Economic lessons from the cod trade
I received a copy of Mark Kurlansky’s book “Cod” this Christmas from my sister-in-law.
Kurlansky’s book is an “ecological fable” about the codfish and codfish trade history.
The book has many interesting insights about trade, economics, and government regulation of markets.
Kurlansky has a knack for explaining these concepts through stories in an engaging and thoughtful way.
As I’ve worked through the book, it’s been difficult to overlook the parallels between the cod trade and modern economic and technological problems.
Below, I’ve highlighted two takeaways about technology and free trade that Kurlansky discusses in his treatise, which I found interesting.
Technology never reverses itself. It creates new technology to confront new sets of problems.
New technologies bring many benefits, but they may also cause harm to people, industry, and the environment.
Kurlansky highlights that we often want to return to old systems and ways of doing things once we understand the harms new technologies bring, but we cannot.
Many years ago, new fishing technology was introduced to make fishing for cod safer and more productive; unfortunately, cod fish stocks were devastated as a result. Governments and regulators thought it was impossible to overfish at the time.
There was no going back to simpler, less harmful fishing methods, though, because that’s not the nature of technology - it accelerates forward.
Indeed, once discovered and implemented, we continue to build and advance the technology within the new paradigm. For example, we know atomic bombs are harmful technology, but countries continue to improve their killing power.
Kurlansky’s discussion made me think about artificial intelligence, which we know contains the possibility of significant harm to human beings within it.
Because of this, people, governments, and regulators want to ban, contain, and slow the evolution of the technology down, but that’s virtually impossible now - the cat’s out of the bag. Moreover, effectively regulating general-purpose technology is tough; just look at the rise of the internet or blockchain.
And when we see AI's positive benefits to life and work in action, it becomes even more difficult to put it back into the box. Indeed, general-purpose technology, like AI, lifts all ships, and limiting those potential economic efficiencies and gains to avoid some theoretical harms is a tough decision for people and governments alike.
Government interference in free trade can result in some short-term benefits, but the long-term consequences aren’t worth it
In “Cod,” Kurlansky discusses how the British Crown, after letting New Englanders trade cod freely for more than a century, decided in 1733 to regulate molasses as a key step toward reasserting its control over commerce the cod market and commerce.
Instead, the protectionist measure turned out to be one of the first inadvertent steps toward dismantling the British Empire.
President-elect Donald Trump is taking a protectionist stance on trade, threatening to implement hefty tariffs on major trading partners once he’s sworn into office.
Just the other day, several news outlets reported that once Trump’s sworn in as President, he may declare an economic emergency to justify additional economic measures to protect US economic interests.
History provides mountains of evidence for the benefits of free trade, and many of the world’s most prominent economists champion it because of the wealth it creates. In his book, Kurlansky discusses how free trade enabled poor New Englanders to become wealthy “cod aristocrats.”
Several studies have been conducted, modeling the potential economic impacts that the proposed Trump tariff regime could have on the US economy and the broader global marketplace – virtually none of the models are positive.
When the British Crown restricted the free trade of cod with non-British markets, they invited backlash and conflict with other European powers, which negatively impacted economic relations. Additionally, their protectionist policies created economic inefficiencies and led to other serious political consequences, including the American Revolution.
Some journalists have attempted to explain Trump’s tariff threats using the Nixon “mad man” theory. President Nixon used to try to come across as mentally unhinged to gain the upper hand in negotiations. He thought that if his opponent thought he was capable of anything (e.g., launching a nuke), it gave him stronger bargaining power.
We won’t know what tariffs will be implemented and how until Trump takes office. The coming months will reveal whether Trump is bluffing or if there’s truly going to be a shift toward economic protectionism, even isolationism.
Just like the British Crown’s protectionist economic policies provoked a backlash from its colonies, Trump’s aggressive economic policies risk alienating key trading partners and undermining global economic stability.
Instead of escalating tensions and conflict, Trump and the US should look to resolve disputes and expand the total share of global trade through cooperation.