telegraph | A number of years ago, a story went around that sprouts were being transported
from across Britain to an East Anglian airport, from where they were sent to
Poland for washing and packaging before being air-freighted back again for
sale in supermarkets located but a few miles from where they were grown.
This is an extreme example of the sometimes insane supply-chain dynamics of
modern-day globalisation, but it speaks loudly to widespread disillusionment
with the once-unquestioned blessings of free trade. From the Occupy Wall
Street and Tea Party movements of the US to the renewed rise of populist
politics in Europe, the backlash is everywhere to be seen.
In real terms, Americans are on average no better off than they were 30 years
ago; in Britain, the Institute for Fiscal Studies says that our real
disposable incomes are in the midst of a 14-year freeze. Vast tracts of
gainful employment in textiles, potteries, shoe-making, machine tools and
many other industries have disappeared, to be replaced by… well, not very
much at all outside the now languishing financial services industry and the
housing market.
The West’s competitive advantage, even in hi-tech industries such as
pharmaceuticals and aerospace, is being fast whittled away too. The welfare
and health entitlements to which we have become accustomed look ever more
unaffordable, while the final-salary pensions that workers could once expect
as reward for a lifetime of service are now confined to the public sector –
and those too will surely be gone within 10 years. It is small wonder that
the benefits of free trade are now so widely questioned.
Critics of globalisation, such as Joseph Stiglitz, the Nobel laureate in
economics, used to focus on the supposed harm that Western-inspired trade
liberalisation was inflicting on the developing world. Few would these days
think this the correct way of looking at the problem.
On the contrary, by opening up the global economy to Asia, Latin America and
Eastern Europe, the West seems to have unleashed a doomsday machine which
threatens ever-greater destruction of its own living standards. After a
brief number of years in which globalisation made everything seemingly
cheaper, the terms of trade have moved badly against the West.
Sure enough, the world as a whole is getting a whole lot richer. In the past
decade alone, the global economy has doubled in size. But most of the
benefits of this explosion in activity have gone to the developing world
and, in the West, the already rich, highly educated and talented. The wealth
divide has widened to record levels almost everywhere.
Western business leaders embraced globalisation not just because it opens up
new markets, introduces new ideas and weeds out unproductive, protected
sectors, but because it allows for lower production costs and so bigger
profits. It doesn’t seem to have occurred to them that if you don’t provide
Western consumers with jobs, they’ll be priced out of the market and the
mother economy will wither and die.
The principles of free trade are the same for nations as they are for
individuals. Rather than trying to produce everything we need to live, most
of us choose to work in quite specialist forms of employment, the product of
which we sell to others. We then use the proceeds to buy in other goods and
services. Nations ought similarly to derive a collective economic benefit by
specialising in the things they do best and then trading with others for the
rest.
But the system only works if everyone plays by a common set of rules and
standards.
