November/December 1985 RAIN Page 9 WHAT DO WE SPEND FOR OTY SERVICES? dollars per capita FROM: The Homegrown Economy: A Prescription for St. Paul's Future Have conditions changed recently to make the concept of self-reliant cities more appealing? Morris: Yes, I think that several things have changed recently. But first, let's look at the theory of comparative advantage. The theory was developed by David Ricardo, but people seem to forget that Ricardo said that the theory of comparative advantage becomes irrelevant if capital becomes mobile. In his time, in the 1820s and 1830s, capital was not mobile, and so therefore there was some rationale for the theory. But he himself said if international economic conditions changed radically, the theory would no longer hold. Well, of course, the economic conditions have changed very radically at this point, yet people are still quoting Ricardo, which I think he would find amusing. There is a reason for trade and competition because the presumption is that competition will force you to improve your product or the quality of your service. But that doesn't necessarily need to be a global competition; it could just as well be a municipal competition or a regional competition. The question of comparative advantage presumes that you can produce a product cheaper than I can because of the inherent conditions of your area. But again and again what we discover is that you produce a product cheaper because: (A) the exchange rate allows you to do that, and/or (B) you pay your labor a much lower price and they have worse working conditions. Neither one of those has anything to do with quality or efficiency, so it would seem to me that if you're talldng about a theory of comparative advantage that says that I will be driven out of business mostly by other businesses that are not as efficient as I am, then it seems that the theory begins to fall apart. That is, it falls apart, not as a fact of life, which it is, but it falls apart as a theory that one would want to use political power to support. In the last 150 years, we made a decision in this cbtin- try to have long distribution systems. That was a political decision. So we paid at public expense for the railroads by giving them property on either side of the line, we paid at public expense for massive irrigation systems so we can have the kinds of farms in California that would not have been tenable otherwise, we allowed the pollution from those farms to run off at no cost to the farmers, we paid at public cost for the building of the interstate highway system, we paid at public cost for the excavation for canals and locks, so basically what we did is that we made a national decision that it was inherently good to ship tomatoes from California to Maine. Once we made that decision we then invested enormous amounts of public money to make it cheaper to ship a tomato from California to Maine, and now in 1985 we hear that we shouldn't try to raise tomatoes, at least on an extended basis, in Maine because its cheaper to bring them in from California. Well, it may be a false statement even now, but even when it's true we find that it's true only because of the subsidies that have gone in the front end in the last 40 or 50 years. So that's a long answer to a short question, but the question that you raise is the central issue that faces local self-reliance. My feeling is that if I can extract the maximum amount of useful work from a given resource, and if I can extract more useful work from a given resource than somebody else, then I am economically competitive within the rules as I develop them. But I'd add one thing. That is that research and development plays a very important role in creating the production systems with which we live, and if we make a decision as a nation that we will invest the money to create the technologies that will allow local self-reliance to be economically competitive with centralized, globalistic systems, we can have that come about. But we
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