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Fair Trade

April 2, 2017

NYC TRADE

Trade.  It’s the whole reason we are here.  Were it not for powerful European nations seeking a shorter trade route to India, the Americas might not have ever been discovered and we’d all still be living in a “flat” world.  Trade with the new world began immediately, the net flow being more positive towards Europe than to the native peoples of the Americas.  Gold, beaver hides, tobacco, anything of value, could be gotten in trade for metal tools, tradecloth, mirrors and trinkets.  We knew a good deal when we saw one, but clearly this was the land of really great deals.  So it was that on May 24, 1626 Dutch colonists purchased the island of Manhattan from Native Americans, by all accounts Canarsee Indians, in exchange for beads worth sixty guilders or twenty four US dollars. So the plot of land on which Trump Tower now sits was acquired for mere pennies.  Now that’s what I’m talkin’ about!  The real dealmakers may all be dead, but their philosophy lives on.  Value is subjective, but the willingness to take advantage of someone is universal and lives on in the dark side of the human spirit.  Are we being led astray by that spirit?

From an early age all cultures expose their children to trade. Whether it’s in the open air markets of underdeveloped nations or by way of sports-related, bubble-gum trading cards here in the US, children learn to practice trade.  I’ll give you a Ted Williams and a Stan Musial for that Mickey Mantle.  Eventually as teens we follow sports news, watching as real life sports figures are traded one team to another. It’s just business.  It’s all business, right?

So as we reach adulthood, we move on to more meaningful endeavors— futures, commodities, stocks and bonds, currencies, or on the national level, spies for prisoners, or arms for hostages.  It’s an acquired skill held in high regard.  It takes a special person to make that extraordinary deal.  If someone could sell us the Brooklyn Bridge, well that would be the ultimate dealmaker. But consider this. The very best dealmaker would sell us something that we would never own—something that we could just keep paying for, something such as a concept, something completely ephemeral. Ultimately that’s where it falls when you run out of things of real value to sell.  Sell an idea.  In and of itself an idea has no intrinsic value.  It’s value lies in the mind of the beholder and the ability of the dealmaker to assign a value by stimulating desire.  Well yes, that is what we bought into with Trump, a nationalistic dream, an imagined alternate reality, “Make America Great Again.”

But let’s get back to trade for a moment.  Jeff Immelt, CEO of GE, made some very enlightening remarks regarding trade in a recent interview.  He cautioned us to look at trade through the lens of globalization and not exclusively through import statistics, as the Walmart model provides.  As an example, GE exports 70% of its output while it imports only 30% from it’s factories on foreign soil.  The net effect of this current trade balance is to create more American manufacturing jobs to support the export needs of overseas orders.  Furthermore, GE has a policy of building plants close to and within the market they service.  As a result, economies are achieved regarding shipping and its environmental impact.  Trump’s simple broad stroke solution to the perceived trade imbalance is some form of tariff and that may well create a real trade imbalance that would reduce our exports and eliminate jobs.  It’s a delicate chaotic system, where each input variable affects the other and resonates back and forth in unpredictable ways.  For more information on chaotic systems read James Gliecke’s book “Chaos.”  Its a fascinating read. The best kind of trading involves the best kind of dealmaking, “win/win.”  It would be wise to keep that in mind.

But in politics it’s just “WIN.”  And if Trump taught us anything in the last campaign it’s just that.  The problem with our current government is that it’s staffed with one great big pissing match of traders.  It begins with the campaign and corporate lobbyists, trading financial support for legislative action. Once in Office, it’s “ I’ll vote your way on this bill if you give me what I want on my pork barrel project.”  Or how about this one?  “I’ll remove hindering sanctions on your country in return for your initiating dirty tricks via cyber-hacking aimed at my election opponent.”  Pretty soon it’s “I’ll trade you a vote on healthcare reform for an amendment defunding planned parenthood” and it just keeps rolling on. It’s all about the deal. Gim’me what I want and if I can shift the cost to someone else, well so much the better. So just who might that be?  The answer is really so simple and so obvious.  It’s not the fat cats.  They’re the beneficiaries.  It’s not the unemployed and working poor.  There’s just no money there. That only leaves the middle class.  Guess what, that means you.

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