Category: Public Policy

Blog author: jballor
Thursday, October 4, 2007
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The Free Exchange blog at Economist.com (HT) concludes a long and thoughtful post on fair trade, specifically in response to this recent NYT article, “Fair Trade in Bloom,” by wondering:

And how does this affect coffee supply? If a premium is available for fair-trade coffee, shouldn’t other growers enter the market to take advantage of it until the price of coffee is bid down to market levels, leaving total producer take–baseline coffee price plus premium–where it stood before? Such a scenario would also raise distributional questions. If higher coffee prices attract market entrants, then coffee-growing nations will shift resources into that sector, which might be good for grower incomes, but could potentially inhibit the development of other economic activities.

Not to take anything away from the stated goals of the fair-trade movement or the well-meaning consumers who wish to do better by farmers in poor countries. Still, in any economic process, it’s often difficult to foresee the second- and third-order effects of a decision. It will be interesting to observe how growth in fair-trade products changes the structure of markets for targeted commodities.

These sorts of questions and concerns are at the heart of my past criticisms of the fair trade movement.

To the extent that fair trade certifiers are simply acting as agents to inform consumers and guarantee certain practices, to which coffee buyers can freely respond either affirmatively or negatively, there’s no real complaint. Fair trade becomes a boutique item that has to compete in the free marketplace.

But to the extent that the fair trade movement reflects a more thoroughgoing critique of market forces and the “fairness” or justice of market prices, it becomes more problematic. It becomes an entirely different paradigmatic alternative to a system of free trade.

You’ve essentially replaced market prices with arbitrarily determined prices, which are subjectively determined to be “fair.” Compare this with the traditional and classic scholastic understanding of a “just” price as the market value in the absence of any and all fraud and conspiracy.

The Free Exchange blog piece points out all sorts of negative consequences of the change from “just” to “fair” prices, not least of which is the increasing saturation of an already saturated market because of artificial subsidization of a particular commodity. Furthermore, it’s hard to see how it makes good economic and environmental stewardship to subsidize and promote the growth and production of a commodity of which we already have too much.

For more on the disconnect between the intentions and the consequences of the fair trade movement, check out this study, “Does Fair Trade Coffee Help the Poor?”

Blog author: jcouretas
Wednesday, October 3, 2007
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The new issue of Philanthropy Magazine features a cover story on Frank Hanna, vice chairman of the Acton Institute board of directors, and winner of the 2007 William E. Simon Prize for Philanthropic Leadership. The story is titled “Call of the Philanthropist,” a play on Acton’s Call of the Entrepreneur documentary, which features Hanna prominently.

The lengthy profile by Christopher Levenick offers insights into Hanna’s philanthropic activities and his philosophy of giving. Rev. Robert Sirico is quoted extensively, as are executives of other nonprofits that Hanna supports. For those who are interested in how philanthropy can be thoughtfully applied — and effective — the article is well worth reading.

Here’s Hanna on “indispensable causes:”

According to Hanna, donors should direct their funds only to causes they deem truly essential. “I believe,” he writes, “that the charities to which we give significant help should themselves be indispensable. In other words, their success should bring to mankind physical, intellectual, moral, or spiritual benefits of the most important kind, benefits without which mankind (or particular individuals) would be fundamentally diminished.”

Once philanthropists have identified the indispensable causes, they should restrict their donations to charities for which their support is truly indispensable. A small contribution to a massive organization will have marginal influence, at best. A series of marginal contributions is hardly better. Funds are always best spent where they will be put to the most effective use. If the organization can succeed without this donation, the money would be better spent on an organization that absolutely needs the funds to attain its objectives.

The Principle of Indispensability is designed to help maximize the leverage of charitable contributions. “Archimedes is credited with discovering how to use a lever to get seemingly disproportionate results,” says Hanna. “But Archimedes didn’t just stick his lever anywhere. He had to find the point of maximal leverage.” So too with philanthropy: Charitable donations achieve seemingly disproportionate results when they are directed to the point of maximal leverage.

A quote from T. H. Green, refuting the view that the law’s “only business is to prevent interference with the liberty of the individual,” construed as doing what you like as long as it does not infringe on others’ rights to do what they want. Green writes:

The true ground of objection to ‘paternal government’ is not that it violates the ‘laissez faire’ principle and conceives that its office is to make people good, to promote morality, but that it rests on a misconception of morality. The real function of government being to maintain conditions of life in which morality shall be possible, and morality consisting in the disinterested performance of self-imposed duties, ‘paternal government’ does its best to make it impossible by narrowing the room for the self-imposition of duties and for the play of disinterested motives.

From Green’s Lectures on the Principles of Political Obligation (PDF) [1883], quoted in Himmelfarb, The De-Moralization of Society, p. 152.

See also, “Moral Duties and Positive Rights.”

Excerpts from Clifford Krauss’ article in the New York Times (cross-posted at SchansBlog.com)…

The ethanol boom of recent years — which spurred a frenzy of distillery construction, record corn prices, rising food prices and hopes of a new future for rural America — may be fading.

Only last year, farmers here spoke of a biofuel gold rush, and they rejoiced as prices for ethanol and the corn used to produce it set records. But companies and farm cooperatives have built so many distilleries so quickly that the ethanol market is suddenly plagued by a glut, in part because the means to distribute it have not kept pace…

–> Of course, markets can suffer from gluts and bubbles, but such problems are much more likely in the face of government planning, regulation, and intervention. Central planning doesn’t work because central planners lack the knowledge and motives to do it effectively. This is not a correctable deficiency in central planners. Thus, better central planning is unlikely. (At least, that’s what the data say overwhelmingly.) Nonetheless, faith in central planning– or interest by interest groups in using it to promote their own ends– continues apace…

While generous government support is expected to keep the output of ethanol fuel growing, the poorly planned over-expansion of the industry raises questions about its ability to fulfill the hopes of President Bush and other policy makers to serve as a serious antidote to the nation’s heavy reliance on foreign oil.

–> Uhhh…and that’s not to mention the limits of ethanol (even at its peak, it could only provide a small fraction of the total demand) and its energy and economic inefficiencies.

“If Congress doesn’t substantially raise the renewable fuel standard,” Mr. Brady said, “then this is not just a short term problem but a long term issue, and there will be more of a shakeout in the industry.”

–> Right…What’s “the answer”? More regulation and subsidies. That’s a great answer if you’re in the business; it’s a bad answer if you’re anyone else.

Why might there be “increasing participation by religious organizations in offering substance abuse treatment funded by federal government vouchers”?

Perhaps because, at least in part, “A program’s faith element relates to the people they serve and the type of help they provide, as programs with more explicit and mandatory faith-related elements are likely to be substance-abuse programs.”

Thus, the more explicitly faith-filled substance abuse programs will increasingly face a special temptation to take federal funds for such purposes. And this will lead to complaints “that many of the faith-based programs funded by ATR [Access to Recovery] do not meet state licensing requirements, and are permitted to use religiously-based materials in treatment programs.”

These two brief essays provide a good juxtaposition of two perspectives that view immediate and mandated action to reduce carbon emissions as either morally obligatory or imprudent. For the former, see Vaclav Havel’s, “Our Moral Footprint,” which states rhetorically, “It is also obvious from published research that human activity is a cause of change; we just don’t know how big its contribution is. Is it necessary to know that to the last percentage point, though? By waiting for incontrovertible precision, aren’t we simply wasting time when we could be taking measures that are relatively painless compared to those we would have to adopt after further delays?”

Contrast that with Bjorn Lomborg’s “Our Generational Mission,” which uses the economic concept of opportunity cost to argue that immediate action is not necessary, and perhaps will never be. He wonders, “Why are we so singularly focused on climate change when there are many other areas where the need is also great and we could do so much more with our effort?”

Orlando Patterson, professor of sociology at Harvard University, penned a challenging piece on Jena 6 and our current racial tensions. I have learned much from Patterson over the years. For example, he was the first person to help me realize that we often confuse issues of race and class in America by assuming the race as the single variable accounting for the cyclical plight of poor blacks.

In a September 30th New York Times op-ed piece Patterson rightly says that what happened in Jena, LA and the current state of black America goes well beyond the antiquated appropriation of racial reasoning. Patterson writes:

The circumstances that far too many African-Americans face — the lack of paternal support and discipline; the requirement that single mothers work regardless of the effect on their children’s care; the hypocritical refusal of conservative politicians to put their money where their mouths are on family values; the recourse by male youths to gangs as parental substitutes; the ghetto-fabulous culture of the streets; the lack of skills among black men for the jobs and pay they want; the hypersegregation of blacks into impoverished inner-city neighborhoods — all interact perversely with the prison system that simply makes hardened criminals of nonviolent drug offenders and spits out angry men who are unemployable, unreformable and unmarriageable, closing the vicious circle.

Jesse Jackson, Al Sharpton and other leaders of the Jena demonstration who view events there, and the racial horror of our prisons, as solely the result of white racism are living not just in the past but in a state of denial. Even after removing racial bias in our judicial and prison system — as we should and must do — disproportionate numbers of young black men will continue to be incarcerated.

Like many others, Patterson fails to see is that the crisis in black America, especially among black males, is primarily a moral one. To what Patterson said, I would add the following:

(1) Patterson calls for prisons to reintroduce rehabilitation as an integral method of dealing with offenders. Sadly, the best any government-run rehabilitation can do for a struggling inmate is to offer shallow behavior modification which has been proven not to work long-term. A man in prison has deep emotional, psychological, and spiritual issues. Prison rehabilitation is incapable of transforming and healing the soul of man who has acted out of his own lacerated wounds.

(2) Black fatherlessness is having a devastating affect on the masculine formation of black boys. This is a moral issue. Cultivating the attributes of love, commitment, intentional formation, care, teaching, time, and discipline that boys need to learn from their fathers, and other men who care about their development, cannot be engendered by a tax incentive.

(3) Rejecting the ghetto-fabulous mindset is a moral problem. On what basis do we expect a young black male to reject the self-sabotaging ghetto-mentality? Money and success? In a country as vain and immoral as America at times the market not only supports and encourages stupidity it also provides incentive for young black boys to pursue with recklessness. “Do yo’ chain hang low?” “Read a book!”

(4) The type of healing and restoration men need when exiting the prison system is moral at the core. While it is true that these men will need job training, new skills, etc., these men need, more than anything else, to embrace a new vision for what it means to be a man. Having a masculine identity that pursues whatever is true, honorable, just, pure, beautiful, commendable, praiseworthy, and the like requires a radically transformed and renewed mind and soul. It takes a morally formed masculine identity to make job skills and family commitments cultivate cycles of human flourishing.

When black men are given the moral formation to pursue a radically transformed view of themselves as men they will become the kinds of men who fight evil in the world instead of fighting each other and are intentional about raising another generation of girls and boys to do the same thereby making the world a better place.