The Caldwell Society Lecture

The Caldwell Society was delighted to welcome Mr William Clayton, Head of Economics at Merchiston Castle School, for the first of this term’s lectures.

Mr Clayton chose to talk to the Society about Trade and Globalisation in an attempt to make the children better understand how and why trade takes place and, more importantly how countries benefit from trading with each other.  To begin he asked the children what might be necessary for a country to produce goods – some quick and astute answers came racing back; including the likes of resources, land, markets, a well motivated workforce and technology. He also added good leadership and economic decision making as factors that should not be underestimated.

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To illustrate the point Mr Clayton asked the pupils to divide themselves onto two tables where one would be a poor nation (e.g. Somalia), and the other a rich nation (e.g. the USA). He then provided them with a task to produce the same ‘goods’ – paper aeroplanes. However, whereas the USA could use both their hands, had access to scissors, rulers and clean, crisp, flat paper, the Somalia table could only use one hand, had crumpled up, tatty bits of paper and had no other aids. He then gave both tables five minutes to produce as many planes as possible. Inevitably the USA produced more in the given time, although Somalia did well to produce a good number given their restrictions to good resources and manpower. The next challenge was to produce paper boats – this time a far more complicated design. Inevitably, in the same time span and with the same resources and workforce, Somalia trailed in well behind the USA – producing a third the number of the American made boats.

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In a simple demonstration Mr Clayton had made the point that poor countries could not compete with the technologically advanced nations who, even allowing for higher salaries, were far more cost effective in producing goods more cheaply.  He then asked what the benefit for such countries in trading with such a poor country might be? Some good answers came back; markets and political gain in seeking alliances against terrorism stood out. However, he went about to explain that poorer countries, the likes of Somalia, were important trading partners, as they could buy from the US boats relatively cheaper than they could produce and therefore were ‘saving’ money, while they could then turn their hand to produce planes, with which they could compete more readily with the US in some form. Mr Clayton then produced the mathematical proof to illustrate the benefit, a proof that could be adapted for any nation, goods or volume of goods.

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Mr Clayton also went on to say that many countries often chose production based on perceived needs of the nation. As an example, he mentioned that Great Britain decided to stop buying chemicals from Germany, who were then the dominant world producer, in the 1930’s to encourage the development of the industry in Britain – a wise decision given the events of 1939. Reference to the Thatcher years and the decision to follow the financial services route at expense of industry – always a topic of contention in these ‘austerity’ years - brought a very enjoyable talk to an end in what had appeared a blink of an eye!

Innes MacAskill, 18/09/2013