Category: International Trade

Blog author: jcarter
Wednesday, May 20, 2015

FREE-STUFF-Several years ago economist Bryan Caplan provided the most succinct and helpful statement about how we should think about free trade: “We’d be better off if other countries gave us stuff for free. Isn’t ‘really cheap’ the next-best thing?”

As with any simplification, critics could find many reasons to grumble about what that leaves unstated (e.g., trade leads to offshoring of jobs). But it highlights an important point about why free trade matters. Free trade is about as close to a “free stuff” economy as you can get in the real world.

A primary effect of free trade, as Tim Fernholz says, is that when companies hire or set up factories abroad to take advantage of cheap labor elsewhere, Americans’ real income goes up because a lot of the stuff they’re buying is cheaper.

At RealClearReligion, Rev. Robert A. Sirico offers an analysis of President Obama’s move to thaw relations with Cuba, a diplomatic opening that was supported by the Vatican. Citing Pope Francis’ appeals for “an economy of inclusion,” Rev. Sirico asks: “What, indeed, could be more inclusive than trade and travel?” More:

Free trade is not the solution to all economic, social and political problems. Nor does anyone expect it to be. That said, on my visits to Cuba and China, I have yet to meet anyone who thought restricting trade or travel helped, all of which will have to be negotiated once relations are normalized. Mutatis mutandis, those unfortunate to have to live under oppressive regimes are among the first to long for U.S. companies to setting up shop in their countries, gain new markets for their own products and will increase contact and opportunity for themselves. To have more exchanges with Americans at every level, whether it is through tourism, educational, trade or technological exchange, is what many Cubans want.

The open question is to see whether the Castro regime — which, after all, remains ideologically Marxist and viciously persecutes anyone who steps out of line — will use this thawing as a way of moving Cuba away from 50 years of one party rule and a top-down approach to the economy, and towards wider freedoms. Their track-record, to date, would not inspire confidence.

Read “The End of Cuba’s Double Despotism” by Rev. Robert A. Sirico at RealClearReligion.

The eyes of many in the world have turned to Cuba over the last day or so. A great deal has been made of the historic changes in the relationship between the US and Cuba and whether such changes fundamentally alter the situation of the political leaders and the elites in the island nation.

More interesting to me, however, are the personal stories of suffering and loss during the years of the Castro regime and the hope that dawns,  however slight it may be, with the normalization of relations. Perhaps the changes will simply serve to prop up a tyrannical regime, but there is real possibility that the day-to-day existence for millions of people will improve with greater travel, access to markets, and communication.

One of the great tragedies of the Castro regime was its suppression of non-approved cultural artifacts and forms, including traditional Cuban music. The Buena Vista Social Club’s closure was representative of a larger tradition of cultural pluralism and civil society in Cuba that had no place in the communist regime.

The guitarist Ry Cooder visited Cuba in the 1990s, and was able to reunite many of the original members of the club. Cooder put together an international tour for these wonderful musicians, including a trip to Carnegie Hall in New York City. That created an album and later a documentary. Here’s a scene from the documentary where a couple of Cuban musicians are visiting New York City for the first time:

The audio cuts out a couple minutes in, but you can see the wonder and appreciation that is apparent in their reactions. They see immediately and instinctively that the vitality and vigor of the city, with its commerce, exchange, culture, and liberty, are a marked contrast to their experiences in Cuba. “Activity! Activity! Activity!” one of them celebrates.

“This is the life!” concludes the other. Let’s hope that increased liberalization of engagement between the US and Cuba can help unleash more of this kind of vibrant dynamism among a people that stand in so desperate need of it.

Do yourself a favor and check out The Buena Vista Social Club.

Sic semper tyrannis, eh?

Sic semper tyrannis, eh?

The Burger King acquisition of Tim Hortons and the resulting plans to move the corporate headquarters under the taxing authority of the Canadian government is being derided by some as unpatriotic.

This is the latest in a long string of similar phenomena over the last decade or so, as we see patriotic loyalty (or the lack thereof) becoming a political issue in the context of offshoring, globalization, outsourcing, and so on.

A response to the charge of being unpatriotic would seem to me to require at least two points.

First, the responsibilities of a business owner, CEO, or corporate board are different than those of a government politician. They have different loyalties, so to speak. So to judge the one by the standards of the other is an exercise in missing the point.

Second, I would respond with a query along these lines: Which is more unpatriotic, a greater disservice to a nation, for someone to be involved in: moving a business from one country to another or making the tax environment in a country inhospitable to businesses?

Blog author: dpahman
Wednesday, August 20, 2014

Reading through the German economist Walter Eucken’s work The Foundation of Economics (1951), I came across one of the most helpful charts for economic analysis I have yet to find. In it, Eucken gives every possible form of market in a single table:

Eucken Chart

The Foundation of Economics, p. 158

Eucken adds four qualifications that are important to keep in mind:

  1. “These forms of market are actual forms which have been or are to be found in actual economic life (often blended with one another, and existing alongside the forms of a centrally directed economy). They are not given a priori. They are discovered with their distinguishing characteristics by studying the planning data of those taking part in the market….”
  2. “Under each particular form of market a man can act according to different principles, for example, that of maximum net receipts or that of optimum output….”
  3. “Each of these forms of market can appear in four types: both open, both closed, or closed on either side only.”
  4. “Fixing of prices by the state occupies a special position, since it can follow any form of market and has different effects accordingly…. For example, the significance of coal prices being fixed by the state varies according to whether perfectly competitive, oligopolistic, or monopolistic supply, or some other form of market, exists, or whether both sides of the market are open, or whether the supply side is closed by an investment veto. Governmental price-fixing is to be treated as a variant of the different market forms and not as a special market form of its own.”

So, what does this amount to? (more…)

Blog author: jballor
Friday, December 20, 2013

Newburgh, ME Piper Mountain Christmas tree farm1

A couple of further points in reply to Micah Mattix’s response on buying Christmas trees, based on his original post here.

1) I think Mattix’s characterization of the buyer as “selfish” goes a bit too far, and is not an accurate characterization of a good deal of market activity. “Self-interested” would be more accurate, and would allow for selfish actors, but would also allow more generally for benevolent actors. For instance, a nun who runs an orphanage has decided that her wards need spiritual as well as material sustenance, and has allotted a portion of the budget to purchase a live Christmas tree. But for every dollar she spends on the tree, one less bowl of gruel will be served. Is she acting selfishly if she gets the best deal on a tree that she can get? She may not be regarding the interests of the seller on the same level as her own (which include the interests of her wards), but it seems to bias the discussion too much to simply describe all the players involved as necessarily selfish. The same would apply mutatis mutandis to the father providing a tree for his family. In fact, buying a Christmas tree is usually a pretty unselfish activity.

2) Related to the above point, and developing it a bit further, certainly the buyer ought view the seller as someone to whom he or she has moral obligations. But to expect the seller to haggle up seems wrong. Perhaps the seller is perpetuating injustice by simply trying to sell trees even at a loss. Perhaps like the poet in Frost’s work they would be better off doing something else with them besides dumping. But they key here is that the buyer and the seller are in the best position to judge for themselves. It should also be noted that the tree seller isn’t just selling a single tree. Earlier sales of higher priced trees may subsidize and offset the costs of selling later trees at a discount. Mattix largely seems to want to argue for conscientious consumption, and I am all in favor of that. Let your conscience be your guide, and let your conscience be informed. But all too often things move beyond this to legislation of some kind of baseline. I realize that Mattix is not arguing for this, but the dangers of a mandated price floor for Christmas trees should be apparent.

3) We do agree “that a market economy is a good system that takes into consideration certain truths about human nature” and we also agree, as Mattix concludes, “that as a buyer price should always be the only determining factor.” I am certainly not defending an ideal of perfect prices. Prices are not perfect, and they are not sacrosanct. But they are often the best device we have for sorting out all of the complex realities that lie behind market transactions. The dynamic of this issue shares similarities with the disputes over fast food as well as, more broadly, the debates over fair trade. Here’s how Victor Claar sums things up, and I’ll close with this thought: “If you purchase ‘fair trade,’ buy it because you like the good or the service. Do not do it out of mere charity. Instead, give generously to charities that you know are effectively working for human rights, development of human and physical capital, and opportunities for the poor to discover increasingly valuable ways to serve others in the global marketplace.” Otherwise you might just be helping perpetuate the poverty-trap of Christmas tree sales.

Here’s a key section from a speech given by Nelson Mandela in 1998 at the World Council of Churches:

At the end of a century that has taught that peace is the greatest weapon in development, we cannot afford to spare any effort to bring about a peaceful resolution of such conflicts.

Nor can we allow anything to detract from the urgent need to cooperate in order to ensure that our continent avoids the negative consequences of globalization and that it is able to exploit the opportunities of this important global advancement.

That means working together to ensure that the legacy of underdevelopment does not leave Africa on the margins of the world economy.

That means finding ways to deal with the world’s highest incidence of AIDS, to advance and entrench democracy, to root out corruption and greed, and to ensure respect for human rights.

It means together finding ways to increase the inward flow of investment, to widen market access, and to remove the burden of external debt which affects Africa more than any other region.

It means cooperating to reorient the institutions that regulate the international trade and investment system, so that world economic growth translates into the benefits of development.

It means finding ways of ensuring that the efforts of countries to put their economies on a sound basis in order to uplift their people are not set back by huge flows of finance as they move across the globe in search of quick profits.

The challenge facing today’s leaders is to find the ways in which the prodigious capacity of the contemporary world economy is used to decisively address the poverty that continues to afflict much of humanity.

As I outline in Ecumenical Babel, this kind of a platform for ecumenical engagement of the issues surrounding globalization would have been much more positive, constructive, and promising than the course that was pursued by the mainline ecumenical organizations. Mandela’s words here provide a much more balanced and nuanced assessment of globalization than is often found in ecumenical pronouncements, including the deliberations that ended up leading to the Accra Confession of 2006.

Ecumenical Babel: Confusing Economic Ideology and the Church's Social Witness

Ecumenical Babel: Confusing Economic Ideology and the Church's Social Witness

Arguing for the continuing importance of Christian ecumenism, Jordan J. Ballor seeks to correct the errors created by the imposition of economic ideology onto the social witness of ecumenical Christianity .