didn’t really take off until China joined the club. The reduced tariffs ushered in by the WTO had three key effects: it made the large corporations more profitable, thus putting more money in the pockets of the ruling classes; it reduced government revenues around the world, thus putting governments further into debt; and stimulated global demand for consumer products, thus putting more strain on our resources and biosphere. The immense profits reaped by the mega corporations allowed them to grow without limits, buying out the smaller players and further concentrating wealth in the hands of the few. So, the ultimate outcome of globalization was the creation of monstrous corporations, with enormous financial and political power to influence elections and elected representatives around the world (more on this in a subsequent chapter).

Is globalization the last frontier of capitalism? With tariffs on merchandise exported around the world significantly reduced, or eliminated, it would appear that capitalism has reached its zenith. Economic growth just for the sake of growth has its limits, and we may have already reached them. Assuming that it requires the same amount of energy to produce an item in China as it does in the U.S., it’s clear that it will require additional energy to ship it from the former to the latter. Until the cost of that energy is compensated by the cheaper labour cost in China, it’s possible to manufacture there and ship to the U.S. However, when that cost advantage disappears, Americans will have no choice, but to manufacture their own products again. That will happen in one of two ways: either labour costs rise in China, or they drop in the U.S. When that happens, globalization will be in retreat and international trade will be in decline. There is another way, of course, which would be to raise tariffs, but that would be highly unlikely, as it would be against the interests of the large corporations and the ruling classes.

Consuming vast amounts of energy to ship goods all over the world is not a sustainable model, and sooner or later the tide will turn. Not only will we be saving non-renewable resources, we will also be reducing environmental pollution. Furthermore, repatriating manufacturing jobs will reduce unemployment, particularly among the youth, where they have reached alarming proportions. These are not nameless people. They are our children or our neighbours’ children. We can all point to a friend or relative that is out of work because their job was exported to China, India, or another Asian country. There is also the possibility, or hope, that as prices of manufactured goods rise, per capita consumption will decrease, which would be immensely beneficial to Mother Earth and our health. The health impacts of overconsumption will be discussed in a subsequent chapter.