Dany H. Assaf is co-chair, competition and foreign investment group, Torys LLP.
The propensity to truck, barter and exchange one thing for another … is common to all men, and to be found in no other race of animals – Adam Smith
The International Monetary Fund recently cut its global growth forecasts, citing concerns about further disruptions in trade policies. Stock markets are ricocheting in part because of similar fears of escalating trade wars. Market and political volatility have made us all feel like we are on a roller coaster from month to month waiting for something really terrible to happen.
While we have so far averted a disaster like the Great Depression or a World War, we are all anxiously wondering – how bad could it really get? So do we just exclusively await and rely on the decisions of political leaders to resolve issues and reset a path forward in these turbulent times? Are we all still completely hostage to the wisdom of traditional political leaders to make the right decisions in the moment to avoid disasters as global economic, technological and social disruptions unfold? Or does the modern economy, with current technology, give us an unprecedented say, because Adam Smith’s observation about humankind remains true as ever, but people today actually have the technological tools to make this human condition more of a reality than ever before regardless of what political obstacles are in the way?
In other words, are we on the cusp of an era where the economy is democratized and productivity atomized in such a way that what was once called the “American Dream” is increasingly available to everyone and the possibility and potential to compete for that dream is what keeps us afloat in these rough seas? As a practitioner in the area of competition law and policy, I say yes because the barriers to market entry have never been lower, and an individual’s ability to participate and compete in the modern economy never higher, owing to the way current technology, data and markets are interconnected.
This is not a matter of left versus right. nor of the 1 per cent versus the 99 per cent. because everyone is united in the desire to provide for themselves as well as their families and loved ones. Everyone still needs to put food on the table regardless of their political stripe.
Why the optimism? Because when we study markets and the potential for entry and competition, the focus is not on a snapshot of what has been, but on the market structures to best predict what will likely be. Depending on market barriers and contemporary rapidly shifting consumer expectations and demands, today’s winners can easily become tomorrow’s losers and vice versa. This disruption can also create opportunity as markets turn. Just ask Blackberry, although even it is in the midst of reinvention. On the other end of the spectrum, the world may not have known of another Canadian superstar, Justin Bieber, if it weren’t for YouTube.
The larger point is whether we can avoid becoming the collective victims of the extremes of the protectionist “beggar thy neighbour” policies of the 1930s and the collapse of trade as each escalating short-term protectionist trade goal was advanced while, ironically, ultimately making everyone poorer. Of course, when you’re in the middle of a war, trade or otherwise, there are nationalist politics to exploit for electoral gain. We have already seen that play out and we see politicians continue to draw on that as well. We know how that story can end but, perhaps this time around, the bottom would not be so deep and depressed. As a result of the structure and development of modern markets and constantly advancing technology and innovation, it is now harder for politicians to completely stand in the way of the secular economic reality that, looking ahead, suggests it’s increasingly more possible and way more profitable for most of us to do business together than fight with one another through trade or otherwise.
With electronic communications, payment systems and the availability of real-time supply and demand data and information, how effective can any government be in shutting down trade as effectively as in the 1930s? The modern economy is like a rushing river and, even if you manage to put a large boulder in the middle, the water will just find a way to flow around it. For example, recently in North America, notwithstanding much rhetoric about ending the North American free-trade agreement and all sides’ stated willingness to walk away from a “bad” deal, in reality it became apparent that the economies, markets and supply chains were really too intertwined to actually unwind and a “new” deal was made and rebranded.
This is not to say that escalating trade wars and unwise political decisions could not, and would not, cause more damage or that there are not serious trade modernization issues and imbalances to address. However, there is another reality and narrative that can take hold to buffer some of the extremes that brought catastrophic ruin in the last century because the technological tools of economic democracy did not exist and market barriers were just too high for individuals to overcome bad politics. Now that technology has given us a say, and business has become everybody’s business to essentially give everyone at least the chance to compete for the “American Dream,” our common propensity to truck, barter and exchange with one another might just protect us from succumbing to the rule of the jungle along with the other animals.