Editor’s Note: The Moral Economy is a new series that tackles key economic topics through the prism of Catholic social teaching and its care for the dignity of every person. This is the eighth article in the series.
Global trade is the water we swim in. It’s the highway Walmart and the driveway Amazon box. The shirt on your back and the toothbrush in your mouth. The MacBook I write this on and the coffee I sip while making edits.
It is hard to think critically about a human activity that shapes our environment so consistently and decisively, but if we are to talk about a moral economy, we need to understand global trade. Specifically, if we are to look at trade through the Catholic social teaching prism of care for the dignity of every human, we need to better see each person involved in making and shipping us the stuff we wear, ride, eat and sleep on, and the connections between them and us. And we need to understand that, like all things in capitalism, trade gives us something good (a higher quality of life) at a cost (the decimation of manufacturing jobs closer to home).
We need to better see each person involved in making and shipping us the stuff we wear, ride, eat and sleep on, and the connections between them and us.
Long-distance shopping is not new. In the Belle Epoque era of prosperity before World War I, a London resident could “order by telephone, sipping his morning tea in bed, the various products of the whole earth,” the economist John Maynard Keynes wrote. At the time, trade accounted for around 15 percent of the global economy.
Now it is more than double that share, around a third of a global economy worth over $90 trillion in 2021, leading some economists to coin the term “hyperglobalization.”
In human history there has never been a time like hyperglobalization, when shipping costs tend toward zero, big corporations are instantly global, and the entire world has designated its most populous country, China, as the pre-eminent manufacturer of everything from toothbrushes to computers. As the world found out when it had to scramble for masks and medical devices during the Covid-19 pandemic, China doesn’t just make toys and shoes.
Hyperglobalization is why American highways and neighborhoods have almost all the same big-box chain stores and fulfillment centers for shipping out online orders; why middle-class wages are depressed in the United States while Asia is no longer poor; why China is powerful; why populists like Donald J. Trump and Boris Johnson win elections; and why the United States and Europe face a dramatic crisis of inequality between the people whom trade has helped and the people whom it has hurt.
Hyperglobalization is also the choice we have made as buyers of Nike shoes, Gap clothes and Apple laptops, and that we continue to make every time we click on an Amazon “buy now” button. Our consumption habits empowered corporations to lobby the U.S. government for lower import tariffs and free trade deals. Americans like to complain about losing jobs to global trade, but the truth is that we have used our wallets to say: We want this.
Americans like to complain about losing jobs to global trade, but the truth is that we have used our wallets to say: We want this.
True, there has been a sea change in U.S. politics. One thing that President Trump accomplished, with the help of Bernie Sanders, is to reverse the free trade consensus that had shaped U.S. economic policy since World War II. Now the consensus between both of America’s chief political parties is clear: We don’t need more trade deals. But there is no turning back the clock on hyperglobalization. We are going to keep importing because we like this cornucopia of goods.
Admittedly, global trade has done a lot of good for people in countries that were once very poor. This is something the church has noted even as it grapples with the dehumanization of the people growing your sugar and making your clothes in sweatshops. As Archbishop Ivan Jurkovic, the Vatican’s envoy to the World Trade Organization, put it in a 2017 speech, global trade “has helped to lift a billion people out of poverty in developing countries and has improved the livelihood in many developed countries.” At the same time, he said, it “can cause dislocation and uncertainty in some sectors and communities.” The benefits of trade, he argued, “have failed to reach as many people as they should.”
For if hyperglobalization has made countries broadly more equal, it has made citizens within countries less equal. The jobs lost to trade in the United States and Europe tend to be middle-class manufacturing jobs that cannot easily be replaced. Many of the same Americans and Europeans who worked in factories for $30 an hour are now working for half that amount flipping burgers or stuffing Amazon boxes. And in the United States, which has a weaker social safety net than Europe, global trade has contributed to hollowing out the middle class.
The shipping container changes everything
The arrival of hyperglobalization came after two world wars and the Great Depression crippled global trade in the early 20th century. Beginning in 1945, U.S. and European leaders argued for free trade as a way of improving global prosperity, lifting the standards of living in the developing world and fostering more interdependence between nations. They slashed protective import tariffs to open up consumer markets in the United States and Europe, allowing companies like Sony and Volkswagen to flourish by selling TVs and cars. The strategy worked: Germany and Japan used export economies to rebuild from the carnage of war.
And arguments for free markets carried the day intellectually, pushed by thinkers like the economist Milton Friedman and politicians like Ronald Reagan, with frequent references to the Smoot-Hawley tariff of 1930 as having worsened the Great Depression. The United States led the way in signing global trade agreements, and in 1995 set up the World Trade Organization in Geneva to promote free and fair trade deals.
In this century, trade has soared beyond any conceivable expectations. One reason is China’s emergence as the biggest trading power since the British Empire. But most important, the development of the shipping container in the 1960s (to supply U.S. troops in Vietnam) cut the cost of ocean shipping to a marginal amount and has permitted a colossal boom in global trade. The 40-foot steel container box, which can hold over 50,000 pounds of goods and be stacked by the thousands on cargo ships longer than football fields, is the linchpin of hyperglobalization.
In this century, trade has soared beyond any conceivable expectations. One reason is China’s emergence as the biggest trading power since the British Empire.
In his excellent new book Arriving Today, the technology journalist Christopher Mims chronicles the journey of a USB charger from its factory in Vietnam to a home in the United States. In two months, “it has traveled more than 14,000 miles, across twelve time zones, by truck, barge, crane, container ship, crane, and truck again,” he writes. “Along the way, the charger was touched by dozens of people, all of whom had their humanity, their hopes and fears, their dreams and histories, trained and channeled into achieving a maximum of efficiency, a machine-like efficiency, in order to keep pace with the automation they work alongside.”
The dramatic reduction in the cost of physically moving goods from point A to point B has permitted corporations to set up supply chains that span multiple countries. Apple, for example, uses suppliers in 43 countries. An iPhone might include a glass screen from Japan, a lithium battery from China and a GPS locator from Germany.
To be sure, supply chains have always crossed borders. Since the 1960s, auto parts have been going back and forth between Michigan and Ontario, as Ford and General Motors assemble cars. But the low cost of shipping has spawned absurd situations, like fish caught in European or U.S. waters that is shipped to Asia for processing, and then returned to grocery stores in London and New York.
At some point, most supply chains run through China, the greatest trading power the world has ever seen. When China decided to abandon its Maoist form of Marxism and reintegrate into the capitalist system in the 1980s, it did so via trade. The country built manufacturing zones where Western companies could build factories and export goods with no or minimal taxes. And Chinese diplomats did not need to lobby governments in the United States and Europe to open their markets. Those Western companies, including Boeing, Nike and Walmart, were happy to do that for them.
In 2001, with the support of the aforementioned corporations, China joined the W.T.O., which lowered tariffs on the goods from its factories being exported to the United States and Europe. Western consumers could afford more stuff; China rose from poverty.
The United States had faced imports from Japan, Taiwan and other Asian countries in the 1960 and 1970s, “but it wasn’t a knockout blow,” said Doug Irwin, a historian of trade at the University of Dartmouth and the author of Clashing Over Commerce: A History of U.S. Trade Policy. “China was different, because it made everything.”
Lost jobs and fair trade
Economists, politicians and policymakers underestimated the dependence of regional economies in the United States and Europe on nearby factories, mines and steel mills. Their closings over the last half-century have made life a lot harder, and poorer, in wide swaths of America.
Small towns, like the one in West Virginia where David Bernabo and I made the PBS film “Moundsville,” illustrate the importance of a living wage. (Also see “Living in Trump’s America: A West Virginia Town Looks for a Fresh Start,” America, 2/6/18.) With stable, middle-class incomes, places like Moundsville could rely on thousands of families to keep a community alive and stable. “Once you lost the jobs, you lost the community,” one retired teacher and industrial worker, Bill Wnek, told us. The factory floor has been replaced by service jobs at places like McDonald’s and Walmart, the town’s biggest private employer. Rates of poverty, divorce and drug use have spiked, and membership in churches and civic organizations has plummeted.
As free trade and the deindustrialization of the U.S. economy became the consensus, both religious and secular activists focused on building a more ethical and moral trading system. One approach was defined by Pope Francis in a letter to the World Bank in April, in which he wrote that “it is time to acknowledge that markets—particularly the financial ones—do not govern themselves.” They need “laws and regulations,” he said.
As free trade and the deindustrialization of the U.S. economy became the consensus, both religious and secular activists focused on building a more ethical and moral trading system.
But in a world still operating on principles of economic freedom, a more practical way to make a difference is to change consumer behavior. That is why, toward the end of the last century, a global movement adopted the concept of fair trade, making sure that everybody in the supply chain of whatever you are buying is paid fairly. The fair trade movement is not anti-capitalist but instead aims to give consumers the information they need to change buying patterns; fair trade groups do this by investigating the sources of goods and labeling them “fair trade” if they meet certain standards. By creating an alternative supply chain, fair trade seeks to distribute profits more equally and to stop child and slave labor.
In 2006, Media, Pa., a town of 5,500 near Philadelphia, designated itself the first “Fair Trade Town” in the United States. It promotes businesses that sell fair trade goods, made by people earning a living wage and not hurting the environment—goals that align with Catholic social teaching’s emphasis on human relationships and on fostering healthy local communities.
Every year, Ally Britton, the manager of a store in Media called Kuto, travels to Indonesia, Taiwan and other places in Asia with her father to buy the jewelry, scarves, handbags and clothes they sell in their store. They send 40 to 60 large airplane containers—tens of thousands of dollars of merchandise—back to the United States. “I like knowing who’s making things and where they come from,” she told me. “I’ve been able to work with a lot of women who’ve become more economically independent.”
The fair trade movement admittedly does not help places like Moundsville, and it has mainly changed niche markets like coffee and jewelry. But it has forced major corporations to make some changes. “If you go back 20 or 30 years ago, fair trade was something you bought in the back of a church shop,” Bruce Crowther, the founder of Fair Trade Towns International, told me. “Now it’s something you can buy on Amazon, or in supermarkets.” (Mr. Crowther is publishing a book in November titled Not in My Lifetime: A Fair Trade Campaigner’s Journal.)
Indeed, the basis of the fair trade movement isn’t to ban buying stuff from Walmart or Amazon. “There are too many people in the world to make big companies disappear,” said Mariana Lamaison Sears, executive director of the Fair Trade Committee in Media.
Similarly, another one of the fair trade movement’s biggest successes also illustrates its limitations. In the 18th and 19th centuries, coffee was one of the first mass-produced consumer goods supplied via global trade. Factory workers engaged in long, sweaty shifts needed the caffeine boost. But it came from a place they couldn’t see. Around 1800, half the world’s coffee was produced on the island of Santo Domingo (present-day Haiti and the Dominican Republic). Fair trade campaigners have managed to carve out a corner of the $465 billion global coffee market. And they successfully pressured corporations like Starbucks to give more money to farmers, plant trees and do other things to make coffee more sustainable. It now touts its “99 percent ethically sourced coffee.”
Fair trade coffee—even if it has its own problems—is one victory. But it doesn’t really change our dependence on imports made in China or bring factory jobs back to places like Moundsville. For now, as we try to be more loving humans, we must reckon with hyperglobalization as the way of life we have chosen.