| The swelling
American trade deficit is an odd species of the elephant in the
living room. It’s not that nobody’s talking about it—the
record $55 billion gap for the month of October, and 2003’s
record $489 billion deficit both got plenty of press—it’s
that nobody is doing anything about it. In spite of all the worried
talk, few people seem to understand the deficit’s colossal
effects, and fewer still are trying to reverse a trend that strongly
signals the decline of American economic and industrial vitality.
Part of the problem is that economists disagree on the long-term
effects of the trade deficit. Some believe that it’s actually
a sign of economic strength. Remember Gregory Mankiw, the head of
President Bush’s Council of Economic advisors? He reignited
the debate last February when he said that outsourcing “is
probably a plus for the economy in the long run.”
Mankiw’s comments infuriated unemployed American workers but
many economists and business leaders agreed with his fundamental
argument. Jeff Madrick, for example, a New York Times economics
columnist who admitted to his own fury at Mankiw’s “insensitivity
to the considerable pain of job dislocation” allowed that “it’s
hard to have taken even a couple of economics courses without essentially
agreeing with [his] point.”
The point is this: “When a company contracts services or manufacturing
to a lower-wage nation, it reduces costs and cuts the prices of
its goods and services. This surplus amply benefits consumers, and
in general allows the United States to make at home what it makes
best.”
That’s the theory, and for an increasing number of American
companies it has proven to be both compelling and profitable. But
even the most ardent advocates of free trade are beginning to see
that the theory in practice is proving to be unsustainable—economically,
socially and ecologically. Millions of manufacturing jobs have vanished
and with them the very foundation of American industry. Supply chains
span the globe, making it hard for manufacturers to assure the environmental
health and safety of their products. And, as Madrick notes, despite
profitable growth for some sectors of the economy, it is quite possible
that “the gains from trade will not outweigh the losses due
to job dislocation and lower wages.”
Moreover, the trade deficit has made the U.S. a debtor nation. In
2003 the U.S. borrowed $540 billion from overseas creditors and
the debt load is expected to double in the next six or seven years.
This is not a signal of economic strength. “A very wealthy
nation can tolerate this negative toll for many years, but not forever,”
writes economic journalist William Greider. “Unless the historic
meaning of debt has been repealed, no nation can borrow endlessly
from others without sooner or later forfeiting control of its destiny,
and also losing the economic foundations of its general prosperity.”
Why not put business to work to restore the general prosperity,
to rebuild the foundations of American industry, to create long-term
wealth rather than short-term profits, to support the commons and
the public good?
It’s true that much of this work will depend on enlightened
policy and national leadership—incentives to keep factories
open rather than move manufacturing jobs offshore, or trade pacts
that bring some balance to the wage gap between rich and poor nations—but
a great deal of the wealth creation that supports long-term economic
health is driven by the synergistic activities of individual business
leaders, companies and entrepreneurs. Indeed, addressing the trade
deficit by rebuilding the industrial capacity of the U.S. through
private enterprise could be seen as an emerging growth industry.
Our greatest hope lies in a fundamental redesign of industry, a
transformational trend already visible on several fronts. One is
the growing influence of cradle-to-cradle design. After a decade
of germination and growth, the basic ideas of cradle-to-cradle design—the
development of circular rather than linear material flows, a reliance
on renewable energy, the scientific assessment of the environmental
health and safety of product ingredients, and design based on the
effectiveness of natural systems—are now being embraced by
influential members of the business community. In key sectors one
can see regenerative industry taking root and blossoming.
A dozen years ago, the presence of a single cradle-to-cradle product
on the market was cause for celebration. Today entire businesses
are reorienting their design and production protocols around safe,
healthful cradle-to-cradle standards. Some are tracking their entire
supply chains to ensure the environmental safety of their products,
while others are organizing take-back programs to close the loop
on material flows. Meanwhile, manufacturing plants are being outfitted
to run on renewable energy, naturally and cost-effectively filter
stormwater, and heat and cool themselves through engagement with
the local environment. And perhaps most significantly, we are seeing
the emergence of business-to-business partnerships devoted to implementing
circular material flows throughout entire industries. In these ways
and more, cradle-to-cradle design is allowing businesses in many
sectors—packaging, textiles, electronics, home and office furnishings,
apparel—to optimize their products and services rather than
simply minimize their negative effects.
These businesses are the vanguard of the reindustrialization of
America. By moving from the lean production of degenerative technology
to the clean production of regenerative technology they are showing
how American industry at-large can regain its competitive advantage.
With the huge wage gaps between rich and poor nations, there is
no way that an American factory can compete with a Mexican or Malaysian
factory making the same product—wage balancing just won’t
happen fast enough. But by focusing on a cradle-to-cradle strategy,
adding value and creating wealth by cleanly producing regenerative
goods and services, American manufacturers can achieve a level of
quality that will set their products apart.
Success in these ventures could be contagious. Politics typically
trails the innovative energies of business, so one can imagine how
national economic priorities might follow the growth of cradle-to-cradle
enterprises. Indeed, a national strategy aimed at developing a circular
economy—an economy driven by renewable energy in which naturally
derived biological nutrients and synthetic technical nutrients flow
in closed loop cycles—inherently supports national industry.
In the United States, creating a circular economy would refocus
the attention of American business on generating long-term national
wealth. Public investments, as well as an influx of “patient
capital” from increasingly potent institutional investors interested
in expanding the social dimensions of business, could help fund
the rebuilding of industries, infrastructure, transportation and
energy systems—the foundation of economic strength. At the
same time, making innovation, quality design, and environmental
health the hallmarks of American industry would create new markets
for American products. Perhaps most importantly, evidence of large-scale
industrial renewal would provide additional incentives for companies
to move their operations back to the United States. An infrastructure
for the recovery of industrial materials, for example, would allow
companies to optimize the value of their technical nutrient cycles,
which are most beneficial when materials are recovered and reused
with a minimum of transportation.
This kind of deeply considered, thorough, ecologically intelligent
reindustrialization would make manufacturing a safe, beneficial
addition to community life. Its focus on generating long-term national
wealth would not mean an end to vigorous trade between regions or
nations. On the contrary, it would simply confirm that, as in politics,
all sustainability is local and that a nation of cradle-to-cradle
economies would be an economically vibrant nation as well as a good
trading partner.
Consider the relationship between China and the United States. Currently,
America’s trade deficit with China is swelling faster than
its gaping deficit with the rest of the world. In 2003 the deficit
climbed to an all-time-high $124 billion and the last figures available
in 2004 showed a record deficit of $16.8 billion in the month of
October. Compounding the imbalance is the fact that the two nations
suffer from the commercial exchange of ecologically questionable
products that damage the economic, social and environmental health
of both nations. While China becomes the world’s low-cost producer
of these products, the U.S. brings them to market with the world’s
most “efficient” distribution system, moving goods in
a rapid, one-way trip from retailer to consumer to landfill. In
many cases, the U.S. sends the most toxic products back to China,
where lead and copper are unsafely recycled from computers and televisions.
This is trade as mutually assured destruction.
Yet it offers an unparalleled arena for partnership, innovation,
and mutually beneficial regenerative growth. There is no doubt that
China’s rapid economic expansion over the past two decades
has produced serious environmental and social problems. But we need
to remember, as the China scholar Elizabeth Economy has pointed
out, that integrating environmental protection with economic development
is an ongoing struggle for every nation, one which, “in many
respects, China has just begun…”
The beginnings are promising. Stepping out ahead of the U.S., Chinese
leaders have recognized that the cradle-to-cradle strategy can be
applied on a large scale. In 2002 Madame Deng Nan, China’s
Party Secretary for Science and Technology, declared that it had
begun to develop industries and products based on cradle-to-cradle
principles. Working with the China-U.S. Center for Sustainable Development,
China is already applying cradle-to-cradle thinking to urban and
rural planning and developing strategies for a variety of solar
and wind powered enterprises, villages and cities.
China is also integrating cradle-to-cradle thinking into policy
making. In March 2004, Premier Wen Jiabao announced that China will
increasingly pay attention to “the development of a circular
economy.” And in May 2004, Deng Nan publicly presented China’s
goal to increase the utilization of resources by a factor of eight
to 10. “If we are to succeed,” she said, “it is very
important to develop a circular economy based on cradle-to-cradle
design principles.” These principles, she added, represent
“what China’s central government wants to achieve.”
A serious, reciprocal American response could transform the relationship
between China and the United States, and indeed the foundations
of world trade. Imagine, for example, the powerful transformations
that could emerge as the two nations, the world’s greatest
producers and consumers of goods, engaged in developing regenerative
enterprises and circular economies. Together, their share of global
consumption is enormous: nearly 50 percent of the world’s cement;
nearly 40 percent of its steel, aluminum and lead. If each of these
commodities were seen as a technical nutrient, designed to be used,
recovered and used again at a high level of quality, the world would
begin to see new levels of achievement in the quest to integrate
economic growth with environmental protection. Indeed, we would
begin to see the synergistic benefits of regenerative industry as
new growth brings wealth creation, social capital and ecological
renewal.
As the cradle-to-cradle infrastructure grows in China, as it is
growing in the United States, the two nations could become cradle-to-cradle
industrial partners, developing products and enterprises that support
the life and health of both. This cooperative relationship, at its
best, will be a competitive one. Rather than competing to destroy
each other, however, China and the U.S. could compete in the classic
sense of the word, which in Latin means “to strive together.”
Imagine, then, the two nations—or a coalition of nations—working
vigorously toward a common goal: Not an end game in which one player
wins but a field of endeavor in which China and the U.S. get fit
together as each nation strives to create enterprises that generate
commercial productivity and celebrate the common assets of each
nation—their air, water, and soil as well as the social structures
and institutions that support creativity, scholarship, health, and
conviviality.
That will only be a beginning. The birth of truly regenerative industry
and commerce calls for global action. It requires energy, genius,
creativity and commitment from all sectors of society from all nations.
It asks that communities, governments, NGOs, educators, and business
leaders from Beijing to Buenos Aries apply cradle-to-cradle design
and development to the pursuit of a prosperous, equitable future
for all. We must, all of us, reach for nothing less.
Clearly, the work begins at home, where the elephant sits in the
living room waiting for our attention. |
