Trading Incentives: Local versus Global Economies

In my ANTH 330 class (Rural Peoples in the Global Economy, taught by Charles Menzies), we’ve spent some time talking about the greater care local populations take in managing the natural resources in their territory. This is true for the coastal fishing communities, both First Nations and settler. The same holds for the gladesmen of the Florida Everglades, who were cast as outlaws by both Swamp Reclaiming programs seeking greater agricultural land and the parks system which they evaded in poaching alligator hides. Finally, we’ve looked at the experiences of the fishermen of Bigouden, in the Breton region of France. Artisanal fishermen have long struggled both to compete with larger trawlers in their waters and as people affected by the impact they have on natural resources (in economic terms, a negative externality).

Each of these conflicts is between two types of trade: one of which is local, artisanal, and dependent on regional resources and harvesting populations, and the other of which is global, industrial, and able to move its operations internationally if necessary. In GRS and LFS, we generally have a prejudice toward the former. But let’s consider the rewards and costs of each:

Local economies have great benefits when it comes to the valuation and management of local resources. When a population is dependent on certain resources, it tends to value them more. Additionally, the existence of local and traditional ecological knowledge from generations of experience allows them to look back at past events and practices when deciding what course to take in a situation. Increasing the valuation of local resources is a question resource economists face during development. When impoverished rural villagers turn to black-market lumber trade, for example, it’s because the value of the money outweighs the value of conserving that forest in the short term. This means that institutions must exist which allow these black market lumberjacks to both become legal, and also to properly conserve the forest as they have a vested interest in doing. This is far easier with local economies when one resource pool is used by the whole community.

On the other hand, if this resource pool or economy is affected, the region can face recession, depression, or social collapse. This can be a natural disaster. In the case of many artisanal fishers, it is the collapse of fish stock caused by overharvesting by industrial trawlers. This is the cost which must be accepted in a highly localized economy. If the economy cannot be rebuilt, people will eventually migrate to different areas to try and make a living.

Global players have different incentives. As they can move around the world, they will go where it is most cost-effective to operate. If they can outsource labour, they will. Even in the case of fishing operations, we read about how trawlers will pick up and go from Europe to Africa. They can spend weeks in the ocean, raking in hundreds if not thousands of tons of fish. They aren’t dependent on a local region. This means they don’t have as much incentive to conserve the pool of resources and ensure that it’s properly managed. State regulation and consumer pressure are much more important in regulating them, but they also have the option of exit if they find themselves too restricted.

But consider the security which this global field of play can bring to not just the firm, but to its customers. If a region imports from multiple locations around the world, then if one of those locations is disrupted the rest can still deliver. If global trade institutions are in place, it’s also easier to move in resources from other areas to make up shortfall and rebuild economies following local shocks. That diversification creates an element of stability because of redundancy built into the system.

So our goal in constructing a resilient food system should be to try and incorporate elements of each form of stability into the system, in order to benefit from both. Each region has its own comparative advantages. Local cultures and thus the desires of local consumers generally evolve to accommodate these advantages. In that sphere, local economies are the ideal area to grow precisely because it can make these systems more sustainable in the long run. The question many in LFS should be asking is, what sectors is it appropriate to maintain global trade in? How can this be done? How can we stop the undermining of local economies? Do we use protectionism in some areas and free trade in others (that’s almost always a de facto “yes” in most countries)?

A synthesized local economy coexisting with appropriate global trade networks is more complicated than the urban farms which many like to imagine. It also comes with more responsibilities than Big Agriculture generally likes to have imposed on it. Nevertheless, it’s almost certainly going to be what results, one way or another, in the years to come. Thus, we should plan ahead and make sure that these networks have solid and sustainable foundations as we continue to work toward a more resilient food system.