Friday, 3 January 2020

Hyper-globalised Capitalism is Slowly Killing Civilisation

It is easier, according to the adage, to imagine the end of the world than the end of capitalism. Judging by the muted reaction to the raging Australian bush fires, the truth of that observation is being borne out. But actually it may be worse than that – it is easier to imagine the end of the world than the end of the particular version of hyper-globalized capitalism we live under.

Over the previous decade – in spite of calamitous warnings of what lies in store if massive cuts are not instituted – carbon emissions have continue to rise. Except that is for three years (2014-2016) when coincidentally world trade – but not, strangely, global economic growth – shrank.

Look closely and 2019 follows a similar pattern. According to first estimates, carbon emissions continued to increase last year, but the rate of increase – at 0.6% – was smaller than before. It compares to 1.4% in 2017 and 1.7% in 2018, according to one means of calculation, and 1.5% and 2.1% according to another. It should also be noted that the 0.6% estimate is based solely on the first 9-10 months of last years and could be revised downwards.

Coincidentally, 2019 was also a decidedly rough year for world trade – when it faced the headwinds of a trade war between Trump’s America and China. The imposition of unilateral tariffs on goods by both countries undoubtedly had a dampening effect on trade levels. After the strong rebound of 2017 and 2018, trade suffered. In October, the World Trade Organisation revised its April estimate of a 2.6% increase in world merchandise trade downwards to just 1.2%.  But given that a – possibly temporary – truce has been called in the trade war, rates may return to more ‘normal’ levels in 2020 – unless of course a global recession, or war, intervenes.

The conventional perception of world trade is that it involves the one-time transport of finished goods – clothes, cars or refrigerators for example – to the consumer. Undoubtedly that’s part of it but not all, or even most, of the story. Most world trade now occurs within firms during the production process. It is part of what are called ‘global value chains’ – where multi-national corporations scour the world for the most cost-effective and appropriate venue for making one part of a commodity – the engineering of components in one country, assembly in another (poorer) one and branding in yet another. The sinews of intra-firm trade between numerous countries involved in the construction of an iPhone illustrate the ‘new nomadism.’

But Apple is far from unique. Global value chains make up, it is estimated, 2/3rds of world trade. The ‘value chain’ of US vehicle manufacturer, General Motors, comprises 20,000 businesses worldwide, while the imported parts can make up 50% of cars ostensibly ‘made in the USA’. The World Bank defines global value chains in the following way:

Companies used to make things primarily in one country. That has all changed. Today, a single finished product often results from manufacturing and assembly in multiple countries, with each step in the process adding value to the end product.

There is a glaring contradiction between, on the one hand, wanting to reduce the world’s carbon emissions and, on the other, aiming to increase, or shore up, the volume of global free trade. Yet any number of conservative, centrist, liberal and social-democratic politicians happily exist in such a state of cognitive dissonance.

Just as it makes no sense for a consumer to proclaim a commitment to the environment while simultaneously seeking out the cheapest products regardless of how they were made, it makes no sense for corporations – and their backers in the media and politics – to say arresting global warming is their overwhelmingly priority whilst, at the same time, pursuing a production strategy whose fundamental amoral, profit-maximising purpose ensures that it won’t happen. Yet the latter is precisely what our political and economic system has reified as sacrosanct and non-negotiable.

And we are talking about maximising profit here, not the difference between profit and no profit at all. Apple, for example, would still have an ample profit margin if its iPhones were assembled in the US, not China. Just not quite as big.

But it is not, sadly, a question of corporations simply pursuing their institutionally selfish aims without the public in their domestic countries knowing or approving. They also enable us to physically and mentally outsource the problem of global warming to other countries. They are the ones burning coal to produce commodities flooding the global market, while we are ‘doing our bit’ by reducing our territorial emissions (ironically largely because we have off-shored dirty production to those very countries). It becomes a matter of out of sight, out of mind. And that suits a lot of people just fine.