Category: International Trade

Blog author: jballor
posted by on Monday, January 9, 2012

Made-in-ChinaThe latest episode of This American Life follows the story of Mike Daisey and his investigation into the origins of Apple products, especially the iPhone which is “Made in China.”

What might the iPhone say if it could speak for itself? Ira Glass provides some answers to such a question in the opening moments of this episode, “Mr. Daisey and the Apple Factory.” It’s illuminating that Daisey half-jokingly describes his devotion to Apple products in religious terms (this doesn’t prevent him from using the Lord’s name in cursory fashion, however).

Just like the pencil in Leonard Read’s essay, “I, Pencil,” the iPhone is “a mystery,” one “taken for granted by those who use me, as if I were a mere incident and without background. This supercilious attitude relegates me to the level of the commonplace. This is a species of the grievous error in which mankind cannot too long persist without peril.”

There are many, many lessons to learn from the story of I, iPhone. One of these lessons has to do with the dignity of the various people who work together to invent, assemble, market, sell, and distribute such wonders. This is where This American Life largely focuses its energies in this episode.

Another lesson has to do with the lessons about global trade and interdependence. In his book Work: The Meaning of Your Life—A Christian Perspective, Lester DeKoster leads us through a thought experiment, in this case having to do with “I, Chair.”

As seeds multiply themselves into harvest, so work flowers into civilization. The second harvest parallels the first: Civilization,
like the fertile fields, yields far more in return on our efforts than our particular jobs put in.

Verify that a moment by taking a casual look around the room in which you are now sitting. Just how long would it have taken you to make, piece by piece, the things you can lay eyes on?

Let’s look together.

That chair you are lounging in? Could you have made it for yourself? Well, I suppose so, if we mean just the chair!

Perhaps you did in fact go out to buy the wood, the nails, the glue, the stuffing, the springs—and put it all together. But if by making the chair we mean assembling each part from scratch, that’s quite another matter. How do we get, say, the wood? Go and fell a tree? But only after first making the tools for that, and putting together some kind of vehicle to haul the wood, and constructing a mill to do the lumber, and roads to drive on from place to place? In short, a lifetime or two to make one chair! We are physically unable, it is obvious, to provide ourselves from scratch with the household goods we can now see from wherever you and I are sitting — to say nothing of building and furnishing the whole house.

There’s much more to unpack just from these two lessons, of course.

How much of our expectations about the conditions of workers are simply culturally hegemonic forms of colonialism? Don’t Americans tend to assume that the ideal is immediately possible? What about the difficult choices that actually face workers in other countries in their concrete situations?

On these kinds of choices, consider Nicholas Kristof’s “In Praise of the Maligned Sweatshop” (Kristof is also heard from in this episode of This American Life): “We in the West mostly despise sweatshops as exploiters of the poor, while the poor themselves tend to see sweatshops as opportunities.”

As we listen to Daisey’s story, our natural instinct is revulsion. We certainly wouldn’t want to live and work that way. And even apart from concerns about cultural colonialism, Daisey documents real abuses that ought to make both consumers and producers reassess how things are done.

And so what might it mean for someone else to have the opportunity to work their way out of such situations, to have more choices than the binary options of industrial manufacturing and subsistence farming (or starving), and to have these opportunities not merely individually but corporately?

What might true compassion, which places us within the context of the other person in their concrete situations, mean in these kinds of settings?

Blog author: kjayabalan
posted by on Wednesday, November 30, 2011

Greetings from London, which is only partially shut down today due to a public sector strike over the British government’s not-so-temporary austerity plan. The worst fears of extremely long delays at the airports and of possible violence have yet to materialize and let’s hope they never do.

We’ll be holding the last of our Poverty and Development conferences here tomorrow on the theme “From Aid to Enterprise: Economic Liberty and Solutions to Poverty.” Our speakers will look at the (rare) successes and (recurring) failures of government-to-government development assistance, and it just so turns out that former British Prime Minister Tony Blair weighted in on the subject with a Washington Post op-ed last Sunday entitled “Ending global aid in a generation.” Blair boldly and confidently predicts: “I believe that within a generation no country need be dependent on aid. This matters around the world but especially to Africa, the continent most dependent on aid and a focus of my own work. ” You’d be forgiven for thinking that Blair was the keynote speaker at our event, having seen the light on the futility of Official Development Assistance (ODA).

Alas, you’d be wrong. For while Blair does cite the positive example of South Korea’s development based on enterprise, he still clings to the dogma of the church of ODA: governments must still fulfill their commitments to provide 0.7 percent of GDP to ODA. He doesn’t seem to ask the obvious question, which will surely be raised at our conference: if ODA is generally ineffective, in some cases counterproductive to the cause of development and only serves to breed economic dependence, why should governments continue to honor their commitments to a failed policy? Courage in the service of an ignoble end is no virtue, after all.

I, for one, still note an lingering prejudice against free enterprise in Blair’s supposed conversion: “Lord, make me trade with others as equals, but not yet”, to adapt St. Augustine. Like everyone else in these times of austerity, Blair preaches the need for economic growth. But also like many others, he doesn’t seem to realize how to achieve it. Yes, he addresses important factors such as governance and investment, which only leaves me wondering why he couldn’t seem to mention that dreaded word “business” in his article. Development, for Blair, remains in the hands of government leaders and aid experts, rather than in the hands of the people who take risks, seek new opportunities to provide goods and services to others, and thereby create wealth.

In the words of a former U.S. president, “Yo, Blair!” You should stop by our conference tomorrow to complete your bold vision of world without foreign aid.

Glenn Barkan, retired dean of Aquinas College’s School of Arts and Sciences here in Grand Rapids, had a piece worth reading in the local paper over the weekend related the current trend (fad?) toward buying local. In “What’s the point of buying local?” Barkan cogently addresses three levels of the case for localism in a way that shows that the movement need not have the economic, environmental, or ethical high ground.

At the economic level, Barkan asks, “Does the local stuff taste better than the imported stuff?” This is essentially a question about competitive advantage. This is the economic idea that some locations, given geographic, cultural, or other features, are better places to produce certain things than other places. Try as one might, it is difficult to grow mangoes in Michigan.

But one of the arguments against large-scale (statewide, national, or global) trade is that there are large environmental consequences. To this point, Barkan writes, “Following this thread means that most decisions which in the past were made on a variety of criteria will now be made only upon the criteria of consuming resources in transportation. How can I keep my carbon footprint small? No more Swiss chocolate, Italian cheese or French wine. Is this what we want?” I think that is what many of the localists in fact do want. It is somehow immoral for me, living in Michigan, to consume mangoes grown in Mexico.

What these kinds of considerations lead to is the moral claim that, in Barkan’s case, for instance, “I have some sort of moral obligation to buy Granny Smith apples from Michigan, and not from Washington.” To this Barkan responds that one mark of moral calculation is discerning where needs really lie: “If I had to choose between making a purchase which provided an income for a very needy family in Alabama, or a less needy family in Kent County, I think I would choose the former.” And better yet, given the relative wealth of even the poor in America on a global scale, we might say that poor workers in the developing world need trade more than the relatively poor in America.

An article in the Spring issue of the Journal of Markets & Morality makes the implications of these kinds of considerations quite well. In “Social Choice: The Neighborhood Effect,” Brian K. Strow and Claudia W. Strow write in the context of wealth redistribution, “a lower-middle-class worker by Massachusetts standards may be a net beneficiary of income redistribution at the Commonwealth definition of society but is likely to be a net contributor at the national definition. They most certainly would lose the vast majority of their income if the world were used as the definition of society.”

The payoff for Barkan is that “a soul is a soul. Whether it is a Kent county soul, or one from California, or Ghana. I choose to have my purchasing decision do the most good for the most needy. Regardless of localism.”

Or as economist Victor Claar put it, “we should treat people as people, no matter where they happen to live. We are all created in the image of God. I find it distressing that we protect relatively affluent Americans when we should give everybody an opportunity to do something they can do well, at a low cost, in a high quality way.”

A person’s a person, no matter how far.

Kishore Jayabalan, director of Istituto Acton in Rome, is quoted extensively in a story about the Vatican’s note on economic centralization written by Edward Pentin, a reporter for the National Catholic Register. If you wonder why the Acton Institute is around — why we feel the need to connect your good intentions with sound economics — well, Kishore explains:

Kishore Jayabalan… welcomed the Vatican’s attempt to deal with the economic crisis, but he said their conclusions were based on “political and economic ignorance rather than experience.”

But the note, written by the Pontifical Council for Peace and Justice, lacks more than sound economics; it lacks theological depth. It speaks throughout of the common good, but without a moral framework, that common good can have little ethical consequence. The kind of economic reform the note calls for could only be motivated by a conception of the common good rooted in a full, Christian understanding of human nature. Jayabalan again: “[the note] doesn’t speak of God or the natural law and so neglects this substantial notion of the common good,”

There is comparatively little talk even of greed and idolatry in the note — those vices seem get more attention at Occupy Wall Street drum circles than at the PCPJ. We’ll talk about them though:

Jayabalan, a former official at the Pontifical Council, said greed and idolatry are permanently recurring temptations that require “constructive ways” to combat them. And yet “quite surprisingly for an office of the Roman Curia and from a Catholic perspective, the note does not tell us much about the spiritual battle that must take place.”

Rather than draft this note, Jayabalan said the Vatican should have drawn on the “economic wisdom of the division of labor” which would have told them “to stick to what it knows and does best.”

Samuel Gregg is quoted in today’s New York Times story about the Vatican note calling for a central world bank — he gives the final word on the document. The “politically liberal Catholics” quoted before him reveal that they have missed a crucial distinction in the document produced by the Pontifical Council for Peace and Justice. Gregg, of course has picked up on that distinction; he wrote yesterday:

Putting aside doctrinal questions, this text also makes claims of a more strictly economic nature…. The text makes a legitimate point about the effects of a disjunction between the financial sector and the rest of the economy.

Unfortunately, many of its authors’ ideas reflect an uncritical assimilation of the views of many of the very same individuals and institutions that helped generate the world’s most serious economic crisis since the Great Depression.

The academics and activists who see in the document a way forward to socialism have missed the split between the note’s diagnosis of the world economy, and its proposed economic reforms. I cannot resist quoting G.K. Chesterton: “The reformer is always right about what is wrong. He is generally wrong about what is right.”

To say that “the time has come to conceive of institutions with universal competence,” as PCPJ President Cardinal Turkson did yesterday, is all well and good, but the possibility of such institutions running effectively is another matter.

Indeed, Kishore Jayabalan, the director of Istituto Acton and a former staffer at the Council, asked the National Catholic Reporter, “What makes the [Council] think that ‘global’ leaders will succeed where so many national ones have failed? It is a shame this document is based more on sentimental political hopes for world government than on actual experience and expertise of financial markets.”

Congress insults our intelligence when it tells us that Chinese currency games are to blame for our trade deficit with that country and unemployment in our own. Legislators might as well propose a fleet of men-o’-war to navigate the globe and collect all its gold: economics is not a zero-sum game.

An exchange on yesterday’s Laura Ingraham Show frames the debate nicely. The host asked Ted Cruz, the conservative Texan running for U.S. Senate, what he thought about the Chinese trade question. Said Cruz, “I think we need to be vigorous in dealing with China, but I think it’s a mistake to try to start a trade war with them.”

“The trade war is on, and we’re losing it,” Ingraham responded. “[China is] subverting the principles of free trade.”

We blockaded the ports of the Barbary pirates when they subverted the principles of free trade — is Ingraham looking for a similar response now? No, she wants weenier measures: just some punitive sanctions here and there to whip China back into shape (because those always work).

Conservatives who are looking through the Mercantilist spyglass have got to put it down, because it distorts economics in the same way Marxism does. Economic growth and expansion of the labor market don’t come by the redistribution of wealth; they come by allowing man to exercise his creative talents, to innovate, to produce.

Protectionists also tend to ignore the inverse relationship between the trade deficit and the inflow of capital to a country. We are a nation of entrepreneurs, and entrepreneurs require investment. All business requires investment. If it’s Chinese investment, then Chinese investors see long term value in the U.S. economy. Sorry I’m not sorry about that.

Our leaders do the country a disservice by proclaiming that unemployment is caused by a trade deficit, and that a build-up of retaliatory tariffs is the way to fix the trade deficit. And they do other countries a disservice also, because U.S. protectionism hurts our trade partners (or potential trade partners). Holding back U.S. economic progress by artificially retaining manufacturing jobs, for example, means that workers in China or Vietnam are denied employment opportunities. It’s mindless selfishness.

There’s a saying that when goods cross borders, armies don’t (it’s the correlative to the observation attributed to Bastiat: “If goods cannot cross borders, armies will.”). The point is that trade tends to bring people together who might otherwise have cause to be hostile. One of the themes at Acton University, which begins in just a few hours, is globalization and various Christian responses. That’s sure to be the case again this year, as we have just about 70 countries represented among the various participants.

It’s within this context that I want to pass along a noteworthy story I heard yesterday on our statewide public radio station, Michigan Radio. It focuses on what automaker General Motors did when faced with parts shortages following the Fukushima earthquake.

GM added a local Japan-based “War Room” to its response, focusing on solving problems on the ground to get the supply-chain back up and running. As Tracy Samilton reports, “Once the suppliers became convinced GM wasn’t there to dump them, they were awfully happy for their customer’s help. Whatever GM could do, it did. One supplier ran out of a special form of hydrogen peroxide. GM found another source for it and shipped it in from Korea. The company hired trucks.”

So when you have companies with global reach across borders and global supply chains to match, you get a different kind of “War Room,” those focused on putting “the links of the Japanese supply chain back together, often just in time to keep an assembly line from shutting down.”

As Samilton summarizes the lessons of the parts crisis, “People involved in the effort say they grew as human beings, grew closer to each other, met people in the company they might never have known. It was tough. But War Room veterans are keen to point out that they’re not the heroes of this story.”

Ron Mills, head of engineering at GM’s Tech Center, puts it this way,

“We all worked really hard here, but at the end of the day, I did go home, right? And I ate well, and people in Japan could not do that. They had to work hard and also go back and try to find food and clothing and shelter for them and their families and which – I was just in awe of how hard and how they were able to endure.”

The GM workers were driven both by a sense of self-preservation and need as well as genuine concern for their Japanese partners, a concern that became more concrete and palpable as the invisible hands up the supply chain became increasingly visible.

Blog author: jballor
posted by on Friday, May 20, 2011

Over at the Comment site, I review Dambisa Moyo’s How the West was Lost: Fifty Years of Economic Folly—and the Stark Choices Ahead. In “War of the Worldviews,” I note that the strongest elements of Moyo’s work are related to her analysis of the causes and the trends of global economic power. “Faced with the combined might of the Rest,” writes Moyo, “the West is forced to grapple with a relentless onslaught of challengers from all corners of the globe. And all these countries are growing in confidence, gaining in competence, and jockeying for a frontline position in the world’s economic race.”

A recently released World Bank report echoes Moyo’s sentiments, which are broadly shared by many forecasts. As Motoko Rich at the NYT Economix blog summarizes, “A new report from the World Bank predicts that by 2025, China, along with five other emerging economies — Brazil, India, Indonesia, South Korea and Russia — will account for more than half of all global growth, up from one-third now.”

One way of understanding these trends is that it is simply what you get in an age of global competition. Nations like China, India, and Brazil are increasingly able to make sustained GDP gains because of increased access to global markets, particularly the US. And the US is forced to adapt to remain competitive, and in many cases this hasn’t happened. It’s not clear at all why all this is such a bad thing. After all, it’s not that the US will cease to be affluent in the foreseeable future. It’s just that other nations won’t be as relatively poor.

Even so, Moyo can’t help but cast these developments in negative terms for the West: “…even while globalization could contribute to a rising tide for all boats, it is clear that the relative quality of life will almost certainly have to decline in the West to accommodate a rise in the Rest.” Thus the relatively greater quality of life enjoyed in the West will decline compared to the Rest. But why must this be so dire for the West?

The weakest part of Moyo’s project comes through in her attempts to provide prescriptive guidance for the West to avoid this “precarious path of forecast decline.” All you really need to know about her suggestions appears in this line: “there is, after all, nothing inherently wrong with a socialist state per se if it’s well engineered and designed and can finance itself.”

Moyo wants the US to adopt the Chinese model of state-directed markets because of the “the speed with which policies can be taken and implemented.” Deliberative democracy is just too slow, too cumbersome, and too captive to special interests. We need a lean, mean set of government committees to run the economy properly and efficiently.

What’s difficult for me to understand is why, given the West’s historical success by embodying “a fully fledged capitalist society of entrepreneurs,” we should abandon that model. Moyo should instead be calling the West back to its strengths, its foundations in “democracy and the sanctity of the rights of the individual elevated above all else,” instead of issuing the siren song of state-driven capitalism. If it is really a competition between state-run and entrepreneurial “capitalism,” it’s not clear at all (as Moyo seems to think) that the statists will win.

It seems to me that the West will only truly be “lost” when we give up our commitments to the inherent dignity and rights of the individual, the rule of law, freedom of association, exchange, religion, and expression. The thrust of Moyo’s book is a classic, “It became necessary to destroy the West to save it,” project, and that’s one that’s simply not worth fighting for.

In this week’s Acton Commentary, “The Sheep and the Goats: Work and Service to Others,” I visit Lester DeKoster’s interpretation of the parable of the sheep and the goats from Matthew 25. Although not many have discussed this as an “economic” parable, DeKoster’s point is that anyone who truly serves another through legitimate work, whether paid or unpaid, can be understood to be a “sheep.”

Work, for DeKoster, is “the form in which we make ourselves useful to others, and thus to God.”

I don’t discuss another point DeKoster makes in his book, Work: The Meaning of Your Life–A Christian Perspective, that relates to what results from the aggregation of individuals’ work. The answer is civilization: “Work shares in weaving civilization, which is the form in which others make themselves useful to us, by providing us with the tools for doing our work well.”

DeKoster points to the chair in which you sit while you read, or any of the other myriad objects that surround you, that could only have been produced by the contributions of countless workers through the assembly line and supply chain. Joseph Sunde over at Remnant Culture has a post up today that echoes this, focusing on the example of the toaster. His poignantly asks whether this illustrates “that free trade is primarily about collaborating and sharing? Hasn’t free trade shown that it holds great power for expanding, connecting, and shaping a global community?”

Or as Kevin Schmiesing has put it, “No Man is an Economic Island.

I’ve been meaning to write something on the “locavore” phenomenon, but nothing has quite coalesced yet. But in the meantime, in last Fridays’s NYT, Stephen Budiansky does a good job exploding the do-gooderism of the locavore legalists. Here’s a key paragraph:

The best way to make the most of these truly precious resources of land, favorable climates and human labor is to grow lettuce, oranges, wheat, peppers, bananas, whatever, in the places where they grow best and with the most efficient technologies — and then pay the relatively tiny energy cost to get them to market, as we do with every other commodity in the economy. Sometimes that means growing vegetables in your backyard. Sometimes that means buying vegetables grown in California or Costa Rica.

I’ve never liked the idea that its somehow immoral for me or my family to consume mangoes, even though they don’t grow all that well here in Michigan.

And as Budiansky points out, the only way to grow them locally would be to invest large amounts of capital and energy in artificially transforming the climate (via a greenhouse, for instance).

This is to say nothing of the virtue of interconnectedness that comes about when, for instance, I buy mangoes that originate in India, China, or Mexico and someone else buys cherries grown here in Michigan.

There’s something in the Bible about “doing unto others.” If you want other people to buy stuff from you, visit your town, and so on, you ought to be eager to reciprocate.