Category: International Trade

Blog author: jballor
posted by on Wednesday, August 18, 2010

A constant theme here at the Acton Institute is the idea that good intentions are not enough…they need to be connected to sound practice.

In a reflection on fair trade at WORLDmag.com, D. C. Innes commends Victor Claar’s monograph, Fair Trade? Its Prospects as a Poverty Solution.

Fair TradeInnes, an associate professor of politics at The King’s College in New York City, writes,

It’s admirable that people wish to better the lives of coffee growing peasants. I also applaud their use of private initiatives and organizations. But before scorning their neighbors for not sharing their means, and before trying to turn the world inside out and upside down on the basis of an adolescent “why not?” they should make sure that the vehicle they have chosen for their dreams actually does what it’s supposed to do, and doesn’t do more harm than good.

Check out Claar’s book for more on the intentions, challenges, and realities facing the fair trade movement.

Chinese Communism is no longer about ideology.  Now it is about power.

I reached this conclusion on the basis of six months spent in China and extensive conversations with my Chinese friend and fellow Acton intern Liping, whose analysis has helped me greatly in writing this post.

China began moving away from Communist ideology under Deng Xiaoping, whose economic reforms disassembled communes and created space for private businesses.  He justified these reforms to his Communist colleagues with the saying, “It doesn’t matter if the cat is white or black as long as it catches the mice,” implying that even “capitalist” policies were justified if they succeeded in bringing economic growth.  And they certainly did.  Since that time, China’s economic development has been tremendous, so now Chinese people overwhelmingly approve of the reforms.

Despite the success of the opening of China’s markets, the country has not completely embraced free enterprise.  The PRC’s 60th anniversary celebration last fall featured signs boldly proclaiming, “Socialism is good.”  The government still controls key industries such as oil and runs enterprises in many other industries.

Further, all land in China is owned by the government.  Home buyers are technically only leasing land for 70-year periods, a policy established assuming that by that time, the houses will need to be rebuilt anyway.  The government sometimes sells land inside cities to developers for vastly inflated sums of money, evicting the people who already live there.  The remuneration that these people receive is frequently less than the value of the house, forcing them to find inferior housing elsewhere.  These policies have made housing within cities prohibitively expensive for most Chinese people, forcing them to commute from the suburbs.

Despite these continued regulations, economic freedom in China has made significant advances compared to its previous completely collectivized state.  Enterprise is permitted and even encouraged, as is trade with the outside world.  As people come to recognize the benefits of free markets, more and more are becoming eager to participate, which will make it much more difficult for the government to restrict these freedoms again in the future.

However, this economic freedom does not imply political freedom.  Deng Xiaoping, the same leader who had spearheaded the economic reforms, was responsible for the Tiananmen Square crackdown on protesters for political reform.  That incident twenty years ago is only one of the better-known examples of the political suppression that still occurs today.

The government holds a monopoly on the media, dominates the flow of information, and censors any ideas it finds potentially threatening.  It blocks access to web sites that range from information on tense political issues to social networking sites like Facebook and YouTube.  When I was studying there, during a one-on-one session a teacher asked me what I knew about the Tiananmen Square massacre, admitting that due to censorship I probably knew more about it than she did.  When we had finished the discussion, she erased all relevant vocabulary from the board, saying that she didn’t want anyone to know what we had talked about.  Through the high school level and frequently afterward, students are indoctrinated with Marxist philosophy, and studies of literature are focused exclusively on nationalistic or patriotic themes.  Political dissent is strictly censored, and dissenters are often denied work or restricted from moving or publishing their work.

According to Liping, most new members of the Communist party do not actually believe in Marxism; they just see membership as a way to improve their chances of finding a good job.  Similarly, officials suppress opposing ideas, not because they are persuaded of the truth of Marxism but because they want to prevent dissent and opposition to their own party. Promoting Marxist ideas serves as a way to silence political rivals and to enforce popular support for their own rule.  The first Chinese communists sought power to serve their ideology, but today’s Chinese communists use ideology to preserve their power.

The expansion of economic freedom coupled with the continued political repression may seem like a contradiction, and indeed areas with more trade connections like Shanghai also have more political freedom than government centers like Beijing.  Yet fundamentally, this paradox exists because of the shaky foundation for what freedom they do have.

Deng Xiaoping’s justification for moving away from Communist economic ideology was based solely on pragmatic reasoning.  He figured that since the Communist system was failing miserably, changing economic systems might bring prosperity, a prediction that has been proven true.  Yet abandoning the one-party state did not have any such obvious benefits.  In fact, retaining a monopoly on political power was in the leaders’ personal interest.  They could even argue that it was good for the nation, creating what current president Hu Jintao euphemistically calls a “Harmonious Society” unified by common political beliefs.

In the West, arguments for freedom are closely tied to belief in individual rights which the government cannot legitimately violate.  These beliefs originated in the Christian view that people have special dignity because they are made in the image of God.  This foundation means that even if it would be expedient for the government to restrict freedom, it has no right to do so.  Officials may not always act to preserve the people’s freedom, but in violating freedom, they behave inconsistently with their own ideals.

In contrast, the Chinese Communist Party is consistent in pragmatically following policies that they think will be beneficial, whether they increased freedom or not.  Freedom can bring tremendous practical benefits, which is what one would expect of a concept based on a true vision of human nature.  Yet these practical benefits alone do not constitute freedom’s foundation.  The freedom the government gives pragmatically, it can take away when freedom is no longer practical, or when the benefits it provides are less obvious.

Thus, what China lacks is not merely policies that allow people to act freely but an understanding of the essence and importance of freedom.  Freedom cannot be guaranteed by government pragmatism, but only by a genuine understanding of the rights of the people within the country, coupled with leaders who are willing to restrain their desire for power in order to respect these rights.

Blog author: jballor
posted by on Thursday, July 29, 2010

I mentioned Lester DeKoster’s little classic, Work: The Meaning of Your Life—A Christian Perspective, in the context of the Lutheran World Federation’s General Assembly and the theme, “Give us today our daily bread.”

In this book, DeKoster makes a pointed connection between work and food:

“I was hungry and you gave me something to eat.”

The Lord is saying that where humans are hungry, there he too chooses to hunger. He waits in the hungry man or woman or child, longing to be served. Served how? By the work of those who knit the garment of civilization through the production and distribution of food!

God himself, hungering in the hungry, is served by all those who work in …

  • agriculture,
  • wholesale or retail foods,
  • kitchens or restaurants,
  • food transportation or the mass production of food items,
  • manufacturing of implements used in agriculture or in any of the countless food-related industries,
  • innumerable support services and enterprises that together make food production and distribution possible.

God transforms plantings into harvests. Then he waits to be fed by those whose work turns harvests into one of the basic elements of civilization. The gift of ourselves to others through work is the gift of ourselves to God—and this is why work gives both temporal and eternal meaning to life!

WorkMany commentators on this passage in Matthew focus on the “giving” literally as the charitable act of giving, and this is as appropriate. But some others go on to identify the “giver” with the government, rather than charities, individual Christians, or the church itself.

But as DeKoster challenges us, we ought also to think of the “giver” as the person who works in the fields to harvest the food, who gives the sweat of their brow to bring food to the table of those of us who hunger, each and every day.

This shift in perspective, that sees our work as a form of service to others, a way of giving of ourselves to others, changes things completely. And I think it more accurately reflects the nature of market interactions and the value of human work.

In this week’s Acton Commentary, “Lutheran World Federation Misses the Mark on Work and Wealth,” I reflect on the recently concluded general assembly of the Lutheran World Federation, held in Stuttgart. The theme of the meeting was “Give us today our daily bread,” but as I note, the assembly’s discussion of hunger, poverty, and economics lacked the proper integration of the value, dignity, and importance of work.

As I contend, work is the regular means God has provided for the maintenance of our physical needs. And work that is connected to the larger human community becomes increasingly oriented toward the service of others and productive of civilization. Lester DeKoster defines civilization in just this way, as

goods and services to hand when we need them. There are countless workers, just like ourselves—including ourselves—whose work creates the harvest that provides each of us with far more than we could ever provide for ourselves.

These words come from DeKoster’s little classic, Work: The Meaning of Your Life—A Christian Perspective, newly available in an updated second edition.

The omission of considering work in relationship to the development of wealth, globalization, and civilization is endemic to the larger mainline ecumenical movement, which I examine in greater length in my book, Ecumenical Babel: Confusing Economic Ideology and the Church’s Social Witness. In that book I look especially at the outcome of the previous LWF gathering in 2004.

The trend observable in LWF recent history looks to continue unabated. The newly appointed LWF general secretary, Rev. Martin Junge of Chile, has the pursuit of “economic justice,” conceived largely of opposition to globalization, as a high priority. (Full story after the break).
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Blog author: jballor
posted by on Monday, July 26, 2010

Bill Easterly has a brief reflection on the role of religion in global societies, a role that must be taken into account by development ‘experts.’ Speaking of his experience at an Anglican worship service in Ghana:

I think it’s something about how to understand people’s behavior, you need to understand how they see themselves. A good guess is that the people in the congregation this morning, in one of the poorest regions of Ghana, do NOT see themselves primarily as “poor” or “developing”, they see themselves as Christians. Another guess is that similar feelings about religious faith would apply to other Ghanaians in other religious services, like Muslims, Catholics, traditional religions, etc.)

Development efforts must take into account broader cultural, non-material concerns, and religion plays an enormous constitutive role in the formation of cultural worldviews. More important than how those in developed nations see those in the developing world is how those in the developing world see themselves. And as Easterly notes, most often they see themselves primarily as “Christian” or “Muslim” rather than “rich” or “poor.”

The NYT Freakonomics blog notes that the Fair Trade movement does not exist independently of the laws of economics:

But the problem with Fair Trade coffee is that as the program scales up, the alternative market ethics it wants to sustain collapse. Inevitably, the Fair Trade market becomes subject to the same laws that drive the conventional commodities market. When the price of coffee drops, the appeal of Fair Trade’s price support lures growers into the cooperatives that sell coffee under the Fair Trade label. As poor growers rush into Fair Trade agreements, the supply of Fair Trade coffee rises. Protected by the price floor, the Fair Trade coffee remains inflated despite flagging demand. What Fair Trade importers thus end up doing with the excess Fair Trade coffee is dumping it—upwards of 75 percent of it!—on the conventional market.

This is a huge problem for Fair Trade. Essentially, to be successful, it must, as I have stated in the past, “argue for a complete standardization of its price-fixing methods.”

Fair TradeThis gets at the paradox of religious support for Fair Trade. It makes those who argue so vociferously against “consumption” as an evil, something that feeds the Big Ag “devil” (to use the Freakonomics blog’s terminology), instead rather promote and endorse consumerism of another kind: Fair Trade consumerism.

That’s how you get to the point of mainline denominations pushing Fair Trade commodities (like coffee) in the church narthex and small groups, like moneychangers in the temple courtyard.

The Freakonomics post is lengthy and worthy of attention. But for a more comprehensive discussion of Fair Trade, be sure to check out the new monograph in the Studies in Christian Social Ethics and Economics series, Fair Trade? Its Prospects as a Poverty Solution.

In this book, Henderson State University economics professor Victor Claar examines the case of coffee in particular, and relates that in his

past place of worship, dedicated parishioners freely gave of their time and talents throughout the year to serve the retailing, advertising, and distribution efforts of Equal Exchange. Those parishioners who had taken on the ministry of fair trade coffee advertised frequently in the weekly bulletin and monthly newsletter—at no charge, of course. They also operated a coffee cart that was open for business between and after Sunday services, and they took great care to stock up on extra-special goodies in anticipation of gift-giving occasions such as Christmas and Valentine’s Day. They carefully maintained their inventory on hand, placing
orders with Equal Exchange when stocks were getting low. Of course, Equal Exchange was the only coffee served during coffee hour, where an Equal Exchange sign was prominently displayed to remind everyone that ours was a congregation that cared about the poor.

Claar concludes presciently: “In any other setting but a church, the message would be clear: If you enjoyed today’s free sample, be sure to pick some up on your way out to savor at home all week long.”

Order your copy of Fair Trade? Its Prospects as a Poverty Solution today.

Blog author: jballor
posted by on Monday, July 12, 2010

Some of the assumptions built into the mainstream international aid and development movement are puzzling. Among them is the faulty assumption that the comparison that matters most is how the developing world is doing in relation to the developed. Not surprisingly, this kind of comparison tends to make the gains in developing countries seem small, inscrutable, or nonexistent, and end up reinforcing the myth that progress is never achieved.

What’s more important than how a country like Zambia is doing in comparison with a country like Belgium is instead how Zambia of today is doing compared with Zambia of 3, 5, 10, or 20 years ago. The comparison that’s most important is to how bad things have been and how they are relative to now, not how things there are versus here.

You see the outworking of this first kind of comparison, however, in the paradigms adopted by aid and development experts. As Stephane Fitch writes, the other model of comparison (not between developed and developing nations, which among other things feeds envy and despair, but rather between how it was and how it is now in a particular place) can inspire surprising gains from seemingly modest proposals. In a recent issue of Forbes, Fitch writes about the work of F.K. Day, a bicycle company executive who has done extensive work in Zambia.

As Fitch writes, Day complains that “World Bank types…tend to favor (and fund) paved roads and train tracks.” They tend to favor (and fund) those things they assume to be marks of development and progress, based on comparison with the existence of those things in the developed nations. But more important for a country like Zambia than paved roads, train tracks, or even internet access and affordable laptops, are simple and reliable means of short-range transportation: bicycles. In this case, bicycles that don’t, in Day’s words, “suck,” mean much more for the typical Zambian farmer or weaver than a paved road or WiFi service. His charity produces bikes that are much more reliable, sturdier, and appropriate for the Zambian terrain.

Fitch describes Day’s vision:

Through his World Bicycle Relief charity the ponytailed entrepreneur hopes to put millions of sub-Saharan Africans aboard special heavy-duty bikes designed to withstand the continent’s rugged roads while carrying 200 pounds of cargo–enough for a weaver to bring his rugs, or a farmer to tote his produce, to market. Moreover, he aims to promote a self-sustaining bicycle economy with regional operations assembling the bikes and area mechanics trained to repair them.

Sometimes you need to walk before you can run, and pedal before you can press down on the accelerator. This is as true for an individual as it is for a national economy.
Day is focusing on encouraging and fostering entrepreneurship and sustainability (e.g. profitability), and he does so with an explicit acknowledgment of the power of markets to transform lives: “You can have all the goodwill in the world,” he says, “but if what you do isn’t driven by the invisible hand of Adam Smith, you’re doomed to fail.”

That’s another way of saying that good intentions are no substitute for sound economics, and the wedding of both is what you see in Day’s work. And that’s what we’re all about here at the Acton Institute. As Fitch concludes, “It’s amazing too how a charity with a small budget ($2.5 million) and a staff of 24, including 19 in Zambia, can change thousands of lives, two wheels at a time.”

For more information on Day’s charity, his brand of “ponytail capitalism,” and the “bicycle economy” he’s trying to build in Zambia, check out the Forbes slideshow.

As we’ve noted before, the Planet Money team is on the ground in Haiti getting a hands-on look at the economic situation after the disaster. Today they broadcast a moving story of an entrepreneur who lost all her capital in the earthquake. Now she totes a 30+ lbs. bin of chicken necks to make a few dollars a day.

The story is a testament to the power of micro-finance, the complications of an international import operation, and the bookkeeping practices of a purveyor of chicken necks. Check it out and visit the Planet Money blog tomorrow to get the follow-up on how Yvrose fared with her lender.

Thomas P.M. Barnett has written a good, concise, piece on the consolidation and deepening of globalization, specifically Wal-Mart’s tapping into local producers in developing countries. (HT: Real Clear World)

As far as I can tell, there are no Wal-Mart’s in Italy, but having spent the last three weeks at my parents’ home in Flint, Michigan and shopping at places like Wal-Mart and Target, I can clearly see how far behind the curve Italy is.

While family-run boutiques and the slow-food movement have many things to recommend for body and soul, they simply can’t operate at anywhere near the same level of efficiency. Religious leaders can help us understand and better cope with these changes if they regularly read pieces like Barnett’s.

For a fuller picture of the world today, however, the economic perspective does not suffice. I arrived in Michigan just before the failed attempt by a Nigerian trained in Yemen to blow up a plane flying from Amsterdam to Detroit. This near-miss and Anne Applebaum’s piece on the growing international jihadist elite remind us the globalization also includes expanding networks of Islamist hatred and violence, which religious leaders must, indeed are most responsible for, addressing with the utmost seriousness and urgency, even though this is a battle that will be fought for generations.

What’s needed is not just understanding and empathy for “the other” as university intellectuals would have it, but argument and counterargument, as Applebaum says. There is too much going on in the world and too much at stake for well-intentioned believers to remain on the sidelines.

Cardus’ Robert Joustra rightly pillories “fair trade” along with the logic of foreign aid in a challenging article, “Fair Trade and Dead Aid: ‘My Voice Can’t Compete with an Electric Guitar.’”

Joustra’s point of departure is sound: “The aid model is not working, and no large-scale cash infusion or debt forgiveness scheme is going to make it suddenly start working. The fair trade brand is too small-scale and ultimately regressive.”

Unfortunately, though, Joustra’s well-placed critique of the fair trade movement underestimates the scope of the movement’s vision. With regard to coffee, for instance, Global Exchange has called for “a total transformation of the coffee industry, so that all coffee sold in this country should be Fair Trade Certified.”

The logic of fair trade in fact requires such wholescale paradigm shifts. But Joustra critiques the movement in part because it does not, on his view, represent the needed “long-term substantive critiques of the global social and political architecture.”

Joustra conclude that “as long as our consciences are salved by feel-good coffee branding and knee-jerk check writing campaigns, we won’t take the hard look we need at the architecture of global capitalism and bring about the social innovation that is necessary for genuine architectonic reformation.”

The problem with fair trade is not that it is not a comprehensive alternative to so-called global capitalism. It is that undermines the proper functioning of the market by artificially manipulating the price mechanism, resulting in all kinds of negative consequences, some of which Joustra notes, promoting “unprofitable work, and subsidizing unprofitable and undiversified economies.”

The critical questions that remain for Joustra and others are these: Does the proposed architectonic alternative to the current system properly value the role of markets or not? Do the corporatist and governmental abuses of “global capitalism” (e.g. subsidies, price fixing, and so on) need to be addressed, or are the philosophies of fair trade and aid not sufficiently communitarian? Is the basic problem free trade and liberal economic globalization itself or the distortions thereof?

Update: Robert Joustra cogently addresses my questions. His answers, in part:

First, I believe capitalism, particularly coupled with the rule of law in a culture of virtue and long-term’ism, is a sound economic system. But our capitalism has degraded to an obsession with utilitarian short-term materialism. Some are apt to blame the system, but consumerism is nothing new – the scale which modernity enables us to practice it on is. That can entice us to be overly critical of the system which facilitates it, but I remain convinced that the deep “sites” of resistance to global consumerism are not our politics or our institutions, but our homes, churches and grocery stores. Politics, as they say, is downstream of culture and our culture is saturated with short-term materialism.

I find very little with which to quibble in these answers. Read the whole thing.