In terms of historical forecasting and predictions, in both a business and innovations context, one I was just turned on to a few weeks ago was the views of Sir James Goldsmith in 1994 in relation to the sweeping efforts by the US Administration over The General Agreement on Tariffs and Trade.
For those, like me, who were more interested in Jim Carrey’s sky rocking fame (Kurp, 2014) than Global Trade deals, here is a general timeline. In the mid-1980s there was a big push to start to limit trade barriers between nations. Between 1986 and 1994, referred to as the Uruguay Round, countries started to draft free-trade deals which ultimately culminated un the World Trade Organization (WTO) in 1994 (WTO, 1994). Most in the US are familiar with the huge US trade deal between US-Canada-Mexico, called NAFTA. Most in the US are not familiar however of GATT, The General Agreement of Tariffs and Trade, which was a broader sweeping reduction of tariffs globally drafted by the WTO.
Tariffs, for those not familiar, are basically taxes placed on goods when they are sold across borders. The purpose of tariffs is generally to protect the economy within the borders of a country.
What Sir James Goldsmith predicted, best articulated in his 1994 Charlie Rose interview (1994), was that these agreements would be horrific for the American worker. Within the interview he debated Laura D'Andrea Tyson, the sitting Chair of the President's Council of Economic Advisers for the Clinton Administration. Tyson pressed the general US stance on the deal, which was that the reduction of tariffs would make it more profitable for us manufacturers sell their goods abroad.
Goldsmith however pressed another more likely angle, which is that US manufactures would move their production fully offshore, then leverage the free tariffs to sell those goods domestically.
Tyson scoffed at these arguments, stating that the US manufacturers just wouldn’t do that, because the goal of the agreements is to sell overseas, which is what she was assured by large US manufacturers is how they will leverage the agreement.
As we move forward through the 1991s and 2000s, Goldsmith’s prediction won out over the narrative sold to the US Government on how the GATT deal would be leveraged by US corporations. Infamous companies like Nike, Apple, Gap just to name a few have leveraged the ability to manufacture abroad, so much so that memes of workers getting paid 3-cents an hour is common-knowledge within the US.
The forces that drove this prediction coming true, which Goldsmiths articulated is:
- Logic. If you had a lemonade stand, and if my moving that stand across the street could save 35% of the cost of making the lemonade, you’d obviously do that.
- Demographics. At the time of the agreement, the workforce of the US was 134 million, where Chinas was 678 million. This immediate expansion of the available labor force to US companies drove down the aggregate cost of labor worldwide due to an oversupply of labor (World Bank, 2021).
While this wasn’t necessarily a successful prediction in the eyes of the United States worker, it was a successful prediction in terms of US companies who have become enormously profitable leveraging cheap overseas labor. Probably the most prolific of the companies leveraging this phenomenon was Amazon.com, who was founded in 1994 by Jeff Bezos on the backs of these trade deals. Amazon has built an enormously success business leveraging products entirely designed and manufactured overseas, limiting its US work force to primary low-cost distribution services.
References:
Charlie Rose. (1994). Sir James Goldsmith: the General Agreement on Trade. Charlie Rose Inc. https://charlierose.com/guests/7247
Kurp, J. (2014). What Jim Carrey Accomplished In 1994 May Never Be Repeated. UPROXX.Com. https://uproxx.com/movies/what-jim-carrey-accomplished-in-1994-may-never-be-repeated/
NAFTA. (2020). North American Free Trade Agreement (NAFTA). Department of Commerce: International Trade Administration. https://www.trade.gov/north-american-free-trade-agreement-nafta
World Bank. (2021). Labor force, total - China, United States. The World bank. https://data.worldbank.org/indicator/SL.TLF.TOTL.IN?end=2021&locations=CN-US&start=1990&view=chart
WTO. (1994). WTO Legal texts. World Trade Organization. https://www.wto.org/english/docs_e/legal_e/legal_e.htm#services
Xu, V., Cave, D., Leibold, J., Munro, K., Ruser, N. (2020). Uyghurs for sale: ‘Re-education’, forced labour and surveillance beyond Xinjiang. Australian Strategic Policy Institute. aspi.org.au/report/uyghurs-sale
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