Free Trade: What Could Go Wrong? Part 2

Completing my take on What Could Go Wrong items 4 and 5

In the first post on this subject I listed “some things about "free market" economics that I don't like: 1) it leads to massive scale and centralization as enablers of efficiency, 2) ever more urbanization comes as night follows day; 3) it leads to long supply chains which are in my experience brittle and anything but economical were it not for fossil fuels; 4) it leads to specialization, from the individual level to the nation-state level; and 5) externalized costs, in other words costs that aren't reflected in price, like environmental degradation in all its forms, water pollution, air pollution, soil erosion, etc.” And I addressed numbers 1 through 3. Today I write on items 4 and 5.

Number 4: Specialization

We all specialize to a great or lesser extent; my specialties now are the provision of sawmill services and pure maple syrup products, these are in effect my “cash crops.” The cash is then a medium of exchange for purchasing those things we don’t produce for ourselves. Of course we are taking on more, including most importantly at this point the production of food. In the modern sense we are a lot less specialized than most, and in fact a lot less specialized than we ourselves were just a few years ago. To specialize less was a conscious decision, as I wrote about in my first Primal Woods blog post.

A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects.

-Robert A. Heinlein

As usual someone else can say it better than I, and Heinlein is one such person; my emphasis added. So on an individual level I’m not a big fan of over-specialization. Free markets however take it the next level, and in fact the next several levels; communities specialize, regions specialize (Silicon Valley for example in IT, what is now referred to as “the Rust Belt” in steel and vehicle production, the Midwest in agribusiness, etc.), and even nations and groups of nations (OPEC is a prime example) specialize. If we look at U.S. exports:

America’s 5 biggest export products by value in 2021 were refined petroleum oils, crude oil, petroleum gases, cars and electronic integrated circuits. In aggregate, those major exported goods accounted for 18.8% of overall exports sold by the United States. That relatively low percentage suggests a diversified range of exported goods, albeit 3 of America’s top exports are energy commodities.

Not mentioned in our top exports, war materiel:

USA is Number 1

Exports of major arms from the USA grew by 23%, raising its share of total global arms exports to 36% of the arms exported worldwide. These major arms transferred from the USA went to a total of 96 countries, a far higher number than any other supplier. US arms exports were 76% higher in total than those of Russia – the second-largest arms exporter in the world. In 2010–14 US exports of major arms were 17% higher than those of Russia, whereas in 2015–19 they are 76% higher.

Look no further than right here for the biggest arms dealer in the world, and make no mistake, we are the preeminent war machine.

Of course there are problems with what we have chosen to specialize in, but my concern is in regard to what we choose to not do for ourselves, at any and all levels. I’ll take food as an example.

It is estimated that the meals in the United States travel about 1,500 miles to get from farm to plate. Why is this cause for concern? <One of several> reasons:

This long-distance, large-scale transportation of food consumes large quantities of fossil fuels. It is estimated that we currently put almost 10 kcal of fossil fuel energy into our food system for every 1 kcal of energy we get as food.

Again, my emphasis added. Let’s say you’re a pre-historic hunter-gather; if you expended 10 kcal of energy in the harvest of 1 kcal of food you would starve to death in short order. The only thing that makes this equation work at all is fossil fuels. If the fossil fuel supply is disrupted for any reason, costs will go up necessarily to “cure” the ailment (supply and demand at work), and if the fossil fuel supply is cut off entirely you will simply go hungry. Choosing to not specialize in food production at any level, individual, community, region or nation-state, carries with it the not insignificant risk of food supply disruption at worst, and higher costs at best.

Beijing. Chinese President Xi Jinping has argued that his country needs to be independent in terms of seeds to achieve food security, state media reported yesterday, reiterating growing concern over dependence on food imports.

The Chinese get it, we apparently, do not.

Number 5: Externalize Costs

Externalized costs, costs not incurred by the producer, and therefore not a part of the price-setting mechanism, are a very significant problem. In general I would say that this should be a role for government, as much as it pains me to admit that. But as usual, and unfortunately, government involvement creates bigger problems than those it sets out to solve, and the federal government creates the biggest problems of all. The reason the government is able to do such damage? Your money, our money, and lots of it. States don’t have the resources to build Hoover Dams. States don’t have the money to drain the Everglades. States don’t have the land to subsidize or give away to create Dust Bowls. Outcomes of government involvement: the Colorado River is actually a bone-dry riverbed before it reaches its natural outlet to the Gulf of California; The Grapes of Wrath, read the book or watch the movie, depicts an outcome of the Dust Bowl; and a nearly destroyed ecosystem in Florida. Those are just some of the many deleterious outcomes. In short, no group or organization has had more “success” in destroying the environment than the U.S. federal government.

When most people think of southern Florida, they conjure up images of Disney World and spring break. Yet further south than Mickey and Daytona International Speedway are the Florida Everglades, one of the most unusual ecosystems in the world and a true mecca for wildlife enthusiasts. Over the past half century, the Everglades have been suffering from pollution, water problems, loss of habitat, and a tremendous loss of wildlife. What most people don’t realize is that the federal government bears a large portion of the blame.

Bart Frazier

The problem of “externalized costs” is a tough one, and one that in some cases we have simply offshored, by trading with countries that have less environmental protections in place than we do in the U.S. I must say though, as there is no such thing as throwing something “away,” there is no such thing as eliminating externalized environmental costs by offshoring the costs; eventually “away” and “offshored” costs will catch up with us. In the early days of agriculture in the United States we would simply move from lands we had destroyed to new virgin lands, which we would subsequently destroy. As should be apparent, that approach too cannot last.

Generating three centimeters <1 inch equals 2.54 centimeters> of top soil takes 1,000 years, and if current rates of degradation continue all of the world's top soil could be gone within 60 years, a senior UN official said

- Scientific American

There is a lot of argument around whether or not that UN assertion is true, but regardless, I do believe that fertile soils are not in inexhaustible supply. The culprit is industrialized farming, plain and simple, which of course is subsidized heavily and protected by the federal government in the U.S. And how about the algae blooms?

The map above can be found at EWG. We’ve all probably heard about the algae blooms in the Gulf of Mexico; the so-called Red Tide. Let’s just say it’s bad, very bad.

While there may be such a thing as “externalized costs” economically, with respect to the environment there is no such thing in terms of its negative impact locally, regionally, nationally or globally.

In Summary

So what does all this mean? I can only speak for myself. First of all, I’m not willing any longer to take on the risks associated with long supply chains from centralized producers for things I cannot live without; water, food, heat, and so on. Likewise, I cannot be such a specialist that I become unable to provide for Geri and myself without being dependent on extensive systems over which I have no influence or control. So we have and are developing systems to provide those things more locally, and at best so locally as to be from this homestead. To the extent that we provide some food or some service to others, we are not willing to absorb “externalized costs” to our land; which is to say we are not going to destroy our land in the pursuit of cheap food. The price of doing the right thing in my view is, well, higher costs and prices. Sorry not sorry.