[Pops]

Specialization, Containerization, Globalization, Automation, Financialization

This has been the progression up to this point. More and more specialization created greater efficiency; then containerized shipping cut shipping costs dramatically and enabled international labor arbitrage, which combined with automation and communication in turn resulted in globalization; and finally, in the US and UK, the creation of the global "back office" of finance/insurance/trade.

So here we sit at the apex of cost cutting efficiency. But we have a slight problem in that the power behind the low cost shipping is at some point set to reach a maximum and decline (without a Plum from the Energy Fairy that is) and then what?

How do we de-globalize when there is no way to compete with globalization? If you've ever contemplated starting a business, especially a business making plain stuff, say furniture for example, you'd take one look and walk away. There is no competing with globalized commodity manufacturing, perhaps custom furniture for the .1%, but not for the rest.

So how will we transition to a localized economy?

[dolanbaker]

So here we sit at the apex of cost cutting efficiency. But we have a slight problem in that the power behind the low cost shipping is at some point set to reach a maximum and decline (without a Plum from the Energy Fairy that is) and then what?

The cost of shipping is such a small fraction of the consumer price of most goods that it would take a scarcity of fuel to have an adverse affect on global trade, the cost of fuel could go up easily by a factor of ten and it will only add about one or two percent to the retail price for most small electrical/electronic goods.

Transportation of bulk low value product is a completely different situation, a lorry load of (locally produced) firewood could easily double in price.

[Shaved Monkey]

I dream of a daily third world food market down the road.
No refrigeration, just super fresh local seasonal products,fish, chickens and meat.
All it takes is time and the ability to cook them.

The itinerant/traveller/gypsy was a big part of pre industrialised Europe.
They arrived and repaired or replaced things and left.
Bartering of food was often the price.

[Pops]

Granted Monkey, that is the almost inevitable end stage but what happens between here and there?

The key is not the cost to transport chachkas from the orient per se, but demand for the chachkas themselves as the cost to transport everything (including people) rises and so the cost for everything rises.

The change I think we have seen in the oil market from demand constrained to supply constrained and eventually to investment constrained will be mirrored in the chachka market as it moves from supply to demand constrained. As the economic fuel declines, so will demand for consumer goods leading to an oversupply, prices falling below profitability - but in the end the same lack of investment.

The revolution in globalization was driven by automated containerization - conex, intermodal, trailer/train whatever. A huge innovation but one that merely enabled labor and regulation arbitrage. Labor is becoming less and less of a factor as automation increases and as witnessed by the pollution in China, the regulatory burden will likely equalize to an extent. Perhaps never totally equal but close enough to eliminate it as a profit strategy. So the economic benefit is shrinking even without FF decline - why ship anything around the world if there is no profit to be had?

I'm just trying to pull all these different threads together into a scarf and see what it might look like, LOL.

[Pops]

The problem is stranded capacity, manufactured products will be in oversupply so very cheap, cheaper than replacement local manufacturing can make them.

This goes on for x amount of time before the factories close down.

What was dirt cheap - a $10 coffee percolator say, now has no replacement because to make one locally would cost $100.

Extend that to items of real value and you see the Transition as a real problem.

[Shaved Monkey]

It is interesting that Australia exports as much fish as it imports.
We export quality to make a profit and the poor eat cheap imports.
Australia exports Cherries to the US and imports Cherries from the US
As both products arrive out of seasonal they sell for a premium.

In both cases the local fresh product is better quality and cheaper.(but not available at that time)
But the export market drives up its price of the local product by increasing demand.
You used to be able to get a box of cherries at their peak for virtually nothing as they have a limited shelf life.
No longer the case thanks to Globalisation.
The winner is always the middle man not the consumer.
The consumer is just fooled by choice (not quality).
These items are often air freighted so rely even more so on cheap FF and "rich" people being able to buy them and fly to subsidise them getting there.

I can see wheat continuing to be shipped as its a game changer, when the hungry get angry, they can interfere with the elites enjoyment of seafood platters and bowls of cherries
and the military costs more to run than the a ship full of wheat.

[Quinny]

I think the transition is a real problem and though it's difficult to break the 'habit' I've noticed a big difference since moving to rural France. In England every supermarket seemed to have very similar & consistent pricing policies. Aldi & Lidl seem to have broke the mould to a certain extent but in general they still have a similar pricing profile when you look at it over time.

Food is much more seasonal here and local produce is also very popular even in large supermarkets. I the last couple of years the locally produced food seems to have dropped in price when compared to imports. There are still times of the year when Dutch or Spanish Tomatoes are cheaper, but hardly anyone seems to buy them.

There also seems to be much more variation in prices, and not just in terms of seasonal variations. There are often 'offers' that are just in one shop. It seems that using local suppliers is often a key factor and local produce is sometimes cheap enough to make you change your buying pattern.

[Quinny]

Population density, is still quite high in many parts of Europe and I believe cities will/are become/ing challenging places to be, but my village supported 3x current population back in the 19th century.

Current population density of France is about 118 v USA about 32 so overall you're about 25% of France. Our locality is similar to USA overall at about 30, and this was an area that fed itself for many years before the widespread use of FF. Life was tougher then though.

[Tanada]

Specialization, Containerization, Globalization, Automation, Financialization

This has been the progression up to this point. More and more specialization created greater efficiency; then containerized shipping cut shipping costs dramatically and enabled international labor arbitrage, which combined with automation and communication in turn resulted in globalization; and finally, in the US and UK, the creation of the global "back office" of finance/insurance/trade.

So here we sit at the apex of cost cutting efficiency. But we have a slight problem in that the power behind the low cost shipping is at some point set to reach a maximum and decline (without a Plum from the Energy Fairy that is) and then what?

How do we de-globalize when there is no way to compete with globalization? If you've ever contemplated starting a business, especially a business making plain stuff, say furniture for example, you'd take one look and walk away. There is no competing with globalized commodity manufacturing, perhaps custom furniture for the .1%, but not for the rest.

So how will we transition to a localized economy?

There is only no way to compete with globalization because transport fuel is so cheap. The more expensive transportation becomes the less competitive low wage workers are over the oceans from the consumers neighbor who could be doing the same job for more money.

If the price increase is slow enough the system will reverse order, first manufacturing for USA consumers will return to the lowest wage states. When transport inside the USA gets too expensive it will move closer to the consumers in the high wage states like New York and California to places like Kentucky and Oregon. If transport costs get high enough it will move to the border states of the highest wage states.

If on the other hand the price rise is too fast for old manufacturing jobs to return we are looking at a catastrophic collapse, because our entire economy is predicated on consumption of frivolity. Our needs of food/shelter/water are still a small component of spending in the USA, as that changes over time there will be less and less demand for consumer electronics and other gizmo's that we only want without really needing.

[Quinny]

As Pops started the thread, I thought about his wedge theory as regards to prices of globalised products v local substitutes.

[Shaved Monkey]

I dream of a daily third world food market down the road.
No refrigeration, just super fresh local seasonal products,fish, chickens and meat.
All it takes is time and the ability to cook them.

Where will the fresh local seasonal food be produced? Here?



I don't think so. My point above is that way too many Americans live concentrated in urban/suburban consumer ghettos. To live your dream would require sub-dividing the farm lands which currently feed you. Is that okay with the landowners? No. I don't think so.

Different climate and no privately owned land issues but desperation creates innovation.

Havana, Cuba is often lauded as the world leader in urban agriculture, with some sources suggesting that anywhere from 50% to 90% of the city's fresh produce is grown within it's boundaries

http://www.grow-city.org/2012/05/havana ... rview.html

[Shaved Monkey]

Just watched the tail end of a doco on TV
Talked about the effectiveness of a carbon tax.
We put it on production and you drive the polluting factories to China
You put it on consumption and you drive up the prices of imports from polluting countries and put an incentive in, for local manufacture to be greener.
Pricing is the key.
*obviously Oil price is a form of Carbon Tax too
Ill post up a link when it comes online.

[Paulo1]

I just bought two new tools...one Makita cut off saw with a 14" cutting disc for $139...and an excellent Makita power planer for $135. While these crazy low prices are still continuing I am building up my tool crib with both hand and power tools while at the same time building up the gardens and home resiliency. We should still have hydro power in our neck of the woods and if that falters will use power tools simply when hydro is available. For now, globalisation is still evident in these insanely inexpensive tools, etc. I recommend folks take advantage of this while it lasts, because I sure don't see how it will continue.

Paulo

[Shaved Monkey]

or how long they will continue to work....


Though my $300 German made Metabo drill and Jigsaw have died but my $ 60 dollar cheap knockoff Chinese ones are still going.
Hate it when that happens.

[ralfy]

The transition will be forced by nature and physical laws.