Why globalization is (mostly) green

Shipping millions of containers of stuff around the world might seem to be bad for the planet but in the long run globalization will help us solve our environmental problems.

With apologies to anyone who took Econ101 in college and at the risk of oversimplification, here’s why:

  1. The global economy is not a zero-sum game.
  2.  Trade benefits buyers and sellers
  3. Rising incomes and wealth are good for the environment.

Ergo, globalization is mostly green.

This may seem self-evident to some but as I follow the conversation about business, the economy and sustainability in a number of venues — from the sparring over China in last week’s presidential debate to Mark Bittman’s musings about an ideal food label to the argument from some enviros that what we need is not economic growth, but “degrowth” — I’m surprised by lack of understanding of the benefits of trade, globalization and growth.

Take China. Playing to middle-class anxieties over the decline in US manufacturing jobs,  President Obama and Mitt Romney tangled over China during the debate. “I’ll crack down on China,” Romney promised. To which Obama shot back: “Governor, you’re the last person who’s going to get tough on China.”

In the sustainability arena, the China-bashing has played out over the rise of Chinese solar-panel manufacturers. This month, the Obama administration upheld steep punitive tariffs on Chinese companies after finding that they were “dumping” solar panels into the US market. China will surely retaliate.

Why crack down at all? Trade battles almost never end well. Consider tires: During the debate, Obama said that by placing a duty on “cheap tires” from China “we saved a thousand jobs.” But Americans paid more for tires, so they had less to spend or save elsewhere, thus creating a drag on the economy that cost jobs.

As The Times reported:

A study by the Peterson Institute for International Economics found that the tariff protected at most 1,200 American jobs. But last year alone, the institute found, it cost American consumers $1.1 billion in higher-priced tires.

Moreover, China responded by imposing tariffs on imports of American chicken parts that cost American poultry producers an estimated $1 billion. Last month, the Obama administration quietly let the tire tariff expire.

China can’t subsidize tires or solar panels or electric-car batteries forever — already the Chinese solar industry is suffering from a crisis of overcapacity –so if the Chinese to offer discounts on their goods, temporarily, why not take advantage? Cheap solar panels create US jobs for installers, and they are good for the planet. I understand that the US wants to protect domestic manufacturers from unfair competition but until we curb our own subsidies for solar and wind power, as well as oil, corn, sugar, etc., who’s to say what’s fair?

More broadly, let’s remember that China’s growth is good for the US. Trade enables countries (and you and me) to specialize in what they (and we) do best. As China and India become wealthier, their consumers buy more US exports. That creates US jobs in those industries where we enjoy a competitive advantage.

Another example: Shaw Industries, a unit of Berkshire Hathaway, next year plans to open a carpet manufacturing plant n China, to serve the Chinese market. As Jeff Galloway, director of Shaw’s global operations, explains on the company’s blog:

Once the plant opens next year to engage the booming Asian market, a slew of new Shaw employees will be needed in Georgia to spearhead further product development and oversee key technologies. What happens in China will be mostly assembly, but the chemicals and fiber that become Shaw’s carpet tile – the true alchemy of Shaw’s design – will remain in the U.S.

And…if it’s OK to trade in carpets, why not carrots? I’m a big fan of Mark Bittman’s food writing, but his essay last week about food labels, which reflects the widely-held belief among critics of Big Food that local is better, overlooks the benefits of globalization.

Bittman’s label would bring more transparency to groceries and that’s good, but rating products based on how the workers who makes them are treated could have unintended effects. As Tyler Cowen points out on his blog, Bittman

wants to levy a black mark against companies that treat their workers poorly. On the contrary, that is a sign the product likely comes from a poor country and probably you are doing the world more good in buying it and, in the longer run, bidding up wages and working conditions in that country.  It helps other people more to buy from China than Portland, even though workers fare much better in the latter locale.

Two cheers for sweatshops! That was the headline over a Nicholas Kristof story from China back in 2000. Paul Krugman once made a similar argument in Slate: “While fat-cat capitalists might benefit from globalization, the biggest beneficiaries are, yes, Third World workers.”

Poor countries are also unlikely to benefit from “degrowth,” a prescription for the developed world put forward by Erik Assoudourian of The Worldwatch Institute:

Overconsumption in industrialized societies and among developing world elites causes lasting environmental and human impacts….Degrowth offers a new vision of prosperity focused on living well with less, instead of maximizing growth and consumption.

Erik’s argument against overconsumption is appealing but, as a practical matter, it’s hard to see how we could “degrow” developed economies (even if we wanted to) without damaging poor people in emerging markets. Like it or not, consumption and globalization have proven to be the most effective strategies to fight poverty. What we need to do is find ways to consume sustainably.

Strange as it sounds, globalization will also help protect the planet, particularly if we can get those container ships running on clean fuels. People with income to meet their basic needs are more willing to invest in public goods like clean air and water, parks, beaches and wilderness, not to mention hybrid cars and $10 light bulbs.  This is why the environment is a greater concern to rich people and countries, than it is to the poor. Denmark cares more about green than Bangladesh.

So we should feel good when the economies of China or India grow, not just because no one should have to live on $1 or $2 a day but because the planet will be better off. Buying coffee from Indonesia, chocolate from Ghana or grapes from Chile is as “green” as buying an heirloom tomato at the farmer’s market.

It’s not us against them, folks. We live in an interconnected world. Environmentalists, of all people, ought to know that.

Comments

  1. Good post. I like Bittman’s food writing too but he doesn’t seem to wrestle with theses issues at all. Very frustrating.

  2. A very good well written article to explain the blinkered view that seems to dominate many economics debates. This is the world through the eyes of the 20th century; we need the people that can look past these old ideas to tackling the problems of the 21st century.

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