RICARDO'S RATIONALE

A Canadian union would be an improvement on Confederation but we would still have to deal with the "global economy". Globalists say it's the way of the future but actually the global economy is the old colonial economy come back in a new form.

In colonial days France and later Britain told Canadian settlers what raw materials to produce and which finished products to buy. At the height of the British Empire we were a small part of a global economy planned by and for England.

The new imperial powers are the Trans-National Companies, which can make or break the economies of small countries by deciding where to buy their raw materials and make their finished goods and which dominate markets with enormous advertising power.

The companies are privately held and accountable to no-one, but they are richer and more powerful than some so-called independent countries. Each of the 15 biggest TNC's has a gross income bigger than the GNP of any one of 120 independent countries.

The 350 biggest TNC's control about 40% of the world's merchandise trade, and their sales are equal to about one third of the GNP of the industrialized countries. They are beyond control by individual nations because if one government tries to control a TNC, the company can move to a country with a more cooperative government.

Many trans-nationals are based in the United States, Japan and England but others are based in Switzerland, Germany, France and even Canada. In most cases the country of origin does not matter much because in many cases the owners and the senior executives of trans-nationals are loyal to the companies themselves, not to their native countries.

And they all like Ricardo's Rationale. David Ricardo was an English economist in the early 19th century, who took one of Adam Smith's ideas farther than Smith did.

In the opening to {Wealth of Nations} Smith describes a workshop in which 10 men make pins. The operation is divided into steps, each man performs one step, and together they make more pins than they could if each man worked alone.

Smith's pin-makers are efficient because they divide the work up, and each man specializes in one job. Ricardo suggested that communities and whole countries should specialize and produce only the goods they could produce more efficiently than any other. Even when two countries could produce the same kind of goods, he said, each one should produce the kind of goods in which it has a "comparative advantage".

"Two men can make both shoes and hats", he wrote, "and one is superior to the other in both employments; but in making hats he can only exceed his competitor by one fifth or 20 per-cent, and in making shoes he can exceed him by one third or 33 percent. Will it not be in the interest of both that the superior man should employ himself exclusively in making shoes and the inferior man in making hats?

Thus even if one community can make every product more efficiently than another, it should specialize only on those items it produces most efficiently, in relative terms, and trade for others. Each community, and ultimately each nation, should specialize in what it does best."

The rationale is obvious at first glance, and because of that many people never give it a second look.

It's obvious, for example, that Florida has a "comparative advantage" over Canada as a place to grow oranges, and that it makes more sense for Canadians to buy oranges from Florida than to grow them in Canada.

But Ricardo's Rationale assumes that the only value to be considered is profit. It ignores all other standards and Ricardo himself wrote that unemployment was no problem, as long as rents and profits could be maintained at a level that encouraged investment. His attitude is best summed up in his famous "law of wages."

"The natural price of labour is that price which is necessary to to enable the laborers, one with another, to subsist and perpetuate their race, without either increase or diminution."

Ricardo, in other words, expected that most people would live on the edge of starvation, with no hope for more than survival.

The "globalization" of India's cotton industry was one example of Ricardo's Rationale at work. Two hundred years ago India had a significant advantage over Britain in the ability to grow cotton but England's mechanized mills could spin and weave Indian cotton cheaper than India's village-based textiles industry.

England bought raw cotton from India, and offered cheap cloth in return. The cheap cloth was a boon to some Indian consumers, but part of the cost was the destruction of India's local industry and unemployment for millions of spinners and weavers. Local Indian princes and governors wanted to ban the import of English cloth, but England had a "comparative advantage" in weapons to enforce her ideas.

English cloth was allowed free access to India but Indian cloth imported to England was subject to tariff. When the British East India Company displaced the princes and took control of India they also taxed Indian cloth sold in India, and imposed a special tax on household spinning wheels.

As European power increased other Asian nations were allowed to retain nominal independence, but they were forced to accept manufactured goods from England or from another European power.

Through most of the 19th century Europe and the US benefited from a one-sided version of "free trade" which gave the industrialized nations free access to the resources of the world, and which allowed them to flood non-industrialized countries with mass produced products that were much cheaper than the products of traditional craftsmen.

Partly because they could not compete with European industrial power and partly because Europeans would not allow it, most countries outside Europe and the US were also unable to develop much modern industry of their own. It was because of this that most of the national inequities of the modern world developed, over the past couple of hundred years.

Paul Bairoch, director of the Center for International Economic History at the University of Geneva, estimates that in 1750 per-capita GNP was about the same in most countries around the world. The common people of Europe were not as well off as the common people of Asia, but the difference was not significant.

By 1900 the world was divided into industrial -- mostly Europe and North America -- and non industrial, and per-capita GNP was about three times as high in the industrial world as it was in non-industrial countries. By 1938 the disparity was about four to one, and by 1950 about five to one.

Our modern "global economy" got it's official start at an international economic conference at the Mount Washington Hotel in Bretton Woods, New Hampshire in July of 1944. One of the avowed intentions was to help the non-industrial countries catch up to the industrial countries.

Henry Morgenthau, US Secretary of the Treasury and president of the conference, said the intention was to create "a dynamic world economy in which the peoples of every nation would be able to realize their potentialities in peace."

The assumption was that world trade would be good for everyone and the conference organized the World Bank and the International Monetary Fund, and paved the way for the General Agreement on Tariffs and Trade. For more than 50 years the World Bank and the IMF have pressured third world countries to forget about self-sufficiency, and to concentrate on production for export.

Since then world trade has expanded by a factor of about twelve but the poor countries are poorer than ever before. From a ratio of about five to one in 1950 the disparity in per-capita GNP between rich and poor countries rose to seven to one in 1970 and nearly eight to one in 1977. Now it's about 18 to one. The numbers are even more frightening when you consider that some advanced countries, like Canada and the U.S.A., have themselves been losing ground for the past 20 years.

But promoters of the global economy keep trying. In the past couple of years the Uruguay Round of GATT talks formed the World Trade Organization, and regulations which give private companies the right to challenge "nontariff barriers" that conflict with their "right" to trade around the world. The challenge will be judged by a closed council in Geneva.

WTO regulations will not allow governments to buy from their own citizens in preference to foreigners, and they could annul some environmental and health regulations.

Critics of the organization say the WTO will over-rule US clean air laws that ban the import of goods made by methods that harm the ozone layer. Even though American fishermen are not allowed to use drift-nets that kill porpoises, the WTO may not allow the US to ban the sale of fish from countries that allow the use of drift nets. In future the agreement might prevent the US, or any other country, from banning the sale of food contaminated by residue of pesticides that are illegal in the US.

Many of the details of the World Trade Organization were worked out at the Uruguay Round of the General Agreement on Tariffs and Trade. In the fall of 1994, when the US Congress was about to accept the agreement, a group headed by lawyer Ralph Nader offered a $10,000 donation to charity in the name of any congressperson who would swear that he/she had read the 500-page document and could answer ten simple questions about its contents. There were no takers.

When the vote was delayed until December of 1994 Colorado Republican Senator Hank Brown took the challenge. He read the document, answered the questions, and then called a press conference to tell the world why he would vote against it.

He supported free trade, he said, but having read the agreement he did not think the US should accept it.

On Dec 1 1994 Congress approved the agreement by a wide margin -- even though the evidence indicates that most of the members who voted for it did not know what was in it.

Nader and others say that in effect the agreement hands over control of the world economy to Trans National Corporations, to run as they will.

Boosters of the global economy say it will make us all wealthy because it will "optimize" production and allow global corporations to take full advantage of the "economies of scale" possible in a world market. In fact "economies of scale" for most industries can be optimized in relatively small factories, and many trans-national corporations choose to optimize profits by producing goods in countries where labor is cheap, where there are no unions and where environmental controls are slack.

Some of the so-called "economies of scale" are achieved by manual workers who squat on grass mats in crude huts. Their "comparative advantage" is that they are in no position to demand a decent wage.

But that's the kind of advantage some trans-national companies like. In 1993 a survey of 10,000 companies in West Germany found that one in three intended to transfer part of their production to Eastern Europe or Asia, where wages were lower and environmental controls less stringent.

The global economy is good for big business but it's a disaster for the world as a whole, for the people who live in it, and for most national economies.

First the benefits to big business. The most obvious one is that trans-national companies can buy or manufacture their products in countries where wages and working conditions are minimal, where environmental controls are a joke and where people who make gifts to the right politicians can practically write their own laws. They can sell those products for high prices in the richest countries of the world, and make very high profits.

An article in the March 30/98 issue of {Time} magazine says that Nike pays workers $3 a day to make shoes that sell for $100 and more a pair in the US. With sales of $3.77 billion, Nike sold nearly half the athletic shoes in the US in 1997.

Canadian politicians use the global economy as an excuse to take friends and potential supporters on luxury tours of the world. The theory is that the businessmen-supporters are selling Canadian goods abroad, but that's a dubious benefit. In fact it also gives them a chance to buy goods abroad. At least one Canadian company got so many foreign orders on a government-sponsored tour that it built an Asian factory to fill them.

World trade is also good for ship-owners and it helps merchants increase their profits because they can buy goods at third-world prices and sell them at Canadian prices.

It helps some companies to dominate and control their markets. No single distributor can control the supply of goods manufactured in a country, but an importer can control the supply of goods he has the sole right to import. One of the few real benefits Canadians reap from free trade with the US is that American importers of Asian and European goods now sell their imports in Canada, in competition with the Canadian importers who were once able to gouge us for high prices.

But in most ways the global economy is a disaster for Canada. World competition has already wiped out most of our production of consumer goods, some of our mines have lost business to third world competition and we can compete in the global paper and lumber markets only by raping our forests.

The global market helped destroy the fishery of the Grand Banks. Once the richest fishing grounds of the world the Banks could support the pressure of Spanish and other fishermen fishing for their home markets, but not for the world. European fishermen caught everything they could for sale in Africa, Asia and other global markets, and helped destroy the fishery.

The global market assumes that some-day we will develop huge "world scale" factories to manufacture specific goods, but even if that happens we will be vulnerable on two counts.

One is that there is only one global market, and no one can hold it forever. Even if we develop the best whiggles in the world and dominate the market for five or ten years, we know that some day we will lose out to lower wages or perhaps to a better product made somewhere else.

And sooner or later every company that dominates a global market will lose out, because nothing lasts forever. Canadian manufacturers lost the Canadian market to lower wages and, in some cases, better technology, but we could lose a world market for other reasons.

Even if we keep Canadian wages below and Canadian technology above world averages we could lose a world market if our customers have economic problems and are not able to buy, or if our competitors have economic problems and have to sell below cost. We could lose if our customers choose to buy from a competitor because of racial or religious prejudice, or for political reasons, or simply because they have a trade surplus with another country.

Global markets are fickle, and countries that depend on them are always in danger. That's a serious problem right now for about 100,000 farmers who produce about 95% of world's vanilla on the islands of Madagascar, Reunion and Comoros, in the Indian Ocean.

Natural vanilla is very expensive because the flowers have to be hand-pollinated and the seeds harvested and cured by hand. It sells for $1,200 a pound, and it provides 10% of the export earnings of Madagascar, and 66% of the earnings of Comoros.

But the three islands face hard times within the next few years because gene-splicers in California can now produce commercial quantities of vanilla in laboratories for about $25 a pound. The vanilla farmers might be able to find another crop, but their "comparative advantage" is gone and the chances are that they will never find another global market.

Like the vanilla farmers Canadians depend on imports, and that makes us vulnerable to world events. One serious problem is the fact that we have lost control of our food supply.

I saw the first stages of that process back in the 1960's, when I began work as a newspaper reporter in Belleville, Ont. In the previous ten years one big California-based company had bought nine of the ten canneries in Prince Edward County, south of Belleville, and had closed them all. By the time I got there most local stores sold vegetables canned in California, and many of the farmers in Prince Edward County had gone broke.

There has been a slight change since then. Now most of the stores in Canada sell fresh fruits and vegetables from the southern US and Mexico. We like to think that year-round fresh vegetables represent a step up in our standard of living, but tests at the University of Guelph found that most canned vegetables contain more vitamins than the so-called "fresh" vegetables sold in most stores.

The difference is that most canned vegetables are cooked and canned within a couple of hours after they are picked, while so-called "fresh" vegetables may be two weeks old by the time a housewife buys them at a store.

But the big difference is in the economy, because we have lost most of our working farms. That looks like a small matter because farms are a small part of a modern economy -- but they are a key component.

Remember the numbers from the United States? Only 3% of the population lives on farms but the food and fiber industries, which depend on farm crops, employ 22% of the work force and make up 20% of the GNP.

Farming is less important to the Canadian economy for several reasons. One is that we can't grow cotton here, and we lose not only the cotton farms but the spinning and weaving industries that depend on cotton. In the future we might be able to make that up with hemp -- now legal as a farm crop in Canada-- but that remains to be seen.

Our big crop is wheat -- a classical colonial crop because it takes lots of land and very little labor to grow it, and because it can be shipped raw and in bulk to more advanced countries for processing. Much of the Roman Empire was built on wheat, grown in subject states for use in Rome.

We could produce most of the fresh fruits and vegetables we need but instead we choose to import them from California, Mexico and South America. That's a danger, because those imports deliver our food supply into the hands of foreign business.

What if our dollar crashed -- as currencies of other mis-managed countries have crashed in the past? If we grew or raised all our own food that would be no problem but we don't, and our cost of living is tied directly to the price of the Canadian dollar on international markets.

With a 70-cent dollar tens of thousands of Canadians have to get all or part of their food from charitable food banks. With a 25 cent dollar, tens of thousands would go hungry.

But economic problems are not the only danger we face. We know that cyclical climate changes are playing havoc with crops in some areas, and that the El Nino current is a recurring threat to the farm areas we buy our food from. If the scientists are right we can expect massive crop failures and starvation on a continental scale within ten years. If either the Americans or the Mexicans lose their crops, Canadians will go hungry.

Our own crops would be just as vulnerable to climate change as others but most natural disasters are geographically limited and the problem that destroys a crop in the southern US, Mexico or South America might leave crops in Canada untouched.

If we lose our crops we will have to buy from others, but if production is widespread the chances are that someone will have crops to sell. If the Americans lose their crops they will want ours, but we need only sell what we can spare and we can charge a high price for it. In the uncertain climate that scientists expect for the next few centuries, farming may become a high-stakes gamble in which many farmers will succeed only with occasional crops, but in which they will make big profits when they do succeed.

We can import clothes but we can also make them, and we should for a couple of reasons. One is that if our currency collapses we won't be able to afford imports. Another is that if the sources that supply us now find a more profitable business or a better market they will go into it and leave us without a source of supply. If we have our own industry, we have an assured supply.

We also have to build our own homes and that's no problem for now -- but we can expect problems in the future. In the past five or ten years American and Canadian companies have turned pre-packaged housing into a global business, and they make big profits selling homes around the world.

So far so good, but there is a kicker. At least one Canadian company has opened a packaged-home factory in Asia, to fill some of the orders it wrote on a government-sponsored tour to sell "Canadian" products. With cheaper lumber and cheaper labor the Asian factory will turn out Canadian-designed homes cheaper than they can be made in Canada, and how long do you think it will be before someone starts to sell them in Canada? If the Canadian company does not, an Asian company will.

Bafflegabbers say the new world order is a step forward and that the loss of Canadian industry is not important because we have passed through the industrial revolution and are now in a "post industrial" phase of development. That means we are too advanced to make things for ourselves, so we will work in "knowledge industries" and leave the production of physical goods to the people that poet Rudyard Kipling once described as "lesser breeds without the law".

That's supposed to be good for them because it gives them work, and good for us because it leaves us with the nice clean "knowledge industries". It sounds like a good idea, but the numbers just don't add up. Even people who work in the so-called "knowledge industries" need food, clothing and shelter, and we have to get them somewhere.

If you want food we either grow it ourselves or trade it for other Canadian products. If you want a car we either make it or trade it for other Canadian products. If we don't have the products to trade, we have to borrow money or sell off part of our country to pay for imports.

And we don't export enough Canadian products to pay for the goods we import. When you include foreign investment and the resource industries we have a positive "balance of trade" -- but we get the foreign investment by selling off our country; and a big share of the "profits" earned by resource industries and branch plants are in fact exported as dividends to foreign investors.

And I can find enough numbers right in my own home to demolish the myth of the "post industrial economy". I am a typical Canadian and I know in my own life that I spend much more on food and physical goods -- including the apartment I live in and on manufactured goods -- than on "services" or so-called "knowledge.

As an urban Canadian aspiring to middle-class status I buy a new car about every five years, and the last one cost me about $17,500. I spend a couple of thousand dollars a year on clothes and I have a couple of computers, a fax, a photo copier, TV, VCR, stereo and other electronic toys.

My apartment comes with stove and fridge, and I also have a microwave oven, blender and other toys in the kitchen.

I spend about $12,000 a year on rent, most of which goes to pay for a building made of manufactured components, and probably $10,000 a year on other manufactured goods. My wife pays for her own clothes, and spends about $7,500 a year on food for the two of us.

Between us we spend perhaps $30,000 a year in the industrial and the pre-industrial economies. From "knowledge" industries I bought the word processing program I use in my computer. It cost me several hundred dollars, five or six years ago.

My car, TV, VCR and other industrial goods have computers and software built into them, of course, but the computers and the software are just a part of the industrial goods. Some of the software in imported goods might be Canadian but I doubt it. Even if it is, it's a small part of the cost of the goods.

My wife and I spend a few dollars on books too, but not many of the authors are Canadian, and we go to some American shows. Other people may spend more on computer programs and Canadian literature, but the numbers still don't work out. Most Canadians spend most of their money on agricultural and manufactured goods. If we don't grow and make the products ourselves we have to import them, and that means we have to pay for them.

But how do we pay? With resource industries? We have already given most of our resources away to foreigners, and even they don't have many left. Resource industries produce big profits for the owners, but when the resources are developed by foreigners the profits go to foreign countries.

Service industries? That's a dream. Service industries include most of the lowest paid jobs, like flipping hamburgers and washing cars; and some of the highest, like lawyers and accountants, but they all have two things in common.

They do not produce the goods we need to survive and, for the most part, they do not produce anything we can sell to other countries.

If Marshall had been right in saying that one dollar was as good as another we could live on the so-called "service economy" but the fact is that services and trade do not create wealth and, as we spend wealth without creating more of it, we all get poorer.

Some pundits like to pretend that as Canadian industry winds down we can sell our expertise to industry in other countries, but that's just a bad joke. Pardon me while I indulge in a brief scenario.

Joe Blow, the Canadian consultant, walks into the office of Him Got Bucks, the Asian billionaire who owns 36 major corporations that make automobiles, ships, aircraft, electronic goods, chemicals and so forth. Joe speaks.

"Hi Mr. Bucks, I'm Joe Blow from Eager Beaver Consultants Incorporated. As you know we in Canada were the fourth industrial power in the world, fifty years ago. Because of our management methods we now have millions of unemployed, beggars on the street and our manufacturing industry now consists of only a few branch plants.

"In forty years you've turned a population of agricultural peasants into an industrial powerhouse.

"So my people have decided that your people need help, and they've sent me here to show you how to run your business."

Let's hope Mr. Bucks has a sense of humor.

The fact is that consultants sell knowledge and experience, and they get the experience by working in industry. If our industry can't keep up with the best in the world nobody will need our knowledge and experience, and nobody will want Canadian consultants.

Even now the consulting business is not all gain for the national economy. When Canadian consultants work on projects paid for by Canadian aid programs they do not earn foreign exchange, they're just another drain on Canadian taxpayers.

Forty years ago we had the start of a good industrial economy but for most of the last 20 years we have been running on hot air. Because we started with a rich country we got away with that for a while, but now reality is catching up with us.

And like other first world countries, we are even losing the so-called "knowledge industries" to the global economy. Thanks to telecommunications many service jobs are even more portable than manufacturing, and they are moving to low-wage areas.

Within Canada New Brunswick captured hundreds of minimum wage jobs by installing a high-tech telephone system that gave it a "comparative advantage" in the exciting field of telephone soliciting, but that's just the first step.

Thanks to the internet, any computer can work from anywhere in the world and millions of computer-based jobs are moving to the third world. High-tech service companies in Europe use computer programmers based in India's "New Electronic Export Zones" near New Delhi, Bombay, Calcutta, Cochin, Kandia and Madras, where programmers earn less than $3,000 a year. Like New Brunswick, the NEE zones, of course, have state-of-the art communications.

In 1993 Andersen Consulting estimated that US banks and other financial institutions will cut about 700,000 jobs by the turn of the century. Now we know that the loss in the United States will be even greater, because many of the jobs that are not eliminated will be exported.

The global economy is also a disaster for the third world because it enables foreign-controlled export-based development to preempt real development.

Real development for a third world country is development from the ground up. Every country needs farms and companies to make farm tools, roads and vehicles to run on them, clothes and houses and furniture.

But every country needs farms and farm tools and roads and vehicles and clothes and houses and furniture that are appropriate to the country, and to its stage of development -- and third world countries won't get them through the global economy. That's not a prediction, it's history that we have already seen around the world.

It happened when Europeans developed tea, rubber, oil-palm, sugar and coffee plantations in Asia, Africa and the Caribbean, and Americans developed parts of Latin America. I've seen some of the American coffee and banana plantations so I'll write about them and the "banana republics" they created.

Lowland farming in tropical jungle is a specific technique and it's only in the past few years that white men began to understand how well some Indians developed it. For a long time we thought they all used "slash-and-burn" agriculture, in which they cut and burned a patch of forest, then planted crops for a few years.

Now it turns out that some Indians had developed a very sophisticated high-intensity agriculture in which small patches of forest were turned into giant food baskets. White men didn't notice the small farms because they looked about the same as the rest of the forest. We never saw people working them because once the Indian farms were established, they were self-sustaining and they didn't have to be worked.

White men didn't see the native agriculture but some Americans saw an opportunity to grow bananas for the American and European markets. They chased the natives out, burned and bulldozed the forest and the native farms it contained, and built huge plantations. When the locals objected some of the planters installed their own governments and the term "banana republic" was born.

The plantations "developed" the countries in their own way, with railways and electric power and modern buildings, but the development was confined to the plantations and to a few people in the main cities. Most of the local farms were destroyed, and many of the banana republics had to import food. Because only people who worked for the Americans could afford imported food, many of the others went hungry.

Because the plantations dominated the countries most of the local culture was lost. People stopped making stone and wooden farm tools because the steel tools that were thrown away or stolen from the plantations were obviously better, but in most cases the local people did not learn to make their own steel tools. Like colonial people everywhere, they became dependent on imported manufactured goods.

After more than 100 years of development many Latin American countries have a prosperous modern surface, but in most it is only a surface. The cities look modern but they depend on imported technology -- on elevators, wiring, lighting and other accessories made in the first world -- and some countries which have modern cities would be unable to build or maintain a modern village without imports.

Wealthy people in those countries may import more first-world luxuries than most people in the first world can afford but millions of others live in huge slums without sewers, clean water, or hope for a reasonable future.

The slums are growing fast in many areas because more and more people are being pushed off the land. In some areas that's because small farms are still being taken over by big planters who grow fruit and vegetables for sale in Canada and the US, in others it's because traditional farming methods have been lost and "modern" farming can't feed people on the land available.

Cash crop plantation farming in Latin America makes big bucks for a few trans national companies, but it's a disaster for the millions of people pushed off their land to live in the shadow of a technological world they can not ignore but which they can never join.

Imported factories in the third world have the same effect and create the same problems. They pay better than the local average wages but aside from the wages they make no contribution to the local economy.

If the host country supplied raw materials before the move the imported factory will buy the same raw materials, but the factory is an extension of the first world and it will not buy machines or designs from the host country or produce goods that the host country needs.

Because most of the investment is in imported machinery and technology, imported factories do not offer much stimulus to local economies. Like the branch plants that American manufacturers established in Canada, they may stunt the growth of local industry.

And it may be in the best interests of modern plants in the third world to intentionally cripple local industry. Once the Beebop Sporting Goods Company is established in Boogleoogle it wants local wages to stay low and it will not do anything that might increase them.

Some of the workers may even be slaves, or children who work like slaves. A survey released in October of 1996 by the government of Pakistan and the International Labor Organization estimated that about 3.6 million children from five to 14 years old were working full-time in Pakistan alone.

According to a story in the Dec 15/96 {Toronto Star}, a skilled teen-age craftsman in Pakistan was paid one dollar to hand-sew a soccer ball that sold in Europe for $80. One European company planned to sell two million made-in-Pakistan soccer balls in 1997-98.

I don't want to sound moralistic about this, but the fact is there and I can't ignore it. Around the world tens of millions of third world children work to make clothes and toys for the children of the first world. We pretend we don't know about the slaves and the children, and we believe that most Germans did not know about the Nazi death camps. In fact people everywhere can shut their eyes to things they don't want to see.

Apologists for the global economy suggest that if we buy enough from third world countries their working conditions will improve, but that's not a logical expectation. Governments defend national advantages and if the economy of Boogleoogle is built on child labor, we can not expect the government of Boogleoogle to make a serious effort to eliminate child labor. If it depends on lax ecological controls, we can not expect it to tighten those controls.

An article on free trade in the Apr 20/98 issue of {Time} magazine notes that the primary school dropout rate in Latin America has risen since 1994. This is good news to anyone who wants to maintain a supply of cheap labor, but bad news to anyone who thinks formal education would help Latin America develop a modern economy.

Another problem with the global economy is that many goods are manufactured in the third-world only for export, and would be no use at all to the people who make them. I've seen some nice down-filled coats from Malaysia, for example, but I don't think Malaysians need down-filled coats for their own use.

That may be a problem in the long term because we can assume that the market won't last. At one time some Canadian winter coats were made in Singapore and I have seen others from Indonesia and Bangladesh, and I have to assume that when a Canadian importer finds a country where coat-makers work cheaper he will buy from the new source and abandon the old.

Migration is another questionable aspect of the global economy. If the economy of one country does not develop, some of the inhabitants can move to another.

On a simplistic level that makes sense. Why not let people live where they want to?

The problem is that migration is a sorting process. If it's not controlled it will tend to move most of the brightest, most aggressive and best-educated people in the world to the rich countries and leave all the others, with a few predators who prey on them, in the poor countries.

If we assume that all races are equal then the native populations of any one country should be about equal in intelligence, ability and initiative to the population of any other. There will be differences between individuals within each population of course -- some will be smarter or have more initiative than others -- but the average will be about equal.

Until we allow large-scale migration. Let's look at the effect of migration from the third-world country of Povertania to the first-world country of Affluentia.

Because it requires initiative to migrate, the average level of initiative among migrants will be higher than the average level of initiative among non-migrants. Because it also takes intelligence and general smarts to get through the immigration process and be accepted by another country -- especially by a country which can afford to choose immigrants -- the average migrant will also be more intelligent than the average non-migrant.

Result -- after a few years of migration the average levels of initiative and intelligence in Affluentia will be higher, and the averages in Povertania will be lower. Affluentia will develop even faster and become even richer, and Povertania will be hard pressed to maintain the same level of poverty.

Migration also sorts people by education and here the sorting takes a vicious turn. Relatively few citizens of a poor country graduate from high school and the education of the average high school graduate represents a significant investment for the government of a poor country. If education has any value the poor countries cannot afford to lose their educated people -- but educated people are the ones who find it easiest to migrate.

I began wondering about this years ago, when I met a medical doctor from a third world country who came to Canada to study medicine under an aid program, and stayed here to practice.

Even as a high school graduate that man was in a very fortunate position, by the standards of his country. When he got a scholarship to study medicine in Canada, his future was made.

If he had gone home he could have lived very well in his native country, and he could have provided medical service that his countrymen needed. That's why Canada gave him the scholarship, and that's why his government helped him come.

But he chose to stay in Canada and -- because he was well educated and obviously qualified -- he was accepted as an immigrant. He told me he didn't owe his country anything, because he had "earned" the scholarship by hard work. It made no difference to him that poor people in his own country had worked to put him through high school, and that his own and the Canadian governments had put him through medical school so that he could help his own country, not so he could live in luxury in Canada.

That was a special case but all immigrants are special, in their way. They have to be smarter and have more initiative than average to be able to migrate, and these are just the people that no poor country can afford to lose.

Almost any individual case of migration can be justified, but together they add up to a disaster for the third world

Some Canadians feel that we have to accept immigrants because "we're all immigrants here." That's a good point, but it's not quite true.

My ancestors were immigrants, but they did not come to an empty country. If I were a Canadian native I might feel that my country had been taken by immigrants, and I'm not sure that I would admire the generosity of those immigrants if they tried to atone for the theft of my country by handing it over to other immigrants.

The global economy is also an ecological disaster, because it allows big business to sidestep environmental controls in the first world by moving their operations to tolerant third world nations.

In July of 1997 the CTV News network aired a story about the city of Tirupur in India which has 700 dye plants and no pollution controls. Rivers in the area are colored, ground water is polluted 100 meters below the surface and drinking water has to be piped in from a long distance away.

If the ecological damage did the people of Tirupur any long-term good we might consider that a mitigating circumstance, but the fact is that they are getting low wages in a temporary business that will disappear when some other third-world country offers to do the work cheaper. The only long-term change to Tirupur will be the pollution.

According to a story in the Jan 4/98 {Sunday Star} the US Navy now sends old warships to an Indian beach on the Arabian Sea to be broken up. The advantages are that wages for the Indian workmen start at $1.80 a day, and that there are no inconvenient questions about workplace safety or about what happens to the asbestos, PCB, and other potentially-hazardous materials in the ships.

Even if third world governments were to enforce environmental controls, the simple fact of huge freight movements also creates world-wide environmental problems.

The ships that carry global trade burn oil and spill it in the sea. Newspapers and TV tell us about the rare occasions when a tanker goes aground but any powered ship that moves on the sea spills some oil. Tankers and freighters travelling on their normal business, with no accidents, spill more oil every year than do tankers that go aground or break up. We hear about individual accidents, but not the routine day-to-day spills that do most of the damage.

Ships that cross between continents also carry pests, and the more ships that cross the more chance that pests will cross. Ships sail best when they are fully loaded and when a ship carries a light load, such as television sets or other consumer goods, it also loads thousands of gallons of water to bring it up to full weight. When it unloads the light goods and takes on a load of heavier freight, such as coal or wheat or anvils, it dumps the water so it won't be overloaded.

There has always been a danger that ships would dump pests from another continent with the ballast water but that risk was multiplied as world trade increased, and again as ships sailed faster and the pests did not have to survive so long in ballast tanks. That's a problem because imported pests have no local predators, and they may run out of control.

When the St. Lawrence seaway was completed in the 1950's sea lampreys followed sea-going ships into the Great Lakes, where they wiped out the lake trout and other valuable species. In the early 1980's a small European fish called the Ruffe showed up near Duluth on Lake Superior. Within a couple of years it became the most abundant fish in the harbor. It has now spread to some Ontario river systems, and it looks as though it will displace some native fish. Another European fish called the Round Goby showed up in Lake St. Clair in the early 1980's, and is expected to do serious harm to Great Lakes and inland fisheries.

The Spiny Water Flea came to the Great Lakes in the early 1980's and has spread to the Muskoka and Kawartha Lakes, to Lake Simcoe and Lake Temagami. In the late 1980's the Zebra mussel came from Europe to cause billions of dollars of damage in eastern North America.

The Asian tiger mosquito, which can carry dengue fever and other infections, came to the USA, in shiploads of Asian tires. It's now found in 18 states, and may someday spread to Canada. The citrus leaf miner caterpillar from Asia now attacks citrus trees in Australia, Africa, the US and Latin America.

The Virella mite arrived in a shipment of bees from Thailand in the early 1990's, and it has already reduced honey production in some parts of North America by half. Given time, our bees may adapt to cope with it, but then again they may not. Let's hope they do, because about one third of the food eaten in North America depends on bees for pollination.

Other pests introduced by global trade include the chestnut blight that wiped out the American Chestnut tree, the Dutch Elm disease that killed most of the elm trees in North America and the kudzu vine which is now destroying forests in Virginia and the Carolinas and will probably spread.

Airplanes carry pests too. In about ten years the Brown Tree Snake from the Solomon Islands has wiped out most of the birds on the island of Guam, and naturalists fear that if gets to Hawaii it will wipe out most of the birds there.

So far we know of two Brown Tree Snakes that reached Hawaii. One was dead when it was found in the landing gear of a plane, another apparently survived the trip but was run over by a plane before it got out of the airport. We have to assume that if no live snakes have escaped to the wild in Hawaii yet, they will soon.

The chances of a pest travelling from continent to continent vary directly with the human traffic. Most of the human traffic is freight and it would be easy to reduce it, with no loss of human freedom to move.

Some globalists argue that animals migrate with or without human help, and that species will always compete to replace each other. That's true, but we have to remember that the plants and animals that are most useful to us were all carefully cultured by man. We have no reason to believe that they will survive competition with pests, or that the plants and animals that do survive will be useful to us.

We live in an ecosystem we created. If we lose control of it, tens of millions of humans will no longer be able to live.

Disease travels too. Cholera had been wiped on in South America but it came back in the 1990's, to kill tens of thousands of people in the first few years of its return. Scientists think it was re-introduced by a freighter that discharged ballast water from China off the Peruvian coast. The water carried bacteria which flourished in algae which were eaten by fish and shellfish, which in turn were eaten by people.

The global economy also increases the risk of a terrible "killer plague" which will sooner or later kill tens of millions of people around the world. That's not an apocalyptic vision, it's a mathematical probability that the global economy makes into a near certainty.

The probability is a matter of numbers. The more people there are in the world the more chance that some disease will develop into a super-killer plague, and the more there are to catch and spread disease. The more people there are the more we invade areas -- like the rain forests of Africa and South America -- where dangerous diseases may lie dormant.

Jane Jacobs, the writer who developed the most credible scenario on the development of civilization, speculates on the development of grains and the domestication of animals.

She suggests that traders from a large area all brought edible grass seeds to towns to trade for manufactured goods, and that the townsmen may have stored the seeds in one or more common granaries.

Seeds that were not eaten over the winter were sowed in the spring. Because traders from different areas had brought seeds from many different areas the fields outside the town contained a mix of dozens of different strains of grasses, which had the opportunity to cross and produce better types. The better types were collected and saved, and we evolved modern grains.

Jacobs' scenario also offers a reasonable explanation for the development of domesticated animals. With no refrigeration hunters would have captured live animals when they could, and carried them to town to trade. Again because there was no refrigeration, the townspeople would have kept the animals alive until they were ready to eat them.

When the town herdsmen chose animals for slaughter they would naturally have chosen the ones that were hardest to handle -- and the animals that were easiest to handle may have lived long enough in the town herds to breed. Jacobs' scenarios for the development of both domesticated grains and animals are the most reasonable offered to date.

And it's scary to think how they could apply to the evolution of diseases in our future. Throughout history microbes and viruses around the world had little chance to travel from continent to continent. When they did travel, we saw some of the great plagues of the world.

Bubonic plague -- the black death -- had been around for years but it did not run wild until it reached Europe. According to some estimates the smallpox that Europeans brought to the Americas may have killed up to 90% of the natives of two continents.

Now people from around the world carry known and unknown microbes, viruses and parasites to international airports, hotels, convention centers and other meeting points where they can mix, match and mutate into super-killers that could kill half -- or perhaps all -- human life on earth. It has not happened yet and it may not happen, but it is a very real danger.

World health authorities know about the danger, of course, and they are doing what they can. As I write this authorities in Hong Kong are disposing of more than 1.3 million chickens that were killed because a flu virus from chickens killed infected 14 people and killed four.

The death of four people in a city of six million is not a major problem, but the chance of a flu virus getting out of control is. In times when there were fewer people -- and therefore less risk of epidemic -- flu epidemics ravaged the world in 1729, 1732, 1781, 1830, 1833, 1889 and 1918. The 1918 epidemic infected about a billion people and killed more than 21 million of them. More than 500,000 died in the US, and more than 20,000 in New York City alone. The flu killed about 5% of the population of Ghana and 20% of the population of Samoa.

Governments and health officials around the world know that the next plague will be a real killer. If it's as bad as the 1918 plague, it will probably kill about 60 million people.

And the flu is just an old friend that sometimes gets out of hand. Some of the super-diseases that are now emerging from the jungles of Africa, Asia and South America are much more dangerous.

The Marburg virus first showed up at a medical lab in Marburg, West Germany in 1967. The lab used kidney cells from African monkeys to make vaccines, and in one shipment they got an infected monkey.

Thirty one veterinarians, lab technicians, animal handlers and their close contacts were infected. Seven died.

Marburg is a close relative of Ebola, which is one of the most feared viruses of the modern world. There are four known varieties of Ebola. In 1989 one of them raged through an animal quarantine center in Reston, Virginia, in a situation so dangerous that the US Army Research Institute for Infectious Diseases was called in to contain it.

Hundreds of monkeys were killed and the building was decontaminated by a three-day soak in formaldehyde gas, which killed every living thing in it. Months later the same variety of Ebola broke out again, killed all the monkeys and infected all the people who worked in the building.

By pure luck this case turned out to be the only one of four known varieties of the Ebola virus that is harmless to humans. Among the other three the death rate varies from 50% to 90%, and there is no known cure. If the monkeys in Reston had carried one of the other three strains of the virus, the US would have faced a national catastrophe.

Ebola is one of a set of viruses doctors describe as "level 4", which are usually fatal and for which there is no known treatment. We have had several outbreaks of level 4 viruses so far, and as long as we maintain the fiction of a global village around which people can travel at will, and through which goods are shipped in large volume, we can expect more.

Nobody knows know when or how it will come, but governments are taking precautions. We have seen armed troops used to isolate areas of Zaire where Ebola fever has broken out, and US Army medical teams sent to study and help contain it. If Ebola, or any of the other super-deadly diseases get loose, we can expect a plague that will kill more people than a major war.

The global economy also creates a serious danger by concentrating our food supply. The southwestern US and northwestern Mexico have a warm climate and cheap labor which gives them an advantage in growing vegetables, and growers in that region have captured most of the North American market for fresh vegetables. That creates a potential problem, because the concentration of farms puts all our proverbial eggs in one proverbial basket.

It's costing us money already because that basket happens to be in an areas where the El Nino weather system is causing floods and other problems, which damage crops and cause shortages.

And El Nino is just one danger, because the world has been and will be bombarded by meteorites big enough to wipe out an area much bigger than the vegetable farms of the southwest.

Such strikes are not as rare as we once believed. It's now accepted that the dinosaurs were killed by a meteor that struck the Yucatan area about 65 million years ago, but there have also been major strikes in historic times. About 150 meteor craters have been identified, and earth scientists estimate that is about 10% of the total. Astronomers believe that at least 300,000 -- and perhaps as many as 100 million -- asteroids large enough to do serious damage have orbits which cross the orbit of Earth, and might hit us some day.

About 50,000 years ago a meteorite left the famous Meteor Crater in Arizona. If any humans were living in the southwestern USA when it hit, they died within the next couple of weeks.

Australia sustained a major strike, which left nine separate craters, about 3,500 years ago. We have no history of the effects, but they must have been calamitous.

Historical and physical evidence from across Asia and Europe indicates a major strike about 540, and many scientists now believe that strike caused the dark ages.

On June 30 of 1908 a meteor exploded above the Tunguska area of Siberia, with about 1,000 times the power of the bomb that destroyed Hiroshima. There were no known people living near Tunguska at the time, but about 1,000 square miles of forest was flattened. Another big one hit Siberia in 1947.

On Aug 13 of 1930 a meteor struck somewhere in the Amazon basin, with an impact that was felt for hundreds of miles. A near miss grazed the atmosphere over the Western US in 1972, and air blasts comparable to the explosion of nuclear weapons occurred over Colorado Springs, Colorado and over Micronesia in 1995.

So far nothing big has hit within the bounds of civilization, but the danger is very serious. Oceans cover most of the Earth, and a strike anywhere in an ocean would trigger tsunamis that would wipe out most coastal areas around the ocean.

A strike almost anywhere in the Pacific would wipe out Los Angeles, San Francisco, Seattle, Vancouver, Tokyo, Hong Kong and dozens of other cities. A strike in the Atlantic would wipe out the Atlantic coast of the US, and many major cities in Europe.

Whatever we do we will all be in trouble if a big meteorite hits the planet but for any disaster -- whether meteorite strike or volcano or El Nino -- we stand a better chance of survival if all the goods we really need are produced all over the world. That way we can assume that any disaster will do us some damage, but it would take one of global proportions to wipe us out.

The global economy is also vulnerable to economic disaster, because it ties the world together into one system.

That's dangerous because a global system is too big to control. Control of a national economy is automatic because if you produce your own goods you find out quickly when the system starts to break down. Because the problem is within the national economy, it can be fixed.

If Canada had a national economy rather than a colonial economy, for example, we would have had warning about the loss of our industry and farming because we would have had shortages of food and manufactured goods. Because we were part of a larger economy, our domestic problems were not obvious until long after they were very serious.

The global economy is even worse than a colonial economy. Because it's so big there are many points at which it can fail, but also because it's so big it could take a long time before we realize that it has failed. When we do find the problem we may not be able to fix it, because the global economy is not under unified control.

We like to think that the global economy is so big that local problems can't affect it, but we saw wild fluctuations of the stock market when a crisis began in Hong Kong. When a financial problem in a city of less than ten million people can cause repercussions around the world, I hate to think what a serious problem in a big country could do.

Globalists like to pretend that the alternative to globalism is isolationism, but that's not so. The two are opposite ends of a spectrum, and there is a middle ground that is neither one nor the other.

And in this case, the middle is the place to be. We know that the global economy does not work because poverty around the world has increased since the Bretton Woods conference that led to it. The economic strategy adopted then has been a boon to some, but a disaster to most of the world.

We also know that isolation does not work, because it never has. For at least five thousand years, civilizations have made significant progress only when they were in touch with other cultures.

While Japan kept herself sealed off from the world, Japanese technology made little progress. After Japan opened up to new ideas, she led the world.

But contact and trade are not integration. Two nations can fertilize each other's technical and social ideas only if they remain separate, and each develops its own way. If they merge, the cross fertilization of ideas is lost.

The cultures that formed China led the world in technology until they merged into a single empire with one ruler. Then progress stopped for more than a thousand years.

Chinese sailors developed the steering post rudder but it was Europeans who used it to open the sea lanes of the world. The Chinese had gunpowder for hundreds of years before Europeans thought of using it in cannon. There may be some question whether the combination was for better or for worse, but there is no question that if Europeans and Chinese had not met and traded the world would be a very different place.

We need the kind of inter-action that comes with trade and, where one country has a significant advantage over another Ricardo's Rationale applies. It would not make sense for Canadians to grow bananas or oranges, or for Switzerland to develop a deep-sea fishing fleet.

Some economies of scale make sense, too. Considering the cost of developing and building a jetliner, for example, it would be foolish for a small country to try to compete with Ilyushin, Airbus and Boeing.

But along with the concept of comparative advantage we must also adopt the principle of "acceptable advantage". We can accept an advantage based on climate or technology or even market, but we must not accept one based on unacceptable working conditions, lax ecological controls or extortionate profits.

No country can produce all the goods it needs but a healthy national economy will produce what it can and it will look for ways to produce the rest. The vanilla farmers of Madagascar, Reunion and Comoros were content to import manufactured goods from Europe and the United States, but gene splicers in the United States found a way to produce their own vanilla.

Now the people of the United States will be relatively richer because they do not have to import natural vanilla at $1,200 a pound and the vanilla farmers will be poorer because they have nothing to sell. If the islanders produced most of the goods they really need they would have to give up some luxuries as the export market for vanilla died, but the economy would remain healthy and they would have time and money to develop new exports. Because they depend on vanilla, they will be in serious trouble without it.

Some people will import luxuries just to be different, but luxuries are not important. More than 2,000 years ago, wealthy Romans ate hummingbirds' tongues and wore Chinese silk. They might have complained if there were a shortage of hummingbirds' tongues, but they would not have suffered much. If Rome had been unable to buy wheat, Romans would have starved.

The alternative to a global economy is a world of national economies, and that offers some obvious benefits. One of the most obvious is that market adjustments in a national economy occur within the country, and create no major problems. Market adjustments in a world economy occur outside the country, and they may create serious problems.

If Beta brand whiggles are better than Alpha brand whiggles the Beta company will capture the whiggle market, and if Alpha can't catch up it will go broke.

If that happens within a national economy there is no problem because when Beta expands it hires some of the whigglemakers that Alpha let go, it buys parts and supplies from Alpha's old suppliers and it may even buy Alpha's old plant and warehouse. Beta won't take all of Alpha's people and property but, because Alpha was a small part of the economy anyway, the loss is not important.

But a failure in the world market is a big failure. If the Canada Global Whiggle Co makes whiggles for the world it will be very big, and important to the Canadian economy. If Canada Global loses out to the Boogleoogle Planetary Whiggle Co, it creates problems for all Canadians.

One is that unemployed Canadian whigglemakers can not move to Boogleoogle and keep making whiggles. When the Canadian company loses out all Canadian whigglemakers are unemployed, and so are the employees of the suppliers and service companies that based their business on CGW.

Instead of a minor adjustment the loss is a disaster that leaves empty plants and warehouses, and bankrupt suppliers.

Another advantage of a national economy is that it is under national control. Within Canada the federal and provincial governments control our banks and make sure they don't take unreasonable chances, but we can't control banks outside our borders. That's a problem because, as we saw in the winter of 1998, the problems of banks anywhere in a world economy can affect the world.

A national economy also has the advantage of shorter supply lines. For the world that means less transportation, and therefore less ecological damage, but it also means more dependable supplies.

The Manicouagan and James Bay areas of Quebec have a comparative advantage over other areas for generating electric power. Hydro Quebec took advantage of it by building huge hydro-electric power dams in those remote areas and sending the power over hundreds of miles of high tension lines to the cities.

That gave the cities cheap power but the strategy backfired in January of 1998, when an ice storm broke the high tension lines. The city of Montreal lost power for nearly two weeks, and some areas were shut off for more than three weeks.

If the same storm had hit Toronto we would have suffered damage but, with power plants to the east, north and west and within the city itself, we would have kept some power.

We would like to think that the storm that hit Montreal was unusual but the unfortunate fact is that it was just part of a pattern we have seen in the weather of the past couple of years. That pattern also included a snowstorm that isolated people in the Fraser Canyon and disastrous floods in Quebec, on the prairies and in Nova Scotia. Around the world, we also saw disastrous floods in the deserts of Southwestern USA, and in Europe and huge forest fires in Indonesia, Alberta and Mexico.

The fact is that with or without greenhouse gasses the world's climate is changing, and nobody knows for sure what the change will be. One possibility is the start of an ice age within about ten years.

We can't stop the change in climate but we can prepare for it. The obvious way for a nation to prepare is to make itself completely self-sufficient, so that no natural or economic disaster anywhere else in the world can destroy or cripple the national economy. If California and Mexico lose their crops we may run short of oranges, but we must be able to provide our own staples.

On a world level we will be able to handle most disasters if each nation is self-sufficient, and each has a small surplus. If California and Mexico lose their crops we must be able to feed ourselves, but humanity and common sense demand that we should also be able to help California and Mexico. By the same token if we are struck by disaster, a world of self-sufficient nations would be able to help us out.

A system of national economies would also reduce the possibility of a global plague. People would still travel, of course, but we would reduce the possibility of -- for example -- a man infected with a deadly disease packing sweaters to be shipped all over the world.

Back in the 1940's the pundits of the first world argued that a global economy would spread prosperity around the world, but that was the public pose. Whether it spread prosperity or not, the global economy also guaranteed that the nations of the first world would have free access to the resources of the third world, and that the third world would remain dependent on the first.

And for all the problems we see in western countries, that has happened. The only change we see is that now some people in the former first world are joining the poor of the third, and that some of the rich of the third world are joining the rich of the first. Instead of a world divided by geography we have a world divided by money, power and privilege.

That may be acceptable to the people who enjoy the money, power and privilege, but it is not to the rest of us. Maybe it's time to re-think Ricardo's Rationale and the assumptions of Bretton Woods, and see if we can plan a world order that will be good for all of us.

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