Posts Tagged free trade
In light of my recent posts on the inadequacy of fair trade (1, 2, 3 & 4), I thought this recent debate on the topic was well worth sharing. The discussion includes AEI’s Claude Barfield, World Fair Trade Organization’s Paul Myers, and Henderson State University’s Victor Claar.
Watch it here:
Barfield provides a good historical backdrop, but Claar, whose comments begin at 33 minutes, provides a strong and thorough critique of fair trade’s failures in both fairness and economic results.
Some of my favorite lines from Claar, in no particular order:
- “The fairest trade of all is trade that is genuinely free—free from political logrolling by politicians desperate for votes, free from opportunistic lobbying by industries like U.S. sugar and cotton, and free from the harm to the global poor that well-intentioned rich Northerners like us can sometimes bring.”
- “When the price of something is low–like coffee, or sugar, or cotton–market forces normally direct people to make less of it and move onto something else. But fair trade interferes with the signal that prices ordinarily provide; Fair Trade can never serve as a sustainable long-term development strategy because it will never make people significantly richer than they are today.”
- “Putting at least some faith in markets to be a powerful force for change in the lives of the poor does not amount to abdicating our concern for the poor–instead opting to cavalierly put our hope in little more than faeries and magic dust. Just as we trust gravity to keeps us all affixed securely to the ground, and just as the principles of particle physics assure you that the chair you are sitting in right now will not let you slip through its seat to the floor, markets work invisibly, but in ways that we understand reasonably well…The laws of physics are part of God’s providence; so are the laws of economics. And we fail miserably in our obligations to our Creator when we ignore the fundamental truths of economics in our efforts to aid the poor—even if our efforts flow from the very best intentions.”
One other item of note is how little argumentation Myers delivers in his primary remarks, throughout which he manages to disregard economic efficiency (because the poor benefit from waste?), downplay petty old “freedom” (because the poor prefer enslavement?) and elevate “rules and regulations” (because the problem is obviously too much access to markets?)—all without providing a substantive argument for how price manipulation benefits the poor and how price accuracy (is there a better word?) hurts them. He provides plenty of anecdotes about how the poor need jobs and affordable goods (is this news?), but provides no cohesive argument for why fair trade fulfills these needs and free trade perpetuates them.
I’m guessing this lapse was largely unintentional, and that, aptly representing Thomas Sowell’s “unconstrained vision,” Myers simply assumes that the (supposed) morality of fair trade is self-evident—that those who oppose it must simply value economic efficiency over the interests of the poor (and, to be fair, some do). Thus, fluffy anecdotes and pious platitudes about the struggles of the poor suffice for a moral indictment of free trade. Unfortunately, most free traders believe what they believe precisely because they think it benefits the poor. Myers should start his argument there (when he gets around to making one).
If these assumptions about Myers’ vacuous, emotion-driven remarks are true, then Claar’s later emphasis of Matthew 22:37 is even more relevant than intended.
How do we truly love our neighbor if we are aiming only to elevate our own personal, abstract notions of fairness without checking them against reason or results? How do we truly love the Lord our God if we rely only on our “hearts” and “souls” and not also on our minds? Further, as I’ve indicated elsewhere (1, 2, 3), what does it say about our “hearts” and “souls” if they are detached from an intentionally holistic love of God that looks beyond earthly emotions and assumptions?
Jordan Ballor wrote a marvelous piece for Comment Magazine highlighting some of the key areas of tension between pro-globalization “market conservatism” and the more localism-driven “communitarian conservatism.”
Conservatism at its best recognizes the fundamental relationship between appreciation for markets and economic freedom on the one side, and morality and social responsibilities on the other. Far from a temporary alliance, this deep and real connection guarantees that the essence of the fusionist program, despite calls to the contrary, will continue to animate the future of conservative social thought.
Yet, as is evident throughout the piece, the connection is not so clear to some, and although divisions exist on both sides, Ballor spends much of his time focusing on the concerns of the communitarian side, pointing to the ways in which markets can and should be oriented toward the common good.
To illuminate some of the core problems of the localist framework, Ballor sets his sights on conservative journalist Rod Dreher, whose radical shift to a small-town lifestyle was recently showcased by David Brooks, and whose popular book, Crunchy Cons, “includes a ten-point ‘Crunchy Con Manifesto,’ with propositions like, ‘Small, Local, Old, and Particular are almost always better than Big, Global, New, and Abstract,’ and, ‘Beauty is more important than efficiency.’” After focusing on some ironies in Dreher’s situation, most particularly his frustration with his small town’s slow internet speeds (read the full piece for more on this), Ballor observes that “even the most dedicated advocates of communitarian conservative values at some level realize that the flourishing they experience is, to a great extent, made possible by global markets.”
Here, we can see the value that each “pole” provides the other:
Business activity that provides goods and services truly is, in this way, an enterprise that does good and serves others. This is why John Wesley famously said that the “first and great rule of Christian wisdom, with respect to money,” was the dictum, “Gain all you can.” But he immediately noted that this rule was qualified: “Gain all you can by honest industry” (emphasis mine). If market conservatives help us to remember that we are to gain all we can, communitarian conservatives help us remember that we are to do so honestly, and that morality is not reducible to mere legality.
Yet for the Christian—and here is where I’m going to veer off a bit—it seems that both positions (as stated here) still lack an overarching spiritual component—namely, “gains” according to whom, and “honesty” and “morality” for what/who’s purpose? For the Christian, the market conservative’s message that “we are to gain all we can,” need not be limited to mere earthly value, and likewise, the communitarian conservative message that “we are to do so honestly” is not where our moral/theological discussions of “gains” and “values” should end.
We are fundamentally and above all else called to be oriented around obedience to God, whatever he might Read the rest of this entry »
The topics of self-interest and sacrifice are commonly discussed on this blog—my own view being that any form of either is bound to lead to selfishness unless both are aligned to God’s will (through good, old-fashioned obedience).
I’m currently reading Love & Economics: It Takes a Family to Raise a Village, in which author and economist Jennifer Roback Morse takes a unique approach to the subject, arguing that our views of “rational” man have been severely lacking on both sides (if your ideological buckets are that neat and tidy, that is).
Without incorporating love into our usual assumptions about the self and the other, argues Morse, we will structure a philosophy of life around a fantasy and be doomed to a mechanistic, regressive society.
First, the not unique part—i.e. a summary of the context:
The decentralized market economy is probably the most celebrated self-regulating social institution. Adam Smith’s “invisible hand” insight shows that people pursuing their own self-interest can actually end up furthering the public interest through no intention of their own. Since Smith’s time, free market economists have developed the Invisible Hand concept further through a construct called homo economicus, or economic man. Economic man is a rational person who calculates the costs and benefits of each potential action and chooses the action that brings him the most happiness.
The obvious problem is that we are not, and can never be, fully rational, no matter how much Ayn Rand wishes it were so (though we can certainly be more rational than we are).
On the other side is a similar problem, one which, though more obvious, is plagued by increasingly abundant misunderstanding: other people have an even smaller chance of being “fully rational” on our behalves.
The lofty bureaucrat on top of the hill may think he has a better idea than we do about the appropriate price of an orange (or a cup of coffee), but our personal preferences would likely differ if Grocer Bob had the chance to experiment. Of course, the implications lead to deeper struggles than the prices of oranges and coffee, which is why more fundamental, philosophical variations on Rousseau’s “natural goodness of man” have long served as platforms upon which many a tyrant has constructed his moralistic authoritarian palaces.
Yet even critiques of centralized approaches to knowledge and decisionmaking—Hayek’s, most notably—seem to only get us back to square one: that individual choice would be better (and it would!).
Yes, our knowledge is limited, and yes, our definitions of the “good” will not naturally conform. These are crucial realities to confront, but do they mean that Read the rest of this entry »
I have routinely criticized “fair trade” schemes as ineffective, inefficient and counterproductive — a convoluted form of temporary charity that would be better if treated as temporary charity.
The real problems that cause poverty are deep and complicated, and they cannot be fixed by magical price inflation by Westerners (particularly when our own view of value is as distorted as it is).
As I pointed out in my review of Victor Claar’s book on the subject, one of these problems is often the nature of the given market. When it comes to coffee, for example, Claar explains that “coffee growers are poor because there is too much coffee.” The solution is hardly, “more coffee!”
Many of these realities are difficult to change for good reason: accurate, voluntarily determined prices reflect the real preferences of real people who are just trying to create real value. This includes both the consumer and the creator (the coffee grower). Yet other realities are stubborn because they are involuntarily determined.
This is where we should be setting our sights, and this week at AEI’s newly rebranded project, Values and Capitalism (formerly Common Sense Concept), I focus on one of the biggies: agricultural subsidies.
Here’s a taste:
Although the aims of “fair traders” are often noble (e.g. when “equality of outcome” doesn’t masquerade as “fairness”), their efforts would be much better spent tackling the real problems that impact economic development in the long term. If we’re looking for a game of Demolish the Western Privilege Machine, agricultural subsidies are a marvelous piñata.
Farm commodity subsidies—including price and income supports—crop insurance subsidies, and disaster aid encourage US production and disadvantage farmers who attempt to compete with subsidized production from the United States. These programs stimulate more production when Read the rest of this entry »
What would happen if we had fair trade fast food here in America? What if benevolent do-gooders from Europe and Asia tried to intervene on behalf of American minimum-wage workers and offer a “fair wage” for serving burgers and fries?
Further, what would have happened to me — a former McDonald’s employee — if I had made 5 bucks an hour extra, all out of some well-meaning foreigner’s arbitrary sense of “social justice”? Would I have ever gone to college, or would I have stayed put? Would McDonald’s have remained a competitive job creator, or would it have caved and crumbled next to those who avoided such “compassionate” scheming? Would it have become more difficult for low-skilled workers like myself to get a job in the first place?
But why all the fuss? Wasn’t I, as a minimum-wage worker, being unjustly trampled by “the Man” (in a yellow suit, no less!)? Why did all those privileged cooks and servers at Red Robin deserve more money than me? Was it the “arrogance” of their Mt. Vesuvius burger? In the grand scheme of suburban teenager-hood, why was I of all people doomed to enter that realm of grease and irritable soccer moms?
For [some], my contract with McDonald’s might just as well have been labeled “unjust” and “unfair.” This was not, after all, a “living wage.” Shouldn’t somebody somewhere have stepped in to fill the “gaps” and stop McDonald’s from “exploiting” me? How was I, as a mere teenager, ever to rise above my circumstances without Read the rest of this entry »
This week at Common Sense Concept, I discuss Tom Palmer’s new video on the “morality of profit” as a follow-up to my post on whether capitalism is compatible with Christian values.
Palmer uses the charity efforts of Bill and Melinda Gates as a launching pad for discussion, focusing on their professed desire to “give back” to society. The problem with such language, Palmer notes, is that “you can’t give back what you didn’t take.”
The Gateses did not, of course, take anything, as true free exchange would not permit it:
We are not forced to fill company coffers against our will. We are not doomed to buy oranges or apples if the price isn’t right. Instead, we are free to collaborate of our own free will and by our own consent. In such a world, profit is merely a symbol of community value. If we reject profits as immoral, we should be prepared to reject the community that empowers it. The tricky part, as I’ve mentioned before, is that this is most often ourselves. This is what the “morality of profit” all boils down to: whether mutual exchange is indeed mutual.
This tells us something about the morality of profit, but Palmer’s discussion also teaches us something about the nature of generosity — namely, that when we misunderstand the way wealth is created, we also misunderstand the ways in which (or through which) our generosity should be and can be channeled and expressed.
Indeed, understanding this process is crucial for understanding how God calls us to use our wealth:
By diluting our charity to some redistributionist obligation, we dilute the very potential of our charity, both for ourselves and our communities. How are we to maximize our generosity and distribute compassion effectively if we harbor faulty, guilt-ridden sentiments about Read the rest of this entry »
Fair trade products have become increasingly popular, particularly in churches and various Christian communities. To investigate the merits of this approach, economist and friend of the blog Victor Claar recently wrote Fair Trade: Its Prospects as a Poverty Solution.
This week at Common Sense Concept, I review Claar’s book and echo the key criticisms therein.
A significant part of the book — and a big part of its significance — is its objective examination of coffee markets and the fair trade scheme as a whole:
Given that coffee is perhaps the most popular of fair-trade commodities, Claar focuses his attention there, providing an initial overview of the coffee market itself, followed by a discussion of fair trade strategies as commonly applied. Here, we learn a few important things: (1) coffee is easy to grow, (2) its price is inelastic, and (3) the “market appeal” of one’s beans is essential for success. Additionally, and most importantly, (!!!) demand is dropping while supply is rising. “Simply put,” Claar explains, “coffee growers are poor because there is too much coffee.”
From there, Claar dives into analysis, considering each detail as it relates to common Christian concerns. I’ve read plenty of books that critique fair trade in general terms, but Claar’s views on the proper Christian response are a unique addition to the discussion.
Overall, Claar views such schemes as a means for reinforcing barriers rather than removing them:
Instead of imposing our top-down plans on our neighbors across the globe, Claar suggests that we “work to make trade freer for everyone in our global community: a level playing field for all.” Although it might lack the punch, trendiness, convenience, and immediate satisfaction of buying the right pack of coffee beans at the right socially-conscious grocery store, it actually works (e.g. the 20th century).
To read the full review, click here.
Yeah, yeah, I know: “Globalization is tearing us apart.”
Mom-and-pop shops are shutting down, petty Facebook friending is ramping up, and people everywhere are self-destructing, resulting in an impersonal and isolated wasteland filled with self-absorbed do-nothings who are more fond of texting “ROFL!” than going to the pub for some “real” camaraderie.
Er, um…maybe you should watch this:
There’s a valid critique and concern amid all of the anti-globalization hullabaloo — not when it comes to economics (sorry, Lou Dobbs), but when it comes to community. At a fundamental level, conservatives like to take things slow for the sake of taking things slow, leading many to take up common cause with progressives on matters related to “community preservation.”
Yet as we all know, any community worth its salt is more than capable of preserving itself.
What many fail to see is that plenty of communities do Read the rest of this entry »
In my most recent post at Common Sense Concept, I examine a recent attempt to prop up India’s handmade textile industry.
The IOU Project recently released an ad chock-full of economic myths and Western arrogance, urging us to buy their products and resist the almighty, domineering force of industrialization.
According to the ad, if we lose the battle against the machines, we will quickly descend into poverty, unemployment, and sameness. (LOL)
This is typical fair-trade manipulation: flooding markets that would naturally subside, retract, or level out, resulting in long-term stagnation, price confusion, and plenty of other things.
In my post, I take a look at six of the ad’s main assertions, arguing that more machinery, freedom, and energy consumption is exactly what India needs.
Here’s an excerpt of my response to the anti-machinery talk:
According to the theories in this video, we [industrialized] Westerners should be helplessly enslaved by now, forced to do the bidding of modern machinery. But perhaps we have been! Here we are, destined to work in high-rise buildings and air-conditioned offices, pining away on the internet and dabbling in ideas when we could be sewing our own clothes, hand-washing our own laundry, growing our own food, and thatching our own huts. Dang machinery!
Here’s my response on the handmade industry being (supposedly) emission free:
The cavemen of yore were certainly more environmentally friendly than we are, but they filled their days hunting for food, trying to stay warm in the winter, and hoping they’d have time to come up with a written language. Such a life might sound like paradise to the idealist sitting in the front row of Eco-Imperialism 101, but at what point are we willing to Read the rest of this entry »