Globalization and Trade: Historical Perspective

by Polly Cleveland

The obvious benefits of exchange, both domestic and international, led Adam Smith and the other classical economists to oppose tax and other barriers to domestic and international exchange, including domestic excise taxes, tariffs and quotas on imports, and government-protected monopolies. These arguments sufficiently impressed the drafters of the US Constitution in 1787, that they included the “Commerce Clause” (I:8:3), which effectively prohibited states from levying tariffs against each other. In England, David Ricardo vigorously opposed the so-called “corn laws,” which imposed heavy tariffs on the import of grain. Enacted at the behest of large landowners, the “corn laws” increased their rents at the expense of workers’ wages. The laws were repealed in 1846 due to a growing free-trade movement, which by then had broad support among English merchants and manufacturers.

The classical economists vigorously opposed monopolies (single sellers) and monopsonies (single buyers), both local and national. Both practices — and often the same corporation engages in both — yield economic rent from constraining production and exchange. Monopolies arise from government grants of privilege. That’s true both for “natural monopolies” like the ownership of land, and artificial monopolies like the exclusive right to sell a certain good or provide a certain service. Smith especially attacks the mercantile guilds that controlled occupations in the cities. To become a tailor or a baker, you had first to be accepted by guild member and serve years as an unpaid apprentice. Like today’s Medical or Bar associations, the guilds acted as cartels, keeping up prices by restricting membership and preventing competition.

While cities created guilds, monarchs or Parliament issued charters. These were special trading privileges, such as a monopoly on silk imports or the right to found a colony, granted to influential nobles or merchants. In fact, tariffs often served to protect these monopolies  —  and enrich the monarch. England, France, Netherlands, Spain and Portugal were perennially at war over trading monopolies. The British Navigation Acts barred the American colonists from manufacturing, and forced them to trade only with the mother country. When the British East India Company teetered on the verge of bankruptcy, Parliament gave it a special monopoly to sell tea in the colonies — inspiring the 1773 Boston Tea Party. The colonial revolutionaries played on British-French animosity to get vital French aid. The classical economists hoped international free trade would put an end to war!

The classical economists did not oppose all taxes. On the contrary: they supported taxes on the value of land and other natural resources. The British “financial revolution” of 1690-94 was founded on a stiff land tax (four shillings to the pound — 20%!), used to pay interest on bonds. (The bonds were issued to fight an ongoing war against the French.) Land taxes did not impede exchange, but rather fell on passive wealth.

Changes in Law and Reality

The world has changed in significant ways since the time of the classical economists. Governments have become a larger part of modern economies: in 1900, US government spending was less than 7 percent of GDP, and most of that was local government. Today, government spending is around 40 percent of GDP, and half of that is federal. Other major changes include: 1) the proliferation of corporations; 2) the appearance of new and often mysterious non-physical “products” including “financial products” like “collateralized debt obligations” and 3) the increasing power of giant international oligopolies.

Modern Corporations

Corporate charters were once a scarce privilege. They were granted by governments one at a time for specific purposes, such as founding a monastery, a trade guild, a colony, a town, or a college. Charters also went to “joint stock companies” like the British East India Company, with its monopoly on trade with India. Typically, such charters granted limited liability, meaning that members or investors were not personally liable for losses. In the case of trading monopolies, limited liability made it easier to raise money.

In the US, only in the nineteenth century did state governments begin to grant private owners a right to incorporate — setting off a race to the bottom in lax requirements — a race won, in our time, by Delaware. By the end of the century, monopolistic and monopsonistic abuses by the “robber baron” trusts, such as Standard Oil and AT&T, led to demands for federal action. Eventually, first during the “trust-busting” era of the early 20th century, and again during the 1930s, large corporations were broken up or otherwise restricted. Thus government came to rein in privileges once too freely granted.

Starting in the Reagan Administration during the 1980s, policy shifted towards deregulation, and serious anti-trust activity petered out. National and international mergers accelerated. The Glass-Steagall Act of 1933, prohibiting commercial banks from engaging in investment banking, was repealed in 1999, facilitating bank mergers and helping to bring on the crash of 2008.

New Kinds of “Products”

The classical economists thought of “exchange” in terms of physical commodities — wheat, sugar, cloth, coal, steel, gold and silver. Today’s markets, domestic and international, have expanded beyond physical products. We have large international markets in contracts, such as stocks, bonds, futures, patents, broadcast licenses, fishing rights, and even in “derivatives” like credit default swaps. Along with markets in contracts comes a vast thicket of international treaties to make those contracts enforceable. Many of these contracts, such as patents, in fact convey monopolies — so now we have international markets in monopoly rights — the antithesis of the original concept of free trade.

International Oligopolies, Resource Stripping and Risk

inbevIn Cornered: The New Monopoly Capitalism and the Economics of Destruction, Barry Lynn reports the growing power of international oligopolies. A handful of giant corporations — sometimes only one — now dominate almost every field of production or service. For example, two giant distributors, InBev of Belgium and SAB of South Africa, control the world beer market — including famous brands like Budweiser, Michelob, Stella Artois, Kirin, Tsingtao and Corona.  Almost the entire worldwide optical business, from manufacturing to sales outlets, belongs to a single giant Italian firm, Luxottica. The giant multinationals of course do as monopolists traditionally do: They restrict output to raise prices, reduce variety, and cut back research on new and better products.

The multinationals also act as monopsonists — sole buyers. In this role, they squeeze suppliers, eliminating many altogether and forcing the survivors to take shortcuts. The US auto companies, GM, Ford and Chrysler are no longer vertically integrated as they were a generation ago, each with their own independent supply chains. Today they all rely on the same handful of parts suppliers. The squeeze on suppliers by Walmart or Apple helps account for the appalling working conditions in Bangladesh or China. More ominously, according to Lynn, the reliance on very few stressed-out suppliers creates a serious risk of global disruptions. For example, there have been recurrent shortages of vaccines and cancer drugs due to technical problems at the plants of the few remaining manufacturers.

Ironically at the same time that the classical economists were promoting free trade, England led the pack of Europeans in conquering and exploiting overseas colonies. They forced these colonies to deliver cheap raw materials to the mother countries, as well as slaves to the Americas, and to accept unwanted goods in exchange — notably opium in China. Today, the colonial empires are gone in name but not in reality, as multinational corporations fill the Swiss bank accounts of local strongmen in exchange for minerals and agricultural commodities.

In this way, the international oligopolies also create a serious risk to world food and other agricultural staples like cotton and oils. By continually forcing down prices, the oligopolies have put many “inefficient” third world producers out of business. For example, Haiti stopped growing rice twenty years ago. Consequently, when bad weather, pests, war, or other crises damage crops, prices skyrocket and food riots break out due to the lack of alternative sources.

The proliferation of protective regulations in modern nations raises major questions for international trade, especially trade between developed and less developed nations: Whose rules should prevail, and how should rules be enforced and by whom? For example, should developed nations limit imports from third world nations that pay low wages and don’t enforce worker safety laws? What about shrimp from Southeast Asia, where shrimp farms are destroying mangrove swamps? What about palm oil soap, when palm oil plantations are destroying Indonesian rain forests? Finally how should nations deal with the international oligopolists, who have the implicit or even explicit support — including military support — of the US and other powerful nations?

Redefinition of “Free Market” and “Free Trade”

In the transition from classical to neoclassical economics, the meaning of the terms “free market” and “free trade” subtly changed. The term “free” came to mean “free of government interference.” This is sheer ahistorical nonsense. From the earliest times that people have regularly met for exchange, government has necessarily provided at least a safe physical space. That government might have been no more than the local chief, who protected the traders for a cut of their profits. The early Sumerian, Chinese and Egyptian governments not only provided market places; they also built roads to those markets. They established and enforced systems of weights and measures, as well as standardized forms of money. They also drew up sets of rules, such as the Code of Hammurabi, and provided courts to resolve disputes. In the time of Christ, under the Roman Empire, it’s no surprise to find money-changers in the temple courts, along with all sorts of other merchants — because that was a nice, safe, central location for a market.

ronzalme_walmartGenuine free markets require governments that actively prevent coercion, fraud or monopoly. Good modern governments also help participants find the information necessary to make good decisions, such as requiring accurate labels. And they restrict transactions that could do damage outside the market, for example, barring trade in skins of endangered cats, or requiring background checks on gun purchasers. Even further, genuine free markets require governments that provide some sort of social safety net, including bankruptcy protection, to enable participants to risk innovation, and to protect losers when tastes and technology change. Yet conventional economics textbooks assume genuine free markets just pop up spontaneously like mushrooms after a rain.

Internal contradictions of international free trade policies

While “free markets” implicitly assume a single government, “free trade” necessarily implies the involvement of multiple governments. That’s where problems really begin. Different governments have different rules for labor, property rights, environment, health, consumers, patents, finance and many other areas. They also incline to protect “their” citizens and corporations against the others, regardless of merits.

Dani Rodrick puts it well: “We cannot simultaneously pursue democracy, national self-determination, and economic globalization. When the social arrangements of democracies inevitably clash with the international demands of globalization, national priorities should take precedence.”

International trade agreements

International trade agreements originally — and to some extent still — serve a reasonable purpose. “I’ll reduce tariffs on steel imports if you’ll reduce tariffs on wheat imports.” That’s always a tough deal to make given pressure from domestic producers of steel and wheat, as well as possible job losses for workers producing steel and wheat. But such a deal increases competition and lowers costs overall, while domestic safety nets should compensate losers.

The new style of trade agreements, GATT-WTO, especially bilateral agreements like NAFTA, Columbian and Korean free trade agreements, and the proposed new Trans-Atlantic Free Trade Agreement (TAFTA) and the Trans Pacific Partnership (TPP) — these are different animals altogether. In essence they say, “I’ll enforce your monopoly if you’ll enforce mine,” and “I’ll wipe out my regulations if you’ll wipe out yours.” They are the ultimate gift to multinational monopolists, granting them worldwide protection from competition and regulation. They are royal charters on a global scale, constraining the domestic policies of subordinate nations just as the old British East India Company controlled Indian trade and taxes.

Free domestic trade remains vital to economic functioning, subject to reasonable restrictions for protection of consumers, workers and the environment. Free domestic trade should also include protection from monopolists and monopsonists — a central idea of the classical economists, but now almost forgotten.

Genuine free international trade remains vital too, especially for smaller nations. However international “free trade” has often come to mean in practice freedom of multinational monopolists to strip natural resources from third world countries, to gouge consumers and squeeze suppliers. This is quite the opposite of what the classical economists meant.

The TPP: Privilege is the Product

by Lindy Davies

The debate over the Trans-Pacific Partnership, or TPP, arouses Great Passions. This is not a new thing. Debates over international trade have aroused great passions for the better part of two centuries. Why do these questions seem so intractable?

The basic argument for free trade is quite simple. They make nice lightweight hats in Panama, excellent cigars in Cuba; London has deep wellsprings of legal scholarship; poppies grow well in Afghanistan. It pays to do more of what you do well, trading your surplus with others who are good at making the things you want.

It’s Imported!

I’m old enough to remember when “imported” products had cachet. If someone is willing to go to all the way over there to get the stuff, it must be better! Right? I was chagrined to encounter my own illogic in this regard when, in a Glastonbury pub, I ordered some Tanqueray gin. It was my favorite brand here in the states. I thought I’d enjoy it at its source, but the barkeep had no idea what I was on about. He went and asked his more-experienced mate, who explained that Tanqueray was just the rotgut they bottled for export. “You want Gordon’s” he said. Was I being hoodwinked? The gin & tonic tasted pretty good, but I was confused; in the US, Gordon’s is the rotgut. Economic behavior is complex. Often, value is shown to be subjective; in blind taste tests, a surprising number of people choose the rotgut.

You can’t deny that international trade has many advantages. Asparagus, for example, is a spring vegetable with a short growing season — yet you can pretty much always get it at your supermarket. In 2009 the United States imported 344 million pounds of asparagus. Most of it came from Peru, where tariff reductions, aimed at incentivizing crops other than coca, have had a good effect. But, winter comes to the Southern Hemisphere during California’s growing season. The US managed to export 16.4 million pounds of asparagus in 2009. (The asparagus champion is China: 88% of world production.)

Protectionism, on the other hand, can create real problems: the SUV craze, for example. By the turn of the century, the US auto industry had hit the skids. Detroit’s reputation for innovation, snazzy design and high resale value was a bygone thing. Tariffs and quotas increased the price of imported cars, but not enough. What to do? Rather than working to build a better vehicle, the US auto industry, with help from the tax code, set out to build a uglybetter market. Automakers already offered well-established brands of pickup trucks. Because these were designed as work vehicles, they were subject to less-stringent CAFE emission standards — about 40% less than passenger cars. The running gear was already in production; all they had to do was to slap luxury bodies on them, with air-conditioning, nice upholstery and sound systems: Voila! The Sport-Utility Vehicle was born. They were big, heavy, carbon-belching gas guzzlers — and, if you use an SUV for work, even a little, it can entitle you to a larger tax deduction than a regular-size vehicle! Make no mistake: the SUV is a harmful phenomenon that was almost entirely created by protectionism.

More complicated than that

Starting with the North American Free Trade Agreement (NAFTA), however, the international trade debate started to be about more than simple trade in goods. If it were just a matter of free trade, we’re told, it would be fine, but NAFTA also restricted nations’ rights to protect their environments, or the safety of their workers. These “nontariff barriers to trade” were disallowed under the agreement. Transgressions would be adjudicated by an unelected panel, whose members would represent the transnational corporations that helped to write the trade rules in the first place! Thus, critics claim, NAFTA (and, to a greater or lesser degree, every international trade pact that followed) served to undermine national sovereignty and increase the power of multinational corporations.

The NAFTA agreement was over 300 pages long. Proponents of free trade point out, sensibly, that you don’t need 300 pages of regulations to cut tariffs. Chapter 11, which deals with investor protections, is particularly notorious. It provides, essentially, that a business may sue for damages if a country’s regulatory policy reduces the profitability of an operation that a business has established there. This is a big part of the much-talked-about “race to the bottom.” After all, escaping regulation is a big reason why corporations have moved where they’ve moved.

Public Citizen has published a handy chart of all the Chapter 11 suits that have been brought to date, against the United States, Canada, Mexico and eight other nations (now known as NAFTA-DR/CAFTA). It is interesting reading. A few facts jump out:

  1. The majority of cases have been dismissed or abandoned: of 88 claims brought so far, 15 have resulted in government payouts to investors (though a few are still pending). The awards given have always been far less than the amount initially sought; all told they have amounted to $444.1 million since 1994 (out of many $trillions worth of international trade).
  2. No suits against US companies (out of 20 attempts) have resulted in government payouts, although a couple are pending — including “Victims of the Stanford Ponzi Scheme,” which sued for $50.8 million in 2012.
  3. Most of the suits are relatively small — but one group of Big Players, Agribusiness, has done rather well. Cargill, Archer Daniels Midland and Corn Products International shared a $187 million payout over a Mexican tax on High Fructose Corn Syrup.
  4. Small or not, many of the investor-protection suits brought under NAFTA clearly represent rent-seeking schemes that undermine sovereign prerogatives. A 2014 case against the Dominican Republic was brought by three investors who sought to expand their gated resort community into a protected national park. They are seeking damages of $20 million; the case is pending.

Was NAFTA more bad than good?

The TPP has been called “NAFTA on steroids” — but there is probably some hyperbole in that. NAFTA serves as the basic model for multilateral trade agreements in the 21st century: tariff reductions, investor protections, mind-numbing complexity and opaque process. One way, therefore, to sort out our thoughts about the prospect of the TPP is to ask whether, on balance, NAFTA has been a good thing. A clear answer to that question, however, is not forthcoming: there is a whole lot of partisanship out there.

I tried to sample various points on the ideological spectrum to try to get a handle on that question. Everything is rhetorically churned-up; one must wait for the mud to settle — but agreement slowly emerges on a few points:

  1. Trade liberalization under NAFTA, etc. has fostered economic growth in all the nations involved (that’s growth defined in a conventionally problematic manner, but, still). It has increased labor productivity, and increased employment.
  2. These long-term trends are obscured by local and cyclic factors: the Great Crash of 2008, obviously, but also the Mexican currency crisis, just as NAFTA was coming online, and the ongoing War on Drugs, which has had devastating ramifications in Mexico.
  3. Critics often cite the persistence/increase of trade deficits as a measure of job losses due to trade. But, there are many reasons to doubt this connection. For one thing, as long as the US has a negative net rate of public and private saving, it is going to have a trade deficit. However, high trade deficits have historically been associated with low unemployment and a growing economy. Furthermore, the outsourcing of parts of the production process complicates the trade-deficit picture. For example, if a US car company opens a parts plant in Mexico, those parts of US-made cars are imported, adding to the US’s trade deficit with Mexico, even if the finished car is sold in the US.
  4. The increased productivity associated with trade liberalization has been accompanied by great increases in inequality, of both income and wealth. All the commentators agree on this correlation — though the causation is less clear. Joseph Stiglitz, for example, writes (New York Times, March 15),

…there is a real risk that individuals moved from low productivity-employment in a protected sector will end up zero-productivity members of the vast ranks of the unemployed. We can argue over why our economy isn’t performing the way it’s supposed to — whether it’s because of a lack of aggregate demand, or because our banks, more interested in speculation and market manipulation than lending, are not providing adequate funds to small and medium-size enterprises.

Even the conservative Peterson Institute on International Economics, which issued a detailed report in praise of NAFTA on its 20th anniversary, concedes the precipitous rise of inequality — but “Whether globalization makes a major or minor contribution to the good fortunes of the ‘top 1 percent’ is another question, one that we do not explore.”

Trade as Foreign Policy

The Obama administration stands resolutely behind the Trans-Pacific Partnership. Indeed, critics of the agreement may end up making common cause with congressional Republicans who simply want to thwart anything Obama tries. For his part, the president has urged us not to equate TPP with NAFTA. For instance, the Washington Post reported:

Obama… has urged Democrats not to view [the TPP] in the same frame as past deals, such as the North American Free Trade Agreement. The president said the TPP aims to boost workers’ rights and environmental standards for businesses in some Asian nations. “Don’t fight the last war,” Obama said.

Nevertheless, the devil is in the details, and wow, are these international trade pacts ever detailed. Though the basic shape of the TPP (basically) resembles that of NAFTA, there is one very significant difference: its strategic significance. It is more than just a trade thing; it is part of Foreign Policy. The “giant sucking sound” that Ross Perot famously predicted would come from NAFTA never really materialized — but there has been a significant suction of jobs Chinaward. The People’s Republic of China keeps its own counsel on trade matters; it is not the least bit interested in entering into a trade pact with the US, and it would like to have as much economic influence over its Pacific-rim neighbors as it possibly can. Thus, if the United States fails to secure a trade partnership with the countries in the region (a region which, in today’s shrinking world, includes places like Chile and New Zealand), China most likely will. And it will do so under even less stringent safety and environmental rules, arbitrated through even less transparent mechanisms, than are likely to be in force under the TPP.

There is a reason why trade issues get so complicated, run hundreds of pages, take tens of years to negotiate and are never adequately explained. I think there’s a basic, structural reason. The same reason explains why the US Tax Code is so absurdly huge and abstruse. It has to do with privilege: large and small.

Privilege is the Product

Here’s the thing: we live in a political/economic world, today, that is utterly suffused with privilege. Economists talk about “rent seeking” — but that term is subtly inaccurate, I think; it implies that rent needs to be actively sought — when in fact, it’s everywhere, all around us, influencing every decision we make. We might not get the rent. Most of us get very little of it, indeed. But we know it’s there to get. What else explains the insane popularity of casino gambling, sports betting, state lotteries?

China: Not so many bicycles, these days

China: Not so many bicycles, these days

What modern trade agreements do is apportion privileges. Though they do serve to lower tariff barriers, which is a good thing, calling them “Free Trade” is an Orwellian inversion. That’s why they they must be complex — every local widgeteer wants to preserve his widgetorium’s profitability (oh, and the jobs, those too). Competitiveness at whacking out widgets is not what counts; one does not get ahead by actually making things. It’s all about connections and pork.

That means that in our economy, the real product is privilege. Goods and services are merely the understory, the context in which privileges are traded. The text of a NAFTA or a TPP can be seen as a modern Domesday Book — a record of allotted spoils.

How did we get here? Well, I think that many people have a sense of our messed-up economic order as a dystopian market of privileges, to which actual production is incidental. However, not very many many people realize that these everyday privileges, these little bits of trade protection or union contracts, patent, subsidy, or tax-deductible charity organizations, are small change. All of them are just offshoots of the basic privilege, the mother of privileges, and the one that will still be left even if, one by one, those small privileges are all abolished.

An economy in which privileges are the product is, by its nature, inefficient. We waste time and energy, in bribing and whining, that we could apply to figuring out how to make a better widget with less work. Getting rid of a small privilege — such as, say, the menu of pork that makes a Ford Expedition seem like a sensible vehicle choice — makes the whole economy more efficient. When the economy gets more efficient, the factors of production — labor, capital and land — are worth more. Labor can work harder, and produce more capital. But you cannot — ever — do that without land! Owners of land, as such, make no contribution to production, yet they collect an ever-increasing fee, just for allowing land to be used. That is the mother of privilege. That is, as Henry George so aptly put it in 1886, “the robber that takes all that is left.” It’s something we usually take for granted. Just the way things are. Yet it is the source of all the complexities and dysfunctions that underlie the debates on international trade. Until we understand that, we’ll never make sense of “trade issues.”

A Georgist Perspective on Globalization

by Fred Foldvary

Globalization is the reduction, and ultimately the elimination, of barriers to movements across country boundaries, so they become more like movements within a country. Movements include imports and exports of goods, inflows and outflows of money and financial securities, the movement of people for migration and travel, the transmission of radio signals, and access to Internet web sites across national boundaries. Continue reading

What’s in a Name?

by Lindy Davies

In his well-crafted report on last July’s IU conference in London, Bill Batt included the following news from the Business Meeting:

From its inception, the name has been ‘The International Union for Land Value Taxation and Free Trade,’ even though it is widely understood that the words “Free Trade” have today become linked to an economic philosophy of neoliberalism with corporate trade rules that are detrimental to labor and the environment. Continue reading

Emerging Greenland

by Lindy Davies

greenlUp until recently, here’s how much I had thought about Greenland: it was a big old white landmass on a map of world resources, so I stuck in the resource label “Ice” as a joke. However: it’s an ill wind that blows nobody any good. It’s possible that the strange winds of global climate change will blow some good things to Greenland, the oft-forgotten largest island in the world. It’s not a sure thing, but it’s tantalizingly possible. Greenland’s situation right now is fascinating — and Georgists would do well to pay attention to it.

Climate change, manifested in melting glaciers and rising sea levels (not to mention changing migration and weather patterns) is by no means theoretical in Greenland. Here’s a poignant example: here, as in so many other places, indigenous ways of life are slowly adapting to the dubious advantages of modern civilization. Hunting and fishing are still economically important to many Inuit Greenlanders. Few make their entire living from it, though; many more supplement what meager jobs they can find — particularly on Greenland’s rugged Western coast, three-quarters of which is above the Arctic Circle. Traditionally, hunting out on the pack ice was accomplished using dogsleds. Young men, who are more attracted to modern things in general, are more likely to rely on snowmobiles — but in recent years their elders have been trying to convince them to go back to the old ways. Why? Because it’s safer. The ice is getting thinner and thinner. Dogs can sense when ice is too dangerous to cross.

Greenland remains a province of Denmark, though it has its own Parliament and Prime Minister. Most of its public spending comes from an annual subsidy from Denmark of about $600 million. However, some 88% of its population are Inuit, and the main language is the native Greenlandic. In a non-binding referendum held in 2008, voters favored independence by 21,355 votes to 6,663. (That may seem like a small turnout, but in fact, it represents 48% of the entire population.) As popular as independence from Denmark is, though, it seems unfeasible if Greenland cannot become economically self-sufficient.

That, however, may soon happen. A number of recently-emerging factors are making Greenland’s economic future seem bright, and they all have to do with global climate change. To begin with, its southern cities (and they aren’t big cities — the capital and largest city, Nuuk, has just over 15,000 people) are attracting more cruise ships during the summer travel season. In the long run, though, the bigger story is that receding glaciers and sea ice have begun to make offshore oil reserves, onshore natural gas deposits and rare-earth minerals accessible to mining. And if that weren’t enough, the prospect of Arctic-ocean shipping, due to greatly diminished ice, would bring international trade routes right past Greenland.

niceinuitWhen all these large-scale economic changes come, it’s likely that Greenland will decide that its North American neighbors have more to offer it, in terms of trade and defense alliances, than its Scandinavian colonizers. But, would such an arrangement be good for the people of Greenland, not to mention our ever-more challenged planet? The resource curse has proved contagious among postcolonial nations; Greenland seems likely to catch a bad case of it.

It would be a shame if it that were to happen, and we Georgists did nothing to stop it. At this point the conventional wisdom seems to be that in order to have any chance at secure self-governance, Greenland would have to seriously play ball with corporate interests — a la Nigeria. But there might be another, far healthier game for them. It seems to me that it would be helpful if the people of Greenland were to realize that the resources of their nation belong to them. Furthermore, it would be very helpful indeed if the people of Greenland were to realize this truth not just in an earthy-crunchy moral sense (which is now 99% of the world will take it, if such an announcement is made) but in terms of practical economic and fiscal policy.

Now, the people of Greenland might not want gigantic oil rigs churning away during the three or four months of total winter darkness. They also might not need to make such a Faustian bargain. Remember, the country only has 57,000 people. As global demand for rare-earth minerals grows, and their major supplier, China, is starting to run short, the lodes of niobium, tantalum and stuff under Greenland’s thinning ice cap get more and more attractive. Could these things be mined sustainably? There is concern. Greenpeace has had a strong presence in Greenland for many years, and its folks tend to think it can’t. Then again, though, Greenpeace’s presence in Greenland seems motivated more by a concern for the entire planet than for Greenland itself, or its people — and this has engendered some resentment. In 2010, for example, Greenland’s Socialist prime Minister, Kuupik Kleist, spoke out against Greenpeace’s action to shut down a deep-sea exploration rig, stating that “This is clearly an illegal act, ignoring the rules of democracy.” Additionally, Greenland joined in protesting the European Union’s 2010 ban on seal imports.

Some observers tend to stereotype Greenland’s Inuit population as beaten-down, alcoholic-tending natives seeking what they can get from the outside world. Others are eager to romantically praise and defend their traditional culture. It’s likely that both sides make accurate observations. Greenland’s indigenous people face the same dilemmas and challenges that native peoples have faced for centuries. But there are differences. For one thing, seldom before has a First Nation made up 87% of the population of a resource-rich emerging country.

greenangelsAll of these facts, plus the fact that Greenland’s population is so small (any of New York City’s 59 Community Districts has half-again as many people) could offer the Georgist movement an amazing opportunity, if we could summon the courage and resolve to go for it. It would need to be a team effort, and it would require financial support. But: there is already a wealth of good Georgist material in Danish (which is the second most-spoken language in Greenland). There are any number of Indigenous-rights organizations that are concerned about Greenland, with whom we could make common cause. Facebook tells me it has 9,400 users who speak Greenlandic. Icelandic pop star Bjork once dedicated her song “Declare Independence” to the people of Greenland.

Could we cure the resource curse, and bring the Alodia story to life in the real world? We only won’t know if we don’t try.

 

 

Nigeria’s Breathtaking Opportunity

by Lindy Davies

Recently, Nigeria has completed a rather difficult program of government-mandated bank consolidation. This has been on the HGI’s radar screen because our website, having shown some passing interest over the years in the economic affairs of Africa, has been besieged with requests for information on Nigerian banking. The story that emerges is fascinating, and offers important lessons for the rest of the world at a crucial juncture in history. Continue reading