Specialization and globalization: Genies at our command
This article is the final excerpt from Chapter 4 of Richard Heinberg's new book 'The End of Growth', which is set for publication by New Society Publishers in September 2011. This chapter explores the possibilities of innovation, substitution and efficiency to maintain economic growth.
Access previous chapters here.
Specialization and Globalization: Genies at Our Command
Economic efficiency doesn’t flow from energy efficiency alone; it can also be achieved by increasing specialization or by expanding the scope of trade so as to exploit cheaper resources or labor. Both of these strategies have deep and ancient roots in human history.
Division of labor increases economic efficiency by optimizing the use of people’s unique talents, proclivities, and skills. If all people had to grow or gather all of their own food and fuel, the effort might require most of their working hours. By leaving food production to skilled farmers, we enable others to spend their days weaving cloth, playing the oboe, or screening hand-carried luggage at airports. Prior to the agricultural revolution several millennia ago, division of labor was mostly along gender lines, and was otherwise part-time and informal; with farming and the settling of the first towns and cities, full-time division of labor appeared, along with social classes. Since the Industrial Revolution, the number of full-time occupations has soared.
If economists often underestimate the contribution of energy to economic growth, it would be just as wrong to disregard the role of specialization. Adam Smith, who was writing when Britain was still burning relatively trivial amounts of coal, believed that economic expansion would come about entirely because of division of labor. His paradigm of progress was the pin-making factory:
“I have seen a small manufactory of this kind where ten men only were employed. . . . But though they were very poor, and therefore but indifferently accommodated with the necessary machinery, they could, when they exerted themselves, make among them about twelve pounds of pins in a day. There are in a pound upwards of four thousand pins of a middling size. Those ten persons, therefore, could make among them upwards of forty-eight thousand pins in a day. Each person, therefore, making a tenth part of forty-eight thousand pins, might be considered as making four thousand eight hundred pins in a day. But if they had all wrought separately and independently, and without any of them having been educated to this peculiar business, they certainly could not each of them have made twenty, perhaps not one pin in a day. . . .”
Later in The Wealth of Nations, Smith criticizes the division of labor, saying it leads to a “mental mutilation” in workers as they become ignorant and insular—so it’s hard to know whether he thought the trend toward specialization was good or just inevitable. It’s important to note, however, that it was under way before the fossil fuel revolution, and was already contributing to economic growth.
Standard economic theory tells us that trade is good. If one town has apple orchards but no wheat fields, while another town has wheat but no apples, trade can make everyone’s diet more interesting. Enlarging the scope of trade can also reduce costs, if resources or products are scarce and expensive in one place but abundant and cheap elsewhere, or if people in one place are willing to accept less payment for their work than in another.
As mentioned in Chapter 1, trade has a long history and a somewhat controversial one, given that empires typically used military power to enforce trade rules that kept peripheral societies in a condition of relative poverty and dependency. The worldwide colonial efforts of European powers from the late 15th century through the mid-20th century exemplify this pattern; since then, enlargement of the scope of trade has assumed a somewhat different character and is now referred to as globalization.
Long-distance trade expanded dramatically from the 1980s onward as a result of the widespread use of cargo container ships, the development of satellite communications, and the application of computer technology. New international agreements and institutions (WTO, NAFTA, CAFTA, etc.) also helped speed up and broaden trade, maximizing efficiencies at every stage.
It may be that people were happier before trade, when they were embedded in more of a gift economy. But the material affluence of the world’s wealthy nations simply cannot be sustained without trade at current levels. Indeed, without expanding trade, the world economy cannot grow. Period.
Most economists regard division of labor and globalization as strategies that can continue to be expanded far into the future. To think otherwise would be to question the possibility of endless economic growth. But there are reasons to question this belief.
There may not be much more to achieve through specialization in the already-industrialized countries, as most tasks that can possibly be professionalized, commercialized, segmented, and apportioned already have been. Moreover, in a world of declining energy availability, the trend toward specialization could begin to be reversed. Specialization goes hand-in-hand with urbanization, and in recent decades urbanization has depended on surplus agricultural production from the industrialization of agriculture, which in turn depends on cheap oil.
Relegating all food production to full-time farmers leaves more time for others to do different kinds of work. But in non-industrial agricultural societies, the class of farmers includes most of society. The specialist classes (soldiers, priests, merchants, scribes, and managers) are relatively small. It was only with the application of fossil fuels (and other strategies of intensification) to agriculture that we achieved a situation where, as in the U.S. today, a mere two percent of the population grows nearly all the domestically produced food, freeing the other 98 percent to work at a dizzying variety of other jobs.
In other words, most of the specialization that has occurred since the beginning of the Industrial Revolution depended upon the availability of cheap energy. With cheap energy, it makes sense to replace human muscle-powered labor with the “labor” of fuel-fed machines, and it is possible to invent an enormous number of different kinds of machines to do different tasks. Tending and operating those machines requires specialized skills, so more mechanization tends to lead to more specialization.
But take away cheap energy and it becomes more cost-effective to do a growing number of tasks locally and with muscle power once again. As energy gets increasingly expensive, a countertrend is therefore likely to emerge: generalization. Like our ancestors of a century ago or more, most of us will need the kinds of knowledge and skill that can be adapted to a wide range of practical tasks.
Globalization will suffer a similar fate, as it is vulnerable not only to high fuel prices, but grid breakdowns, political instability, credit and currency problems, and the loss of satellite communications.
Jeff Rubin, the former chief economist at Canadian Imperial Bank of Commerce World Market, is the author of Why Your World Is About to Get a Whole Lot Smaller: Oil and the End of Globalization, which argues that the amounts of food and other goods imported from abroad will inevitably shrink, while long-distance driving will become a luxury and international travel rare. Given time, he says, we could develop advanced sailing ships with which to resume overseas trade. But even then moving goods across land will require energy, so if we have less energy that will almost certainly translate to less mobility.
The near future will be a time that, in its physical limits, may resemble the distant past. “The very same economic forces that gutted our manufacturing sector,” says Rubin, “that paved over our farm land, when oil was cheap and abundant, and transport costs were incidental, those same economic forces will do the opposite in a world of triple digit oil prices. And that is not determined by government, and that is not determined by ideological preference, and that is not determined by our willingness or unwillingness to reduce our carbon trail. That is just Economics 100. Triple digit oil price is going to change cost-curves. And when it changes cost curves, it is going to change economic geography at the same time.”
Despite their economic advantages, specialization and globalization in some ways reduce resilience—a quality that is essential to our adapting to the end of growth. Extremely specialized workers may have difficulty accommodating themselves to the economic necessities of the post-growth world. In World War II, auto assembly plants in the U.S. could be quickly re-purposed to produce tanks and planes for the war effort; today, when we need auto factories to make electric railroad locomotives and freight/passenger cars, the transition will be much more difficult because machines as well as workers are much more narrowly specialized. Moreover, dependence on global systems of trade and transport will leave many communities vulnerable if needed tools, products, materials, and spare parts are no longer available or are increasingly expensive due to rising transport costs. Successful adaptation will require economic re-localization and a generalist attitude toward problem solving.
Whether we like or hate globalization and specialization, we will nevertheless have to bend to the needs of an energy-constrained economy—and that will mean relying more on local resources and production capacity, and being able to do a broader range of tasks.
Of course, this is not to say that all activities will be localized, that trade will disappear, or that there will be no specialization. The point is simply that the recent extremes achieved in the trends toward specialization and globalization cannot be sustained and will be reversed. How far we will go toward being local generalists depends on how we handle the energy transition of the 21st century—or, in other words, how much of technological civilization we can preserve and adapt.
1. In The Party’s Over, I discussed these strategies by which humanity has enlarged its carrying capacity, summarizing a longer seminal discussion in William Catton’s brilliant 1980 book Overshoot. Richard Heinberg, The Party’s Over (Gabriola Island BC: New Society Publishers, 2003), 14-33; William Catton, Overshoot: The Ecological Basis of Revolutionary Change (University of Illinois, 1980).
2. For an unrealistically optimistic view of what division of labor has achieved, see John Kay, “Why You Can Have an Economy of People Who Don’t Sweat,” Financial Times, Oct. 20, 2010.
3. Adam Smith, The Wealth of Nations (New York: Oxford University Press, World’s Classics Edition, 2008).
4. Frances Berdan, “Trade and Markets in Precapitalist States,” in Economic Anthropology, Stuart Plattner, ed. (Stanford, CA: Stanford University Press, 1989).
5. Jeff Rubin, Why Your World Is About To Get a Whole Lot Smaller: Oil and the End of Globalization (New York: Random House, 2009).
6. Jeff Rubin, “Oil and the End of Globalization,” transcript and video of a presentation at 2010 ASPO-USA, The Oil Drum, posted November 8, 2010, http://www.theoildrum.com/node/7095#more