Globalisation

I’m going to embarrass myself here by talking about things that other people will have thought about in a lot more detail, but it’s my blog so what are you going to do about it? This will probably be the last of my holiday recollections, and I can get back to the usual to-and-fros of my normal life.

The Olden Days

As we were driving through Tenerife I was telling my son about colonialism and why the Canary Islands are Spanish and we were looking at all the banana plantations and I was thinking about wealth and poverty.

Much of what I saw of the islands looked poor, or at least poorer than rural North Yorkshire. I thought back to a time when there would have been local farmers providing food for the people, and woodcutters, and miners, and smiths, and…

Essentially, it used to be that each settlement had a number of jobs that came with a settlement that allowed it to function. Any given number of people needs a smith, and a doctor, and a priest, and a tanner etc. There were multiple ways to be ‘wealthy’ because people need a whole bunch of goods and services and you needed to live within around 20 miles of those goods/services (because that’s how far you could travel in a day).

This led to a whole bunch of small but thriving communities.

Better Transport

As transport improved, the distance you could travel in a day increased and thus you didn’t need as many goods/services nearby. When travel by horses was the only option, a doctor who lived 30 miles away was practically useless. Now, a doctor who lives 30 miles away is perfectly good for me thanks.

Better Business

Rather than a woodcutter in every village, why not have a big forest and sell wood to multiple villages. It’ll be cheaper and so mean that everybody will pay less for their wood. It’s just good business, right?

It’s hard to argue that everybody should pay more just to support local business. Comparative advantage means we should all specialise.

Except it further hollows out the ways of making a living in a given place. As the world shrinks through increased connectivity (including physical connectivity), opportunities for earning become scarcer.

Tenerife

Where does that leave Tenerife (or Great Ouseburn, for that matter)? I don’t want to buy anything that can only be made on a volcanic island in the middle of the Atlantic. The odds of the best builder, or luthier, or consultant living on Tenerife are vanishingly slim so what comparative advantage do they have? Right now, there might be the odd industry that survives because of imperfect connectivity, but surely at the limit, as connectivity tends to infinity, industry after industry will vanish?

The climate was the reason I was in Tenerife, and it’s probably their only comparative advantage (hence the reliance on tourism).

In a globalised world, with comparative advantage and agglomeration, doesn’t every small area either get lucky and become the leading location for a given niche, or see all of its industries destroyed?

Holdouts

I can think of a few holdouts, but I feel like it’s only a matter of time before they go too. Teachers and doctors are the big ones, where any community of a given size needs them. But education can happen online and at some point, surely the best teacher in the world online will be better than the best teacher you can find in your village/town?

Then there’s plumbers, hairdressers, pub landlords, childcare…basically a raft of professions that rely upon proximity. But all of these are effected by globalisation too - I can watch plumbing videos and try things myself, cheap beer from supermarkets makes pubs less attractive etc.

There are some professions that benefit from local knowledge (solicitors, estate agents) but all of those local advantages will start to disappear as more of life moves online (and so local knowledge gets ingested by the latest language models).

Holdouts exist, but I don’t see them holding out forever.

Conclusion

I love systems where everybody makes logical decisions and yet the outcome is bad for most/all involved. Of course it’s logical to want to pay less for your wood. Of course it’s logical for a company to set up a woodcutting business in a big forest. Everybody makes good decisions. But the end result is that small communities of the type that people like to live in slowly die.

Happy Friday.