Category: International Trade

Blog author: jballor
Monday, July 12, 2010
By

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.

A recent NBER working paper, “Internationalization of U.S. Doctorate Education,” takes a look at trends in doctoral degrees awarded by American institutions in the physical sciences, engineering, and economics.

From the abstract, “The representation of a large number of students born outside the United States among the ranks of doctorate recipients from U.S. universities is one of the most significant transformations in U.S. graduate education and the international market for highly-trained workers in science and engineering in the last quarter century.”

That transformation wouldn’t be possible without travel and visa allowances, as well as an educational and cultural atmosphere that welcomes immigrants. The trend also speaks to the level of prestige and respect accorded to U.S. institutions and degrees, and the portability and value of those degrees abroad.

Blog author: kschmiesing
Monday, April 13, 2009
By

Zenit reports a new initiative by Cardinal Crescenzio Sepe of Naples, Italy: “he is donating a year’s stipend and part of his personal savings to initiate a diocesan bank that will offer micro-credits to the poor.”

I like two things about this project. First, the cardinal is putting his own money to work, furnishing a good example of personal commitment to assist those in need. Second, he is doing so in a thoughtful and creative way, not “throwing money” at a problem. One of his comments: “[F]ar from being a practice of pure welfare, the micro-credit will be the way to make the creativity and ingenuity of our people emerge again.” Bravo, Your Eminence.

A sour note in his remarks is this: “We thought that the globalization of markets would bring us further well-being, wealth for all, and instead we globalized poverty.” This seems to imply that, on balance, globalization has led to impoverishment rather than economic progress—a dubious proposition.

Blog author: kschmiesing
Thursday, November 20, 2008
By

By now you’ve read one or more stories about the increasing levels of piracy on Africa’s east coast, brought into the spotlight by the recent capture of a Saudi oil tanker.

Piracy is, of course, simply a specific form of theft, a vice that like all basic vices will be with us to the end of time. Sometimes there is a fine line between state military conflict and piracy, as the case of Sir Francis Drake attests (to the English, a hero and nobleman; to the Spanish, a pirate). The problem of piracy along the African coast has plagued American shipping for as long as the nation has existed: One of the earliest missions undertaken by the US Marine Corps was an assault on the infamous bandit havens of the Barbary Coast (remembered still in the Corps’ anthem as “the shores of Tripoli”).

What I found striking about this particular story on the current problem was the sheer breadth of cooperation in the outlawry, evidently without compunction. In the Somali region highlighted, seemingly everyone, from small businessmen, to government officials, to the “mother of five,” views piracy as a positive feature of local life. On display is the absence of elements of a moral culture necessary for a free and functional society, such as deference to the rule of law and respect for property rights. Granted that the culpability of any number of players may be diminished by the harsh realities affecting an impoverished nation without a functioning central government, it is still a depressing picture of indifference to the common good in pursuit of self interest. Would that the modern-day pirates had the inclination and opportunity to direct their talents and energy in a way that actually created wealth rather than merely siphoning it from the rest of the world.