Free trade

It is clear that free trade is the path of the future. Despite the best efforts of governments and individuals everywhere, the trend for the foreseeable years ahead is the lowering of barriers to trade and the increase in the exchange of goods, labor, and capital across the planet. Some might decry this as necessarily a bad thing, but instead it must be viewed as a positive asset, primarily through its increase of material wealth and standards of regulation.

Obviously, increased trade brings about increased material wealth. This is fact. Despite the uneven distribution of such wealth, its spread across the globe has still brought millions of individuals out of poverty. Globalization has resulted in the greatest decrease in poverty since the Industrial Revolution, and thus it is clear that globalization has had obvious benefits.

What is not obvious is the benefit towards policies on the environment and labor. On the surface, it would appear that increased globalization has made it so that countries have lowered their economic policies and made labor regulations weaker. There are two counters to this problem. First, increased material wealth makes it more possible for poorer and developing nations to care about and protect environments and their working forces. Second, increased globalization has also brought increased international attention through the media, and thus has helped focus a spotlight on environmental and labor abuse in developing nations that would otherwise go unnoticed. Such international attention has helped to reduce the overall problems of environmental damage and labor force abuse.

It is clear, then, that globalization has been a force for good in this world. Not only has it brought about increased material wealth, but it has also helped protect global environmental and labor standards. Despite the sacrifices that have been made, the inexorable march of free trade and globalization is poised to make the planet a better place to live in.

The unfortunate price of oil

Some records are extremely difficult to break. The world records for many feats, such as the fastest time in the 100 meters, are considered accomplishments that will take years to beat. The record for the most home runs hit in Major League Baseball took 37 years to beat. However, some records have become infinitely easier to break, one of them being the price of oil. Oil is once again approaching record high prices, as the high of $139 set on June 16th is about to be shattered after recent troubles in Nigeria. Oil prices have made a staggering rise this year, and the possibility of even $200 crude oil is likely to occur by the end of this year and most assuredly by the end of next. Prices for oil do not seem likely to abate within the next 5 years.

This is not to be unexpected. By the very nature of oil the supply must be finite, but demand is infinite. It was obvious that as more was wanted the price would go up. Yes, it is possible to discover new sources of oil, but such sources can only be supported by current oil prices, so any increases in production would not necessarily lead to decreased prices, especially as demand continues to rise in the developing world. Despite the possibilities of new streams of oil and certain free market economists’ arguments, the general trend will be a drastic increase in the price for oil.

Worse still, new sources of oil present their own problems. Nigerian and other new African sources happen to fall into areas of growing political instability and brutality (like Sudan). South and Central American sources of oil are somewhat growing, but nationalistic economic policies mean that Venezuela, Mexico and Brazil, barring some drastic change in policy, will be unable to increase output and might actually have a decrease in output in the future. The Middle East now falls under the renewed specter of terrorism, which is likely to make oil from that region more dangerous to acquire. Other, novel sources of oil, such as the tar sands of Canada, have their own economic consequences.

This might be why the current high oil prices are good in the long term. Speculation in the oil (both because of a weak dollar and increasingly unstable supply) are likely to continue pushing prices higher. Thus, countries and individuals will be more likely to turn to alternative sources of energy, including nuclear, solar, wind, geothermal, electric cars or ethanol. These sources are much friendlier towards the environment in general and can help combat global warming.

The most feasible combination of energy use for the future comes from a combination of solar, wind, geothermal, tidal and nuclear power for homes and business uses combined with ethanol cars. The former technology merely needs greater investment and the continued high prices of oil. The latter will be trickier. Already problems have arisen from using corn ethanol, instead of the much more efficient sugarcane variety, which have resulted in high food prices. The world must push further for sugarcane ethanol and learn to make it truly more efficient.

High prices of oil are an unfortunate reality of life. In the short term, there will be some suffering. The moderate future will likely see a drastic reduction in demand; both from measures such as using less energy in general, more fuel efficient cars, and alternative energy. In the future, as the market effectively teaches its lesson, the next energy marketplace will not rely upon a single resource for powering the world’s energy needs. It is a shame, however, that we cannot simply jump to that future right now.