It is a well-known economic theory that the three major factors in free markets—resources, labour, and capital—will be used or invested in the area where they are most productive. According to the theory, these factors, and the people who direct them, will always look for the greatest efficiency, and hence the greatest profit.
In the past, this typically meant that countries or regions were able to capitalize on what they already had. For example, note that many of the products we enjoy come from other parts of the world. Bananas are native to Southeast Asia and still grow there, and the sweet orange we love so much comes from China and India. Craftspeople around the world at one point honed their trades, exceling in some areas of production more than others. Consider the Swiss and their watch-making skills, or the Germans and their precision tools.
The reality is that these regions were best served by focusing their skills and production on what they did best, sacrificing other avenues of production. And as regions continued to do this, trade developed to provide for the people’s basic needs and enhance their lifestyles through access to goods they either couldn’t produce at all or couldn’t produce efficiently.
And so life was good.
At its humble roots, trade enhances the lives of all parties involved. Think about it from an agricultural perspective. Agricultural trade has allowed regions to enjoy a new diversity of diet and flavour that has improved people’s overall health and enjoyment of life.
Now think about it from a labour perspective. The sharing of labour has allowed for a greater return on our workers’ investment of time. Consider the hours that skilled workers have put into honing their crafts, making products in greater volume to meet the demand of populations beyond their borders.
However, this enormous return of capital has inspired one of the two big trade issues we face today. As we have moved from the era of small producers to large multinationals, corporate greed has produced a situation where all the efficiencies and benefits derived from trade are deposited in corporate coffers, converted into share value and dividends for investors.
And this is a problem, compounded by the second issue: technological advances have eroded the regional advantages people around the world once enjoyed. Bananas from India and China are now rare; producers in South and Central America have taken over the industry.
Indeed, while we may never efficiently grow bananas in Canada, advances in hybridization allow many regions to grow foods that wouldn’t have been possible fifty or a hundred years ago.
These changes have suppressed production in regions where products once flourished. Those regional industries have been suppressed by competition.
The technology and skills that go into production are no longer limited by weather patterns and acres of arable soil available. We can transplant skills from one region to another. Access to raw materials is still a factor, but in our global society it is surprisingly easy and cheap to move these resources.
In light of this, the largest factor in production is now the cost of labour, which places the Western world at an extreme disadvantage, not only against countries like Mexico and China but most of the world. The majority of people around the globe haven’t experienced our level of affluence, and they are willing and able to produce goods at a fraction of the cost—to be quite blunt, they are happy to do it.
So can the answers to our current trade issues in the Western world be found in the area of production? Our own corporations have transplanted our technologies to foreign lands, where goods can be produced more cheaply, and these same corporations now need to ask them themselves a simple question: are they willing to see the cost of production rise in order to bring production back to our soil?
By considering the history of these corporations and the behaviour of their shareholders, the answer is clear. Probably not. These corporations are governed by dollars and cents, not any moral rules.
This means that we, too, need to ask ourselves a question. Are we, as labourers and consumers, willing to adjust our lifestyles accordingly? Are we willing to endure lower wages, higher prices, or a combination of both? What are we willing to accept as far as changes to our standard of living? Perhaps we need to question whether our standards in the Western world are even sustainable in today’s global economy.
In short, we need to ask ourselves: what are we willing to trade?
