Three Reasons Why Global Trade Offers Hope for the Planet
Let's start the new year on an upbeat note:
When we focus on the day's headlines, or get caught up in the petty frustrations of everyday life, it's easy to overlook how dramatically the world has changed for the better in the last decade or two.
We get frustrated when a call gets dropped on the cell phone, forgetting that mobile phones were a luxury until the mid-1990s. I got my first phone -- no texting! no photos! no maps! no web access! -- in 2001.
We don't like to wait in line for cappuccino, forgetting that few Americans had the chance to enjoy such brews until recently. Hard as it may to believe, there were a mere 165 Starbucks stores in this great land of ours when the company went public in 1992. Today, there are more than 11,000. We forget, too, the magic that goes into the making of a cappuccino.
More importantly, we worry -- as well we should -- about the state of the U.S. economy, but we overlook the happier news that about half a billion people have emerged from poverty in China since 1990. Well, that's China, you says, but even here in the U.S. -- despite legitimate concerns about income inequality and declining social mobility -- Americans are demonstrably wealthier, healthier and more free than we were at any time in our history.
Declinism -- the idea that things are getting worse -- has a long history, and it remains fashionable on the left and on the right.
But if history is any guide, and it is, there's overwhelming evidence that life on this planet, and in this country, is, in the words of Lennon & McCartney, "getting better all the time."
I'm feeling unfashionably upbeat at the moment because I've been reading The Rational Optimist (Harper Collins, $26.99) by Matt Ridley, a sweeping history that attempts to explain how prosperity evolves. The book is controversial, especially around the issue of climate -- here's an attack by George Monbiot, and Ridley's response -- but its core argument is persuasive: That prosperity is driven by man's unique ability to trade, specialize and innovate. ("The propensity to truck, barter and exchange one thing for another" is the way Adam Smith put it.) Ridley's claim that the world is richer, healthier and kinder seems to me to be unassailable, based as it is on both statistical and anecdotal evidence:
In 2005, compared with 1955, the average human being on Planet Earth earned nearly three times as much money (corrected for inflation), ate one-third more calories of food, buried one-third as many of her children and could expect to live one-third longer.... She was more likely to be literate and to have finished school. She was more likely to own a telephone, a flush toilet, a refrigerator and a bicycle. All this during a half-century when the world population has more than doubled, so that far from being rationed by population pressure, the goods and services available to the people of the world have expanded. It is, by any standard, an astonishing human achievement.
He goes on to say:
The availability of almost everything a person could want or need has been going rapidly upwards for 200 years and erratically upwards for 10,000 years before that: years of lifespan, mouthfuls of clean water, lungfuls of clean air, hours of privacy, means of travelling faster than you can run, ways of communicating farther than you can shout. This generation of human beings has access to more calories, watts, lumen-hours, square feet, gigabytes, megahertz, light years, nanometres, bushels per acre, miles per gallon, food miles, air miles and, of course, cash than any that went before. They have more Velcro, vaccines, vitamins, shoes, singers, soap operas, mango slicers, sexual partners, tennis rackets, guided missiles and anything else they could even imagine needing.
Ridley's book is an intellectually ambitious, touring 10,000 years of human history and building upon the insights of Smith and Charles Darwin. (The prologue is called "when ideas have sex.") How prosperity evolves is through trade -- simply put, the idea that people are always working for one another, whether they know it or not. Trade is among the most boring of journalistic topics, but if you set aside the back-and-forth about negotiations with Columbia or Korea, it is a marvelous thing.
The cappuccino, for instance, is unimaginable without trade, as the economist Tim Harford writes in the introduction to his book, The Underground Economist. As he explained on a recent Planet Money podcast, no one can make a cappuccino: You have to grow the coffee, raise the cows for the milk, produce steel and manufacture a machine (the ones in my favorite coffee shop come from Italy), and we haven't even considered how the electricity to run the machine is generated, who fabricates the chairs and tables in the shop, and so forth.
A famous 1958 essay called I, Pencil -- the autobiography of an Eberhard pencil by an economist called Leonard Read -- makes a similar point, as does Ridley when he writes about Louis XIV, who had 498 people devoted to preparing his meals at Versailles in 1700. Yet the supermarket shopper or restaurant goer in suburban Washington (or LA or Paris or Warsaw) has more dining options than the Sun King ever did.
Fresh Alaskan salmon? Frozen pizza? Chinese take-out? Yes, yes and yes.
"Never before this generation," Ridley writes, "has the average person been able to afford to have somebody else prepare his meals ... My point is that you have far, far more than 498 servants at your immediate beck and call. Of course, unlike the Sun King's servants, these people work for many other people too, but from your perspective, what is the difference?"
Think about it -- it's remarkable that whatever it is that you have chosen to do has enough value in the market (or at least I hope it does) to provide you with access to the products and services made by literally millions of people who do what they do. Ridley makes this point nicely in an entertaining podcast with my friend, the economist Russ Roberts, at EconTalk.
Now -- I am not at all persuaded by Ridley's last chapter, and certainly not by his argument that the threats we face from climate change are overblown. (His blog links to Bjørn Lomborg and Anthony Watts of Watts Up With That, neither of them climate scientists.) Having said that, he doesn't advocate ignoring the problem; to the contrary, he says that the best way to promote alternatives to fossil fuels (or encourage geonengineering schemes) is to "enact a heavy carbon tax and cut payroll taxes." That would discourage carbon emissions and encourage employment. I couldn't agree more.
Nor do I want to leave you with the impression that Ridley's worldview is in any way an excuse for doing nothing about the world's great problems. Exactly the opposite: His is a robust optimist, a believer in economic progress, human ingenuity and bold experimentation:
It is precisely because there is so much poverty, hunger and illness that the world must be very careful not to get in the way of the things that have bettered so many lives already -- the tools of trade, technology and trust, of specialization and exchange.
So next time you make a call on your cell phone, order a cappuccino or write with a pencil (or on a laptop), take a moment to feel a sense of gratitude -- to the millions of people whose ingenuity and interdependence make it all possible.