Herman Daly tells it like it is...

The following is an excerpt from a 1995 interview with Herman Daly conducted by the Developing Ideas Digest, put on by the International Institute for Sustainable Development. A little outdated, but the fundamental structure is what is in question here, and that has only gotten worse…

DI: Why is free trade necessarily bad for the environment? ...

Daly: My problem with free trade is partly due to the environment - but it's larger than that. I think it's a bad social policy and bad environmental policy. By free trade, what I mean is deregulated international commerce. So the opposite of free trade is not autarky or no trade. The opposite is not state trade or total monopolization of trade. The opposite of free trade, which is deregulatory, is regulated trade. Trade which is regulated in the national interest by governments involved. And the notion that there should be no national interest [in] this trade across national boundaries, that the state has no interest in this, that this should be left entirely to the mutual benefit of the trading parties ... I mean imagine if this logic were applied say to corporations - individuals within corporations just trade with each for their own mutual advantage - nonsense! ... Every deal that corporation people make has to be vetted up through higher authorities to make sure that it's really in the interest of the larger entity. And so I think the same thing is the case with trade across national boundaries. The reason again goes back to community because if you have the free flow of goods and capital and, increasingly, labour across national boundaries, then you really lose any possibility of policy at the national level. You can't have an interest rate policy that's different from your neighbour because capital is mobile. You can't have environmental cost internalization standards that are different from other people because if you have higher standards that'll raise your prices higher than your trading partners', and you put your own people at a disadvantage. So you have to have some equalizing kind of tariff.

So the argument is not that there should be no trade. Trade can be very beneficial. But the argument is that trade should not be based on standards-lowering competition. You have to maintain certain standards. And standards-lowering competition can be weakening the environmental standards to give cheapness, weakening social insurance standards and safety standards to get cheapness. Weakening standards of child labour ... throwing in prison labour even, [about] which even GATT says, 'Prison labour is too much, we'll retaliate against that.' So I think maintaining these social standards which have been actually hard-won over many years - I mean the length of working day, that's been limited; child labour, these sorts of things. You can make products cheaper if you lengthen the working day, if you employ children ... and so I think there has to be this national community protection of basic standards. We can't allow that to be competed away in the name of free trade.

Interestingly, the classical doctrine of free trade as it came from David Ricardo is much more in line with what I've just been saying because in that system, capital did not cross national boundaries. Capital stayed at home and labour stayed at home. The only things that were traded were goods. So you really did have a much more community/national orientation. You have national capital cooperated with national labour - albeit with class conflict, the national community was able to contain that class conflict. You had national labour and national capital cooperating to make national goods, and those goods that competed internationally with other countries and their teams.

Nowadays that's all gone, nowadays you have free capital mobility and so you have a capitalist of one nation [saying] to the labourers of that nation, 'Sorry guys, we live in a global economy, I can employ labour at one-fifth of what you want and I can bring the product right back here and sell it, so you guys are out of line, too bad.' And the labour comes back and says, 'Well gee you know, there are bonds of national community.' 'I just told you we live in a global community. All that stuff is over with. All that old national stuff that caused wars. We live in a global economy. Everything is going to be peace now. Don't you want the Chinese labourer to be as rich as you are - are you a racist?', and on and on. So this idea of mutual responsibilities in a national community [is] being dissolved by this idea of the global world economy. We have a global community now superseding the national community - that's passé, now it's global community. That sounds good if you say it fast enough and don't stop to think about. But it's empty. There is no global community. Where community really exists is at the national and subnational level where people take on mutual responsibilities for each other. Not at the global. Now maybe someday there will be a global community. But our view - of John Cobb and I - is we're all in favour of global community, but it would have to be a federation of strong national communities - a community of national communities. And the present vision is not of a federated community of communities, the present vision is of a cosmopolitan world without borders in which you erase national community and replace it with this globalized single sort of tightly integrated world community.

So the vision of a globally integrated economy is really a single system. You have one tightly integrated system that's mutually dependent across the globe. That's a very dangerous kind of system - something goes wrong, you're in big trouble. We prefer nations to be much more fundamentally self-sufficient, not totally self-sufficient, that's too expensive. But to the degree possible, strive for self-sufficiency and maintain loose international trading relations to make up for where it's hard to be self-sufficient. I mean everyone can make their own aspirin and matches, you don't need to trade multinationally for that. But there are some things that you do need to trade for. That's kind of the vision that we put forward, and you maintain more local control over you economic life. If you don't, then control is shifted far away and the foreigners who control the capital investment in your country may be lovely decent people, they may even be nicer than the local people, but they're far away and they don't really know or have an interest and a feel for what happens there. This is a vision that John Maynard Keynes expressed very similar kinds of notions [to] when he wrote on national self-sufficiency, and his views along with the others have kind of been swept aside in this globalization mania, which really serves the interests of the global multinational corporations because what holds them in check is the nation state - the rules of the nation. So if they can sort of weaken the nation and play off one against the other, then they don't have any real restraints. ...

The other way of controlling international capital would be to have international government and some people advocate that. I see that as frightening. International government. Some things have to be international, for example, we have to deal with global CO2 and things [like that] at a global level. But again that has to be a federation of national governments because once you have a treaty for global CO2 or something, who's going to enforce it? It has to be the national governments who signed the treaties. They have to be strong enough to enforce within their own boundaries the conditions that they agreed to in the international treaty. And if capital, labour and goods flow freely across their borders they don't have any basis for exercising the control that they agreed to. Long-winded answer, I'm sorry.

No problem, Herman – for the full interview click here.

And apologies to the anonymous commenter who finds the sign off a bit cheesy – I hear ya – but it stems from a phrase big-wave surfers use to encourage focus when things get hairy, and seeing as the ride to sustainability is the biggest wave humanity has ever faced, I think it’s appropriate. So – Stay going…