Icing on the Cake : A Cause Currency Route to Pareto Global Trade, an Expedient Solution to Trade Externalities, plus …………..What ?!

Icing on the Cake : A Cause Currency Route to Pareto Global Trade, an Expedient Solution to Trade Externalities, plus …………..What ?!


GangaPrasad Rao 
Energy, Environmental and Mineral Economist
gprao64.blogspot.com; gprasadrao.blogspot.com




Disclaimer: If the Earth is flat, this proposal is a full circle !


Click here for a pdf of the manuscript.

Introduction

Trade and Globalization – the sacred growth mantra of many a Nation-Society - has transformed the global economy. The Nominal economic paradigm, endowed with Competition-ZS Capital, has expanded its financial, and production reach to the distant shores of the world. This expansion of input and output markets was as much facilitated by the global flow of capital, and rent seeking-motivated search for factor advantages, as it was by the emergence of a democratically-elected political government empowered to represent its people in negotiations with capitalists. Multi-lateral Trade exploits relative input-factor advantages across jurisdictions, the availability of globally-fungible nominal capital, and leverages geographic advantages, to bring about a specialization in the production and export of certain goods and services. Such factor-advantaged specialization augments the efficiency of factor allocation, and hence the nation’s productive capacity. Fundamentally influenced by tariffs and non-tariff protectionist measures, Trade is particularly price-elastic due prevalence multi-lateral competition. Such sensitivity is further complicated, both, by FX-influencing monetary policy strategies and foibles of political governments, and by externality-advantaged trade, ie, cost advantages secured due avoiding the differential impacts of environmental regulations on nominal firms engaged in trade in different nations. The implication of this price-sensitivity on trade volumes has several repercussions: from a disproportionate impact on the region’s employment, politics and GDP-linked equity markets, the ‘capture’ of Government as evident in the competition to secure employment/tax revenue-generating firms to locate in the jurisdiction by offering tax-holidays and havens, extra-legal assignments/access to land, water and other infrastructure1, to an aggravation of multi-lateral nominal competition leading to an exacerbation of SESH externalities, at home, abroad, and in the global Commons. Though pecuniary externalities such as displacement in employment opportunities, a bias toward ZS-exploitive trade in resources and consequent impact on societal development, including and in particular, a nominally-exacerbated, trade-biased, resource exportdependent, inequitable society, are widespread, those externalities are incremental to the distributed non-pecuniary SESH impacts in the society associated with real-immeserizing nominal trade. And though much has been written on nominal trade, there is little to suggest any effort, beyond the conception of pro-active, alternative growth strategies built around anticipatory macro-cycle financial/sectoral hedges, or the standard palliative of post-fact government policy intervention to resolve the real impacts of multi-lateral global trade. Such intervention is, again, generally limited to the nominal sphere, leaving real societal impacts unnoticed and unaddressed.
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Where Eagles Dare !

The horse-blinded, capitalist-aggrandizing global Nominal paradigm has, over decades of international trade, brought about a system that, for reasons multi-lateral competition amongst suppliers across nations and inequitable division of trade rents, is simultaneously immeserizing to Real societies on either side of the Trade transaction, and pecuniarily disadvantageous to the privately lessefficient. An expansion of the subsidy-leveraged per-capita society in labor-intensive exportdominated LDCs, has the brought the global trade economy centre-stage as nations seek to maximize potential gains from exploitation of natural resources and labor endowments. However, and in the limit, multi-lateral competition increments business risk to an extent political governments, captured by the employment and economic potential of the trade sector beyond their political patronage, overreach with their (ZS-)interventionist trade policies and cause damage to the real and (other) nominal sections of the society. Such damage is most prominent in revenue losses due upfront lumpsum taxfavors issued domestic and foreign capitalists to influence their siting decisions, in Sector-ZS trade policies, in the monetary manipulation of FX, and the consequent trade-dichotomized, and -susceptible, inflationary economy. Multi-laterally competitive trade is particularly environmentally damaging due the anonimity and remoteness of production facilities from consumption centers. Trade competition exploits, on one hand, public ignorance and insensitivity, and on the other the lethargy/complicity of a captured government, to sidestep ESH rules and regulations, and minimize externality abatement costs borne by trading entities. A lack of well-defined property rights regime upon the Oceans further exacerbates the problem when shipping firms, the primary carriers of internationally traded goods, cause unnoticed damage to the oceanic environment. Thus, it isn’t an exacerbation to claim that unless regulated, monitored and enforced, firms in the trade sector might shirk their ESH obligations to protect, or worse, compensate competition-endangered margins. As capitalism expands to more countries and precincts, such competition is likely to intensify and enlarge externalities. Only a pro-actively and commonly-subscribed to system of global trade, such as the one proposed above, will at all solve the myriad issues around it. Trade fast-forwards the penetration of, and grows the demand for products that apply new technology beneficially. The $T-centered Trade-cum-NTC Bond strategy proposed here offers a social resolution to accommodate the schumpeterian technology process, and thus permits socially-, politically-, and economically-sustainable introduction of new products and technology in to the various global societies. The proposal is hence consistent with a technology-centered, global PQ-LQ economic regime. The strategy suggested here – that of issuing a multi-constituency-sponsored, multi-lateral paretoseeking Trade currency, accompanied by a system of nation-specific, perpetual ‘Real-Nominal compensation markets’, offers a tentative alternative to the current trade regime that, in seeking to maximize nominal profits, destroys the local and global environment, and tears societies asunder globally. Some might raise their eyebrows at compensation issued for pecuniary damages from Nominal PV competition. However, compensation for pecuniary damages is not unjustified when one solves a ‘Real Future - Nominal FV’ problem through a PV-Monetary FV-Financial mechanism operated under the aegis of Cause Bonds. Nominal Trade compensation also serves as a one-time strategic bait that, if played by Private firms, serves as a deterrent to inefficient producers from participating in international trade. The recognition of (uncompetitive) local, regional and sovereign interests and Trade-externalities as impediments to global Trade motivates a ‘Cost-of-Trade Capital’ interpretation to NTC Bonds – PV Pecuniary Compensations and FV Social Resolutions being a necessary socioeconomic cost to accept and internalize in the pursuit of a Real-immeserizing, Nominal ZS-enforcing global Trade regime. In this context, the monetization (and valuation) of PV $T, post setting aside ‘Trade OE ZS PV Gold’ toward damages and compensations, devalues the Trade currency to not only reflect prospective externalities, but also obtain a mitigating-attenuating resolution to those externalities, thus permitting a valid claim to externality-internalization and Trade sustainability. Requiring trade to be conducted in a common, $T Cause Currency, ensures the progressive perpetuation of the multi-laterally pareto Trade Cause, and just as significantly, disincentivizes trades associated with spillover externalities on the society and its economy50. Concomitantly, the provision for an internal Damage-Compensation mechanism, that obtains a loser’s cup to impacted Sovereign entities in international trade competition, and PV-Monetary as well as FV-Real compensation for the trade externality-affected in society, assures people of the sustainability of international trade, and permits pareto-growth of the global society around a trade economy. The divisive nature of the no-limits-to-growth Nominal paradigm is evident in the various instances of social inequities, environmental externalities, and sovereign frictions that accompany trade in the global arena. These phenomena further spill over in to the nation’s politics, and corrupt its institutions to a point that Sovereigns, on one hand, adopt arbitrary, trade-convenient sectoral policies, and on the other, dovetail and sync their environmental and monetary policies globally to promote environmentally-damaging, real-immeserizing, economic growth-maximizing nominal trade. The proposal made above anticipates many mal-incentives that pervade nominal trade, and offers a credible mechanism to conduct international trade on a level-playing field while providing countryspecific mechanisms to resolve issues of sovereign protectionism and resolve trade-related externalities. Further, it anticipates the global, inter-generational social side of Trade externalities by providing for private FV resolutions, as well as global private and nation-specific public intergenerational social adjustments that extend, potentially, to the attenuation of nominal terrorism as well. As the world enters a dangerous phase of political and environmental protectionism exacerbated by fears of AI-Robot and ML-triggered unemployment within a capitalist-dominated ‘political democracy’, it seems necessary that we re-think Nominal trade, and adopt a balanced, Real-Nominal multi-lateral trading paradigm that not only offers technology its FV-dollops, its financier-capitalists their riskgraduated returns, and firms their efficiency-calibrated rents, but also democratic citizens, particularly the socially- and economically-vulnerable sections, a chance at equitably sharing in the gains from pareto trade while attenuating its divisive societal impacts. The proposed conception has the potential to accentuate the positives of international trade, while canceling and mitigating its deleterious impacts on the environment and indeed, the global society, and thus obtain for humanity a better world of technology-, endowment- and efficiency-driven, trade-friendly, yet socially-pareto global nominal economy.