The Two Producers Of Sand
A parable that highlights some of the dilemmas of international trade as they relate to issues of growth, resource use, and inequality.
By Gunnar Rundgren
Once upon a time there were two producers of sand, Henry and Loser. They dug out the sand from the same place, with a shovel and a wheelbarrow. The sand was sold at the side of the road to by-passers. They didn’t earn a lot but enough to survive, to send their children to school, and buy a new wheelbarrow and shovel every other year. The little they could save was used for funerals or if someone in their families fell sick, or had an accident.
One day, for reasons we don’t have to discuss here, Henry was able to buy an excavator. It was expensive and the fuel is also expensive — but still, he can dig sand thousand times faster then before. And he can dig longer hours, his machine works all around the clock and he has bought a truck to supply customers with sand. Through the increased productivity sand prices fall, and therefore consumption increases. More houses and roads are built, the wealth increases. Henry produces more and more sand.
Taste the word “produce” by the way. Doesn’t that give the impression that Henry creates something, that he creates the sand? In our way of speaking we say that we “produce” when we dig up a piece of nature and sell it. And “our wealth increases”? How, when there is less and less sand left and one has to dig deeper and deeper to get it, can we say that wealth increases? Pertinent questions, but let’s put them aside and look at Loser.
Loser leads a hard life. The price of sand falls again and again, and the clients now want to have the sand delivered to their doorstep. And the sand is deeper and further away as Henry’s excavators dig more and more. Clients also have very specific demands on the sand, it should be graded in various fractions and there must be no “foreign” materials. One day a client even asked about the social conditions for Loser’s employees.
Loser looked at him with an empty look: “I have no employees, it is just me and my family.”
“How much do you pay yourself? And what about the children, do they go to school?” the conscientious client asked.
Loser had to admit that he had to take one of the boys out of school to help carry the sand to the clients and that one girl had been taken out of school as they no longer could afford her school uniform, books and pencils. The conscientious client said, “we can no longer buy from you; I am sure you understand that we have to take social responsibility.”
Another client was concerned that Loser was destroying nature, “Didn’t you destroy a fox burrow the other year, when expanding the sand pit?”
“Well I did”, Loser said, “but Henry’s excavators are driving this, they take almost all sand; the little I dig up makes hardly any difference”.
The client replied, “Henry has an environmental policy; he offsets damages here by protecting precious sand dunes in Morocco. Also, he made a very nice mountain bike track for the children in old parts of the pit. He is a good example of corporate responsibility, while you are just destroying the environment.”
As you might have realized by now, life was hard for Loser. Every year his income shrank. When the wheelbarrow broke down, he couldn’t buy a new one. Another child had to quit school and carry the sand in buckets.
For a short while he had a rebound. A consultant from the regional development agency came and told him to look for another market niche; sell sand for special purposes and not “commodity-sand”. “There is a huge demand” the consultant said, “and there is special support for such local quality production” he said, before driving off in his SUV leaving a cloud of dust in his tracks. As long as the support kept coming in it was okay. The support ended, clients were unreliable and fads came and went and as soon as some business was lucrative enough Henry went in and out-competed him. One day Loser had to throw in the towel for good. He now lives on social support.
Our little story shows what happens in an unequal world with free trade and access to fossil fuel; where the price of oil determines the “value” of human labor. That is one of the most important factors in the story. It is simply not possible for human muscle power to compete with fossil fuel driven machinery. We might think that gas is expensive, but a barrel of oil has as much energy as 14 peoples’ annual labor. The absolute poverty line is 1 dollar per day, which is more or less the lowest salary one can pay any place on earth. Even with such deplorable salary, the cost for 14 peoples annual work is around 5,000 dollars, while a barrel of oil costs 100 dollars.
For sure, one can’t compare oil and human toil one-to-one. Human labor has skills and intelligence. True, that is why we have machines to convert energy into something useful. The market is also rarely as “free” as in this example; people with so varied conditions hardly compete next to each other. Some simplifications are made. But with cheap transportation technologies and largely deregulated markets differences in market conditions have plummeted, and prices for most commodities are converging on the planet. Some may also say that there is rarely such a competition for resources as in this example. To some extent this is true, but seen in a global perspective and long term, there is just one planet with a certain quantity of any resource. The first oil brought into the industrial economy was available, in good quality, in abundant shallow reserves on land and was therefore very cheap to extract. Oil is now pumped from big depth under difficult conditions, and qualities are often lower, simply because the best sources are long depleted. To be closer to the example, there is even a global market for sand, which is a scarce resource in some places, for example, Singapore imports sand from the USA.
The relevance of our story is most easily seen in agriculture, where farmers using the most basic hand tools, such as a hoe or a spade, are competing with farmers who have a machine fleet that is worth millions of dollars. In this case, the labor of the small farmer is competing with oil and machinery. Making things even more absurd, the highly mechanized farmers are subsidized by their governments. To borrow money for an investment costs them a few percent in interest rate, while the poor have to pay twenty to forty percent interest rates for loans — if they can get any. The conditions for competition in the so-called “free market” are exactly so skewed. The brutal truth is that there is no future for most of the half a billion small farmers of the world in this market place. A few can survive by going for niche, organic or high-value products, others have to migrate out of the farm sector, and they do. There are, however fewer employment opportunities for them than there were for my grandparents in Sweden who could go from farming to industries that needed workers. And there is no space for the farmers to invest so that they could compete more fairly with “us”.
These are the conditions that we should discuss when we discuss global poverty and starvation (and not increasing GMOs or the use of chemical fertilizers). These are the conditions which actually make the poor poorer. The neo-liberal market doctrines can’t produce viable solutions to the poverty trap of billion people.
We must realize that a “free” market in a deplorably unequal world is not “free” at all. One percent of the world’s population controls around half of all wealth and gaps are widening. When we have so different access to resources, a free market creates bigger gaps and not only relative but also absolute poverty.
The way out? Well, I don’t say it is easy. I don’t claim that we will solve the problems with government regulations, tariffs and government monopolies — in most cases these have had devastating effects. The first step is to clearly see the problems that are generated by a capitalist market economy and fossil fuel, and realize that their root causes are systemic and structural. The solutions are therefore to be found in alternatives to this. How they can look like is a subject of another fairy tale.
“One doesn’t discover new lands without consenting to lose sight of the shore for a very long time.” — André Gide