Free trade - for the people

The gobal marketplace, for real

Imagine a world in which the only multinationals are AT&T and UPS.

In this world, you want a case of mangos, and you want them tomorrow. You live waaay out beyond the 'burbs.

You go to the nearest media appliance. You tell your grocery agent you want mangoes, very good ones for a party, and price is not your main concern. It comes back with an offer from a farmers' co-operative in Kerala (southern India), for an unusual variety whose description alone has you salivating. You order. The following morning, they arrive.

Cost: milli-pennies to AT&T for international communications and pennies to local bandwidth providers, for moving the bits which constitute your market research, exchange of contracts and payment; maybe £30 to UPS for moving the atoms you are about to eat; and £5 direct to the farmers' co-op for those atoms. Total: £35.10.

Total cost of going to market downtown: £20 for the actual mangos -- "OK then, I'll give you the box for £15 since it's the end of the day"; £5 actual cost of a 20-mile drive or train trip (in the US, the same $8 for 40 miles driving); and an hour or two of your time at... what? £25 an hour, I hope... and out of that £40- £70, only pennies go to the farmers.

Hey, this was only supposed to be a reductio ad absurdam, an abstract illustration of the possibilities of producers and consumers doing deals directly, and it's good economics already, at least in special niche-market circumstances.

Of course, it won't happen quite like this. Holderness's Corollary to the First Law of Forecasting states that, whatever you predict about the worlds of communications and multimedia, something more interesting than that will happen.

And there are a few little problems. I ran this fable past Ranil Senanayake, a founder of internet access in Kenya who had a very similar scheme for improving the lot of African farmers. It won't happen, he said: "the movement of pathogenic organisms and diseases are a very real threat in trans-boundary movement of goods." Will General Foods and wheat-market-cornerers Booker McConnell be saved by mountains of regulatory documentation? Not if a few Grays of food irradiation can zap the pest problem.

If it happens late enough, the remaining multi-nationals could just as well be the Chinese phone company and a reformed Indian Postal Service. Whoever, there is scant reason for the continued existence of international corporations, except to service transactions which must take place with essentially zero set-up time. Those transactions are in long-distance bits, and in those atoms which need to be delivered First Day Air, before entropy sets in messily. Someone will be along in a moment proposing a way of decentralising these, too.

Way back when the Web was young (January 1994), Jeffrey K. MacKie-Mason and Hal Varian at Carnegie-Mellon University proposed an automated, real-time auction as a way of pricing reliable bandwidth for videoconferencing and such. The sooner you want that packet, the more you bid. It's still the nicest net-economics idea I know of.

This principle will be much easier to apply to physical goods, from ball-bearings to underpants, since daily transactions worldwide are in the hundreds of millions, not the peta-transactions threatened by the Information Super-Hype-Way.

What'll this do to economies? Mass unemployment among sales droids is not to be sneezed at as a consequence. (What else might they get up to?)

Globally, the principle is that on the internet, everyone is in the same place. This will be extended to trade in atoms. This will drive exchange rates towards Purchasing Parity Power. It will no longer be possible for Euro-trash to wander round India living like lesser Rajas on £10 a day. Eventually, a chapatti will have the same cash price everywhere.

Some horrendous transitional effects are immediately obvious. Farmers' co-ops going heavily into export could get a fair deal for themselves -- but put the price of food way beyond the earnings of people who can't export, like street-sweepers.

On the plus side, conventional development economics drools over cutting out the middle-folk. The shift of economic power from traders to producers will make far more cash available in local economies.

It's not so much a question of whether this is a Good Idea, as of how we cope with it. For how many years can the multinationals delay their demise? Unless someone comes up with an alternative to free markets and free trade, sooner or later people will start trading freely and directly. Since that alternative looks authoritarian, we'd better get down to devising a humane transition to a real free market, now.