Can economic democracy make the global economy more sustainable?
Worried about more coal plants, carbon emissions from transportation, and a crumbling infrastructure? Evidence provided by several recent reports point to one of the least explored causes of these problems: globalization, that is, the transfer of manufacturing capacity from developed to developing countries, particularly China.
The mechanisms differ. The U.S. and Europe, which could manufacture using environmentally benign techniques, instead use old, polluting technologies that wreck China’s environment and increase global carbon emissions. The 70,000 cargo ships that ply the seas moving all of the globalized goods emit more than twice as much carbon as all airline traffic. And because major corporations no longer feel tied to their local communities, they also no longer lobby governments for a world-class infrastructure.
Now, I recently proposed that it would be a good thing to manufacture locally (and Ryan Avent took me to task for saying so). But what I want to propose is not protectionism, but the idea that if local companies were employee-owned and -operated, the problems I describe in this post would go away — as utopian as that may first sound.
But first to the NYT article, “China Grabs West’s Smoke-Spewing Factories“:
Of China’s total carbon emissions, which by some estimates now exceed those of the United States, just over a third are incurred in the course of making products for foreign consumers … A study by researchers at Carnegie Mellon University found that if all the goods that the United States imported between 1997 and 2004 had been produced domestically, America’s carbon emissions would have been 30 percent higher … Germany is China’s mirror image. Polluting factories have migrated abroad. Coal mining has withered. Since 1990, Germany has reduced its annual carbon emissions by 19 percent.
So the U.S. is not the only villain in this piece; even the “green” Germans are taking advantage. Both countries could make steel in a much cleaner way than China, but:
… steel pollutes more than any other industry in China, perhaps in the world … Despite a government-mandated efficiency drive, steel will use 11 percent more power this year than last, fully one-tenth of the country’s total energy supply, according to the China Iron and Steel Association … Along with aluminum and cement, steel is the biggest reason China added 90 gigawatts of generation capacity this year, the third year in a row in which it will increase its power output by more than the total capacity of Britain. About 85 percent of those new power plants burn coal.
So next time you start gnashing your teeth about all of those damned coal plants in China, look at the new gizmo you just bought.
And it’s not like the Chinese don’t understand that they’re being polluted to death:
The country’s central planning agency recently barred purchases of some used industrial equipment from abroad, requiring companies to install newer energy-efficient systems. It has canceled many incentives devised to promote exports, especially for companies that guzzle energy and pollute heavily. Officials have warned companies that breaking environmental laws will cost them their export licenses.
But they are being driven hard by good ol’ market incentives, which is why the following quote blows my mind:
Chen Kexin, an economist with China’s Ministry of Commerce, said weak environmental laws and still inexpensive power, even more than low labor costs, had enabled Chinese steel makers to undercut prices elsewhere. “The shortfall of environmental protection is one of the main reasons why our exports are cheaper,” Mr. Chen said. “This is hardly an ‘edge’ that we should be proud of.”
So it’s not the 50 cents an hour that’s driving their exports, it’s the cheap coal!
They’re put on cargo ships that spew even more carbon into the air, according to recent studies:
Carbon dioxide emissions from shipping are double those of aviation and increasing at an alarming rate which will have a serious impact on global warming, according to research by the industry and European academics.
Separate studies suggest that maritime carbon dioxide emissions are not only higher than previously thought, but could rise by as much as 75% in the next 15 to 20 years if world trade continues to grow and no action is taken … Annual emissions from shipping range between 600 and 800m tonnes of carbon dioxide, or up to 5% of the global total. This is nearly double Britain’s total emissions and more than all African countries combined.
Once the steel gets here, is it used to build high-speed trains or rebuild bridges? Well, according to the N.Y. Times article, “Private Cash Sets Agenda for Urban Infrastructure,” it’s more likely to go into a university, hospital, or museum that is endowed by the growing wealth of our billionaire class. That’s because the former patrons of local infrastructure, major corporations, have flown the coop:
Government investment nationwide has lagged for several reasons, say business leaders, academics and public officials…Perhaps most important, big businesses no longer put as much clout and attention behind public infrastructure investments. In an earlier era, corporations, many with deep roots in local communities, lobbied government for the railroads, highways and many other facilities they needed to operate successfully. And they served as a crucial fountain of local tax revenue … “If you had 30 C.E.O.’s saying, ‘Damn it, we need new bridges or faster trains,’ then that would happen,” said Peter R. Orszag, director of the Congressional Budget Office. “The fact of the matter is that public infrastructure spending does not have much momentum behind it at all.” … But companies are more mobile today. And many of the urban manufacturers most dependent on public infrastructure have moved or gone out of business.
A hollowed out manufacturing sector can no longer serve to lobby for things like high-speed trains because, instead of manufacturing in a less polluting way here, we’re mucking up the Chinese environment and hauling thousands of polluting cargo ships around the world to do it instead.
At this point, it would probably help the central Chinese government to impose environmental standards on the production of goods imported into this country; China has always had a problem of enforcing the decisions made at the center, and no doubt belated efforts from Beijing are meeting resistance in the rest of the country.
But we should also consider the possibility that in order to create a sustainable global economy, we need to think in terms of continental production systems, not global ones. At a continental level, goods can move via electric freight trains, by far the most efficient way to transport goods; local pollution laws can take effect; and firms would be more concerned with their local circumstances.
Instead of using protectionist measures to create a sustainable continental economy, however, I want to suggest the idea that if firms were employee-owned and -controlled — in other words, if they enjoyed workplace democracy — then there would be little need for government intervention to force the localization of companies. Nobody is going to vote for a board of directors that will close their place of employment, and local employees will be more concerned with local environmental and infrastructural problems. The Mondragon Cooperative Corporation, based in the Basque region of Spain, has been a stellar example of the possibilities of a network of worker co-ops, including a co-op bank, that has thrived within its local community.
That model is certainly exportable to all countries, including the U.S. and China. It may be that economic democracy is a prerequisite of a sustainable global economy.