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Climate Change Deniers Are Right–And You’re About To Lose Your Shirt

Naomi Klein said that climate change deniers are right about one thing: the steps we take to limit growth to mitigate the damage cause by climate change will result in economic upheaval.

Industries can take steps now to localize supply chains, or they can commit economic suicide, remain in denial, and be forced by climate, cost, or other forces to radically change their business models.

Seth Robinson, 4, looks around at the Yazoo River flooding of his father's corn crop on farm land along River Road, north of Yazoo City, Miss., Thursday, May 12, 2011. Thousands of acres of corn, wheat, soybean and cotton crops are now underwater as the tributaries are backing up from flooding along the Mississippi River. (AP Photo/Rogelio V. Solis)
Seth Robinson, 4, looks around at the Yazoo River flooding of his father’s corn crop on farm land along River Road, north of Yazoo City, Miss., Thursday, May 12, 2011. Thousands of acres of corn, wheat, soybean and cotton crops are now underwater as the tributaries are backing up from flooding along the Mississippi River. (AP Photo/Rogelio V. Solis)This is exactly what is happening right now in the fashion industry.

This is exactly what is happening right now in the fashion industry.

Global weirding, dressed up as “unprecedented” floods, heavy rains, and frost, have caused raw cotton prices to skyrocket, which has had a rippling effect on food and fuel costs, basically checkmating globalization. The upshot is that in America and Asia, from farming to manufacturing, economic forces have conspired to localize supply chains.

The higher price of cotton has encouraged American farmers to growing cotton on farms that had been growing food. This, in turn is pushing up food prices and causing food shortages in the poorest economies.

Your Needs: Food, Clothing, and Shelter… and 10 Pairs of Jeans?

Clothing is a necessity but fashion is a luxury, and there is only so much farmland to go around. At some point, when the world turf battle comes down to an American’s tenth pair of jeans vs. an Indian’s first potato, cotton is going to lose.

The end of growth is going to hit the fashion industry soon, and it’s going to hit it hard.

The three most likely ways this turf battle plays out all point to further localization:

  • Asia can respond to food shortages by growing more food for their citizenry instead of cotton.
  • China can increase the value of its currency, the Yuan, which by some accounts is intentionally undervalued by 40%, which would make US exports less expensive but also make Chinese exports more expensive, encouraging the US to manufacture more of its own goods.  Already, the Chinese consumer class wants to buy goods made elsewhere, which is difficult when their currency is artificially suppressed.
  • There also can be overproduction of cotton leading to a worldwide collapse in cotton prices, but a lot can happen before then…

Fuel Costs vs. Labor Rights in a Virtuous Cycle

There has been an equally powerful change in the worker rights climate as well, as social media has given exploited Asian workers access to information about the rights they are denied. Last summer saw strikes and riots, resulting in a spike in labor costs. As material prices rise and the Chinese respond by cutting corners on labor, this situation becomes more and more likely to boil over.

The spike in labor costs also increased the purchasing power of the Chinese consumer class, increasing demand for meat and cotton, exacerbating the turf war between textiles and food. In all economies, production moves further and further away from consumers as the consumer class grows. American production moved all the way to China.

Chinese production has been moving further and further away from the cities so employees have fewer options for employment. However they did not adequately prepare transportation infrastructure getting goods from factory to port, resulting in unspeakable traffic and resultant pollution. This has led to increase in demand for fuel. As fuel resources dry up, the high labor cost of trucking rise expect these factories to move back closer to the ports. Again, localization.

This virtuous cycle (or “vicious cycle” from globalization point of view) will compound exponentially. Increasing labor costs will increase costs for food, fuel, and commodities, which will increase labor costs.
Floating the Yuan at that point will be the final nail in the coffin of disposable fashion, when textiles that are already almost too expensive to import increase in cost by another 40%.

Consuming Our Way Through Climate Change, or Learning How to Mend

As commodity prices rise, labor costs become less significant, which also results in localization of production. For example, if it costs $.25 to manufacture a tote bag in China and $2.50 to manufacture it in America, and it uses $.50 worth of cotton, it still costs four times as much to manufacture domestically.  But if it uses $20 worth of leather, the cost of goods will be $20.25 in China and $22.50 in America— a difference more than eaten up by duties and freight.  Note also that other fabrics, like nylon and polyester, move in tandem with fuel costs.

Americans have responded, and will continue to respond to, the increase in costs of imported goods by increasing domestic manufacturing.

Another “buy local” solution to a global problem, that also will mitigate some of the causes of climate change, not only by eliminating the transportation of goods around the world, but also by pulling production away from countries that are less regulated.

So what happens when you can’t buy a dress for $10 at H&M anymore?  What happens when America’s working poor have to pay $200 for a pair of jeans that were “Made in LA”?  Well, a lot of people will only own one pair of jeans, and one pair of shoes, and they’ll take damned good care of them. Consumers will want to buy products from a retailer they trust, who knows the goods, who can vouch for the quality… not pull it off a rack at Wal Mart.

As Michelle Long of BALLE put it, we will see the end of the “one night stand economy” and the beginning of the “relationship economy”.

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