Thomas,
In your response to me, you make several points. I will try to deal with
some of them.
Your first point is that cities have grown at the expense of the rural
economy; that is, the growth of cities has been enabled by a transfer of
wealth from the primary industries of the countryside to secondary and
tertiary urban industries.
I'm a little of the Jane Jacobs school on this. In "The Economy of Cities"
Jacobs argues that cities came first and rural development came later, and
came in response to the growth of cities. In effect, the growth of cities
created the markets which enabled forestry, agriculture and other primary
industries to thrive, and generated the capital that needed for the
development of the countryside. However, two things can happen to the
countryside as its development proceeds. One is that it can lose its
natural capital and become depleted and unproductive. The other is that
more efficient and cheaper sources and methods of supply can be found. Both
of these things happened to the western Canada of the 1950s. In
agriculture, for example, soils became depleted, and more efficient and less
labour-using methods of production were put in place, displacing many people
from farming. And in energy, the most accessible oil and gas reserves were
used up first and we are now into a higher cost energy industry.
What can happen, therefore, is that a particular countryside can become less
and less competitive in the urban marketplace unless it undergoes major
change. Such change has occurred in the primary industries of western
Canada over the past few decades, a result being the loss of rural
population and lifestyle.
You state that it is low transportation costs that has made the global
economy possible, and a soon to come rise in transport costs will make the
global economy unsustainable. It will result in the re-establishment of the
local economy as the dominant economic form. Capital will then move back
from the global to the local economy.
I would agree that the global economy is based on low transportation costs.
However, I would suggest that we are often unaware of just how far
transportation costs have fallen and just how much more efficient
transportation, and the use of transportation fuels, has become. You can
now move an enormous amount of material, and an enormous number of people,
at a fraction of the costs which applied even a few decades ago. Consider
the difference between the DC-3 of the 1930s, the Viscounts and Electras of
the 1960s, and the modern 747. Fuels have indeed become more expensive, as
much because of geopolitics as any real problem of supply. There has been
something of a race between greater fuel efficiency and higher fuel costs,
and so far greater fuel efficiency has won hands down except perhaps in the
case of the private car. This favorable situation may not last for ever,
but considering the vast fuel resources the world has, it could last for a
very long time. It is not something that I would lose sleep over.
I would also agree that the local economy is, and will remain, important.
But having the whole world retract to markets of 100 miles or so in size
does raise some questions, particularly with respect to industries which
must operate at a very large size because of economies of scale. For
example, how would build and pay for 747s in a localized economy? Or would
we no longer have 747s despite the fact that many people might still want to
travel more than 100 miles? What about electric power? Whether they are
nuclear, hydro or fossil fueled, huge facilities are required to meet the
demands of the highly populated, industrialized world we have. But then
perhaps the world would no longer be populated or industrialized, and
therefore it would not need much power.
What I'm saying, I guess, is that the costs of transportation would have to
rise enormously before local production of many of the things we use in our
day to day lives would make economic sense. And even then they wouldn't
make economic sense because the costs would be prohibitive to most
populations living within a hundred mile radius. The reason that trade
takes place is because someone else, in another region, can make something
more cheaply than we can. It makes sense to buy it from him even after
transport costs are added on. But what I hear you and Jay Hanson and
perhaps Douthwaite (though I have not read him) saying is that transport
costs will rise to a level at which no trade makes sense. The local
economy will then have to make sense, whatever its resources and cost
structure. It sounds a little like the Irish having nothing but potatoes to
eat. I'm sorry, but that does not sound like an appealing world to me. We
should do our utmost to avoid it.
You argue that the retraction of capital to the local level will make
multilateral agreements like NAFTA and MAI worthless. Sorry, I don't agree
that there will be a retraction. You can't put the genie back in the
bottle. We are now into a global society and will stay there. And I'm not
saying this is good or bad. I'm merely stating the fact that it is
happening, and we'd better learn to live with it.
Best regards,
Ed Weick
