Category: Public Policy

In this week’s Acton Commentary, “The North American Church and Global Stewardship,” I note that blessed with extraordinary material riches, Christians in North America are increasingly viewing their stewardship responsibilities in a global context. I look at one school in British Columbia and how their local building project also raised funds for a school in Sierra Leone.

Dennis DeGroot, principal of Fraser Valley Christian High School, writes and informs me, “The money keeps coming in for the school project. The students have far exceeded their goal. The total now at $36,000 and money still coming in.” He also says, “My long term vision for this is that all Christian schools would find partnerships like ours in the developing world; true partnerships where we learn from each other where real wealth lies.”

For some background, you can read my brief column in The Banner, “Building on the Tithe.”

While there is a general acceptance of the role of private property for social order and economic prosperity, the challenges to private property have not ended. The eminent domain issue is one threat; another comes from environmentalist groups such as the Foundation for Deep Ecology and others who see humans as a drain on the earth and nature. Some environmentalists advocate the consolidation of land to be put under federal control and promote stringent land usage restrictions that would prevent a landowner using his property fruitfully.

Their argument is nothing new: individuals left to themselves will not be as effective as central planners in decided the best way to allocate and protect resources, etc. etc—they are merely variants of the Marxian arguments used by economic central planners.

Despite the rhetoric, common ownership of land and resources has not been an effective means of addressing problems. It failed under applied socialism, and has not led to environmental protection and stewardship as environmentalists hope. Private property ownership creates incentives for people to use land wisely and in a sustainable manner. John Stossel gives an excellent illustrations of the importance of incentives and the private ownwership including privatizing elephant ownership in Africa.

St. Thomas Aquinas addressed the question of property and human incentives in the 13th century. He argued it is lawful to own property for three reasons:

First, because every man is more careful to procure what is for himself alone than that which is common to many or to all: since each one would shirk the labor and leave to another that which concerns the community, as happens where there is a great number of servants.

Secondly, because human affairs are conducted in more orderly fashion if each man is charged with taking care of some particular thing himself, whereas there would be confusion if everyone has to look after one thing indeterminately.

Thirdly, because a more peaceful state is ensured to man if each one is contented with his own. Hence it is to observed that quarrels arise more frequently where ther is no division of the things possessed.

Notice the humanist vision—the appreciation for the individual, an understanding of human nature, a respect for the capabilities of individuals to make decisions and control their own sphere. Also notice point number three. Compare this to the unspeakable violence perpetrated by socialist government leaders on their own citizens because they were not “content” with operating in their own sphere.

It is unfortunate Marx and the socialists were not steeped in the thought of St. Thomas early on. Who knows, it could have avoided some of the pain and suffering imposed by socialist governments on their own people. But the reality of Marxism has become clear. As Pope Benedict put it in his new encyclical Deus Caritas Est

Marxism had seen world revolution and its preliminaries as the panacea for the social problem: revolution and the subsequent collectivization of the means of production, so it was claimed, would immediately change things for the better. This illusion has vanished.

The leftwing environmentalists are part of a long line of central planners. They want to the control of property in the hand of government bureaucrats and planners, i.e., themselves. But planners are always less effective than those closer to the problem, because no matter how much they know, or think they know, they’ll never has as much knowledge as those individuals on the ground close to the situation. This is the principle of subsidiarity—rooted in Aquinas’ defense of private property. Wisdom of the past as applicable today as it was then.

Hunter Baker at The Reform Club passes along a column by Maggie Gallagher that has him “rethinking” his position concerning illegal immigration. Gallagher notes, “Economic studies suggest that overall, immigration is a net wash, or a slight plus, for the American economy. But the pluses and minuses are not evenly distributed over the whole population: Lesser-skilled Americans who compete for jobs that don’t require Ivy League credentials take the hit, while people like me enjoy a lot of the benefits.”

Andrew Yuengert, a professor of economics at Pepperdine University, in his Acton monograph on immigration, makes the same observation. In his shorter white paper based on the monograph, Yuengert writes regarding the impact of immigrants on the cost of social programs, “the real problem is not the fiscal burden of immigrants but the concentration of the fiscal burden in a few localities.”

Baker identifies with the problems posed for low-wage natives in the US who are faced with increasing competition from immigrant workers (both legal and illegal). It is true that certain areas of the country are going to be negatively impacted in terms of the costs of government programs, as well as that certain sectors of the population in these areas will face increased competition for low-wage jobs.

Neither of these two facts can obscure the reality that liberal and legal immigration results in a net economic gain for the US. What these realities can do, however, is temper and specialize government policy.

Perhaps even more importantly, they can give incentive and direction for private social endeavors to help alleviate the job displacement and negative economic effects. Charities could target immigrant communities and take the burden off the state to provide education and health care. Other programs could focus on training and education for immigrants and natives to move on from low-wage jobs.

Immigration should be seen as an opportunity and incentive for natives in low-wage earning jobs to get better training, experience, and education and improve to higher paying positions. A benefit of increased competition for jobs is that workers are given the incentive not to remain indefinitely in positions that don’t give them the standard of living they desire.

For Yuengert’s views especially as regards illegal immigration, listen to this radio interview (mp3) from The Jerry Bowyer Show.

Actonites know about all the benefits of globalization.

Most of these benefits are economic but also have much greater and often unseen social impact as well. Increased international trade in goods and services promotes division of labor and an efficient use of scarce resources, resulting in lower-priced, higher-quality products. The poor are often the greatest beneficiaries as both producers and consumers. People all over the world come to recognize their increased interdependence, not only with their local grocer or tailor, but with others in faraway lands.

Only the most xenophobic and nationalistic foes of economic and social progress would be against globalization, right?

Wrong.

In nearly every country of the world, including those who have thrived in the last 10-20 years of increased trade, globalization is under attack and in danger of being reversed.

See here for the troubles being reported in Europe, here in the United States, and here in India. And there’s plenty more out there.

This most recent backlash against globalization shows how fears of insecurity prey on mass perceptions and how arguments in favor of economic efficiency are rarely strong enough to resist these fears.

Readers of the Acton PowerBlog know how important religious leaders can be in shaping moral arguments and more of these leaders need to understand just what is at stake here. A collapse of the global economic system resulting from increased protectionism would be an unmitigated disaster for everyone.

There are reports that Pope Benedict is planning a social encyclical on work. It would be a perfect opportunity to re-examine John Paul II’s groundbreaking “Centesimus Annus” and the more recent trends the world has seen.

Blog author: kschmiesing
Tuesday, March 21, 2006
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Last spring I participated in a symposium at the University of St. Thomas School of Law on “pro-life progressivism.” The proceedings have now been published in the school’s law review, which is available here.

To simplify, the conference was designed to explore the possibility of extending the political and intellectual appeal of a position that is against abortion and the death penalty, and left-leaning on economic policy. To the organizers’ credit, they invited the airing of opinions critical of pro-life progressivism from various perspectives. My role was to question the “progressive” part of the equation, which I did, somewhat indirectly, with a brief history of “conservative” Catholic social thinkers.

Not part of the conference, but included in the published journal, is an extremely interesting piece by Patrick Shrake. Shrake argues that the privacy jurisprudence of the last 40 years should be overturned and that the kind of state anti-contraception laws that started the mess could be upheld. Catholics and others who both accept the moral case against artificial birth control and are wary of an activist state will view the article ambivalently, but it is at the least a serious and thought-provoking argument.

Blog author: jballor
Monday, March 20, 2006
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I was intereviewed for this article in yesterday’s New York Times, but I apparently didn’t make the cut. Nevertheless, in “Fair Prices for Farmers: Simple Idea, Complex Reality,” Jennifer Alsever does an excellent job bringing to light some of the dangers that are inherent with external and artificial adjustments to the price mechanism.

In the case of the fair trade food movement, the price floor is set artificially at a certain amount, determined to meet or surpass the subsistence needs of the local farmer. For coffee, this is currently set at $1.26 per pound by the fair trade community.

Alsever writes, “Despite good intentions, most consumers who shop according to their social convictions don’t know how much of their money makes it to the people they hope to help. Critics say too many fair trade dollars wind up in the pockets of retailers and middlemen, including nonprofit organizations.”

The problem is that the fair-trade certification organizations themselves, and also the retailers, can add several layers of increase into the price of a fair trade commodity. We might say that the fair trade consumer, who is presumably already willing to pay more than the market price, has a greater level of acceptable price elasticity.

TransFair USA, the certifying body in the US, “generated $1.89 million in licensing fees from companies that used the logo. It also spent $1.7 million on salaries, travel, conferences and publications for the 40-employee organization.”

“Farmers often receive very little,” said Lawrence Solomon, managing director of the Energy Probe Research Foundation, a Canadian firm that analyzes trade and consumer issues. “Often fair trade is sold at a premium, but the entire premium goes to the middlemen.”

Of course, these are the self-professed middlemen who cut out the layers of middlemen under a market based, free trade system. Those were the “bad” middlemen, while TransFair apparently represents the “good” sort of middleman.

One other aspect of this tinkering with the price mechanism is that the fair trade movement does nothing to recognize the reality reflected by purchasing power parity (PPP). So, writes Alsever, “a price that is fair in one country may not be in another. In Brazil, ‘$1.26 per pound for coffee is a fortune,’ said Kevin Knox, a coffee consultant in Boulder, Colo. ‘In the forest in the mountains of Mexico, the money barely is enough to justify doing it. Their yields are small, and the costs of production are higher.'”

These are just a few of the problems that arise when people try to artificially manage the price mechanism. When it is allowed to do its job, the market price of something provides a lot of good information. It can tell us, for example, that the supply of coffee far outstrips the demand, and so some coffee growers should think about getting into another product or industry. It would be in their best interests to do so, and the best interests of all of us, so that the world doesn’t end up with too much coffee and too little of something else.

The economic ignorance behind the fair trade movement leads me to believe that it really is just a sort of passing fad, especially popular among naïve church groups, which will at some point be replaced by far more effective methods of alleviating poverty around the world, such as micro-enterprise development (for more on this, see groups like Five Talents, Opportunity International, and Kiva). It’s hard to see real staying power behind a movement that thinks the answer to the reality of poor coffee farmers is simply to subsidize the production of commodities of which we already have an oversupply.

For more on some of the emotional and psychological reasons people are willing to pay more for fair trade items, see “Absolution in Your Cup: The real meaning of Fair Trade coffee,” by Kerry Howley. The fair trade movement currently lack the ability to enforce their pricing schemes through the coercive power of the state, so they must rely on other tactics.

Blog author: mvandermaas
Friday, March 17, 2006
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As mentioned in an earlier post, Acton was in Washington D.C. last week to honor the 2005 Samaritan Award-winning programs. But we managed to do a lot more than hold a reception for our honorees – almost all of them also met with members of Congress to impress upon them the value and importance of private charities in their communities.

We spoke with Karen Woods, Director of Acton’s Effective Compassion Initiatives, to get her perspective on a successful couple of days in our nation’s capitol. You can watch that interview by clicking the play button below.




Related items: Acton Senior Fellow Marvin Olasky was interviewed last week by NPR on the White House’s plans to increase faith-based grants. To read about Olasky’s Seven Principles for Effective Compassion, click here.

William Easterly, professor of Economics at NYU, has written a new book challenging the prevailing development orthodoxy of increased aid and the “big push” to combat poverty in the Third World. The White Man’s Burden: Why The West’s efforts to Aid the Rest Have Done So Much Ill and So Little Good, published by Penguin is to be released on March 20th.

I have only read a short bit of it so far, but what I have seen is refreshing. He questions the effectiveness of aid, pointing out that aid has been largely ineffective and more of the same is not the answer. In so doing he goes up against politicians such as Tony Blair and Gordon Brown, economists such as Jeffery Sachs, and rock stars such as Bono and Bob Geldof.

Sachs calls for increased aid and Blair speaks of a “big push” to bring about The End of Poverty. (Sach’s book is also v. interesting by the way) Easterly agrees with Sachs that extreme poverty is a tragedy, but while there is a lot of talk about poverty itself, he says there has been very little said

about the other tragedy of the world’s poor. This is the tragedy in which the West spent 2.3 trillion dollars in foreign aid over the last 5 decades and still has not managed to get twelve cent medicines to children to prevent half of all malaria deaths. The West has spent 2.3 trillion and still has not managed to get four-dollar bed nets to poor families

He contrasts the central planning inefficiency of the aid industry to the market’s ability to distribute 9 million copies of the sixth volume of Harry Potter books to the British and American economies in a single day.

There was no Marshall Plan for Harry Potter, no International Financing Facility for books about underage wizards.

Easterly makes the distinction between what he calls planners and searchers. Planners like Jeffery Sachs and Tony Blair advocate large scale attacks on poverty through aid and global initiatives. Planners operate from top-down schemes that are often well intentioned but have not worked. Searchers on the other hand avoid large scale plans and look for entrepreneurial solutions to solve problems that take into account incentives and accountability.

Despite the evidence, why do big plans remain so popular? Well, one reason of course is that planning schemes are inspiring. End poverty by 2025. Grandiose plans often have the support of big name politicians and celebrities and they promise a solution right away. Piecemeal solutions rarely inspire even when they work. Second, no one is accountable when the fail. And when they do fail the answer is do more of the same thing. The One Campaign is a perfect example. But popularity and good intentions are not a substitute for effectiveness.

A third reason is the prevailing allure of utopian schemes. Easterly writes that the planning approach to foreign aid is part of the what Karl Popper calls the “utopian social engineering” approach to problem. This approach has been tried and failed in diverse times and places such as the five year plans of the Soviet Union, the structural adjustment programs of the World Bank in Africa in the 1980s and 90s, and the “shock therapy” used on the transition economies after years of failed planned economies.

Utopianism is nothing new. Eric Voegelin saw Gnosticism and utopianism as the driving force of modern politics, and it appears to be the driving force of aid as well.

Maybe Easterly’s challenge will wake people up to the failures of planning and get them to respect the entrepreneurial capabilities of the people in the developing world. As Hernando de Soto has pointed out in The Mystery of Capital, there is no lack of entrepreneurial spirit in the Third World.

Instead of increasing aid and more top-down plans decrease regulation and barriers to starting businesses, and let local entrepreneurs and the markets find solutions that far away planners have been unable to accomplish.

Blog author: jballor
Friday, March 17, 2006
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A recent NBER working paper, “The Effects of Tort Reform on Medical Malpractice Insurers’ Ultimate Losses,” argues that “The long run effects of reforms are greater than insurers’ expected effects, as five year developed losses and ten year developed losses are below the initially reported incurred losses for those years following reform measures.”

A number of the specific changes in the history of tort law are discussed in Ronald Rychlak’s Trial by Fury: Restoring the Common Good in Tort Litigation, part of Acton’s Christian Social Thought Series.

Rychlak argues that in addition to the tangible and significant economic impact of current tort law, the system also “encourages litigation at the expense of forgiveness and understanding. It ignores the role that family members, friends, religious leaders, and others can play in bringing about reconciliation.”

Blog author: dphelps
Wednesday, March 15, 2006
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Go here for Acton’s new video, “Solutions,” which offers a real starting place for all of us who want to do something about poverty and hunger.