Posts tagged with: globalization

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.

In his new encyclical, Caritas in Veritate, Pope Benedict XVI calls for an international political authority, “so that the concept of the family of nations can acquire real teeth.” He tasks it with issues like human rights, ensuring access to necessities including food and water, and managing the global economy. What might an effective international governing body look like?

The Nobel laureate economist Friedrich Hayek asked the same question in 1944 in his book, The Road to Serfdom. Seeing his beloved Europe torn apart by war and gross economic inequalities, Hayek wrote, “we cannot hope for order or lasting peace after this war if states, large or small, regain unfettered sovereignty in the economic sphere.” He was referencing World War II, but it sounds like the Pope feels the same way about hoping for order and prosperity after this recession.

Neither Hayek nor the Pope have utopian visions of the world. The Pope reaffirmed the value of subsidiarity many times in Caritas in Veritate. Subsidiarity is the principle that decisions should be left to the smallest competent authority. In questions of politics and economics, this is often a local authority; it is rarely an international organization. Hayek said the same thing when he noted that “the problems raised by a conscious direction of economic affairs on a national scale inevitably assume even greater dimensions when the same is attempted internationally.”

These constraints make international governance difficult, and they all but rule out any effort by a world body to coordinate economic activity. Real problems still remain with a nationally-divided world, though. Hayek said that “it is neither necessary nor desirable that national boundaries sharp differences in standards of living,” and the Pope refers to the “scandal of glaring inequalities” in Caritas in Veritate. What, then, is to be done?

First, it is necessary to ask what stands in the way of people having their rights respected and their needs met. All too often, it is the state. The Pope criticizes much government-to-government foreign aid on the grounds that corruption and bad economic policy need to be fixed before money will do any lasting good. He also calls for Western countries to end the subsidies to agriculture that block farmers in poor countries from having fair access to global markets. When it comes to accessing investment, food, and water, poor governance has done much to hold back the world’s most impoverished people.

As an Austrian who witnessed the rise of Nazism, fascism, and communism in Europe, Hayek shared a similar critique of the unwillingness of many governments to give their people the freedom they need to flourish. His experiences impacted his vision of the international order, and Hayek ultimately proposed that “there must be a power which can restrain the different nations from action harmful to their neighbors, a set of rules which defines what a state may do, and an authority capable of enforcing these rules… it must, above all, be able to say ‘No’ to all sorts of restrictive measures.”

Perhaps Pope Benedict XVI could draw inspiration from this perspective. In order to promote general equity and a search for the common human good among nations, an international authority with the ability to check irrational and cruel decisions made by governments may be the best way to proceed. An international body with the ability to veto rights abuses, tariffs, excessive inflation, corporate welfare policies, agricultural subsidies, and other harmful laws might be the best way to encourage the solidarity of the “family of nations.” It would let markets tap into the ability of every person to create wealth and meet their own needs through the dignity of their own work. By promoting openness and checking destructive policies without trying to take on the job of managing everything in the world, such an authority could also meet the Pope’s requirement that global political authority be organized in “a subsidiary and stratified way.”

The United Nations may or may not be the best organization to carry forward this vision, and it is possible that some other body might be the future of internal governance “with teeth.” Between Hayek, the Pope, and everyone looking for the best way to heed the challenges of Caritas in Veritate, hopefully a productive framework for governing globalization so that it works for the benefit of everyone can emerge.

Blog author: jballor
Friday, February 27, 2009
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Free trade seems to get all the blame when things go wrong and none of the credit when things go right. It’s the Rodney Dangerfield of global economics: it gets no respect. Certainly in this worldwide economic downturn globalism is going to take its bumps and bruises. And as trouble abroad comes to roost at home (and vice versa) more then ever the lesson is going to be how truly interdependent we all are.

In the short term there will certainly be increased popular sentiment that’s antagonistic toward expansion of liberalized trade policies. A recent Gallup poll shows that Americans showed that 47% view trade as a “threat to the economy from foreign imports” while 44% held that it is “an opportunity for economic growth through increased U.S. exports.” These numbers closely resemble the figures from the poll during the last major recession in 1992 (48% and 44% respectively).

ForeignTrade2009

While globalism will be in retreat for the short term, the beneficiary won’t necessarily be the localism so beloved by “crunchy” conservatives. The move will instead be toward a greater “regionalism,” of the kind fostered by continental and geographic “free trade zones.” In addition to the free trade deal announced today between Oceanic and Southeast Asian nations, you can expect NAFTA to get a close review in coming months.

But in the long term, the prospects for continued globalization are as good as ever. The Internet in particular has created a kind of “grassroots” globalism, that connects people in all kinds of social, economic, and cultural ways that were not possible a decade ago. More than ever we’ve come to know that our “neighbor” is not just the one we live in proximity to spatially, but those to whom we are connected virtually and spiritually.

When Iranian President Mahmoud Ahmadinejad makes a public claim it’s typically controversial. So the AP filed a story with this headline in the Jersualem Post, “Ahmadinejad blames West for AIDS.” Clearly the JP went for shock value, as most other outlets chose to title the story something like, “Iranian president: ‘Big powers’ going down.”

But there it is among a bunch of other accusations that Ahmadinejad leveled at a meeting of the Non-Aligned Movement (NAM). According to the AP, “Ahmadinejad’s keynote speech was tailored to reflect the struggle that some NAM members see themselves in against the world’s rich and powerful countries.”

The AIDS claim is just one among many used to drive a wedge between developed and developing nations, blaming the former for the ills of the latter. But Ahmadinejad’s participation in this global blame game is part-and-parcel of what’s been going on for years.

In 2003, for instance, the proceedings of the World Alliance of Reformed Churches’ global south-south Buenos Aires conference observed that “economic globalization has created job loss and grinding poverty, an unprecedented rise in crime and violence, ecological degradation, and the spread of HIV/Aids.”

As a piece I co-wrote wondered at the time,

Just how does a system of economic exchange “cause” the spread of HIV? The only evidence offered by the ecumenists from Geneva is that “the effects of the free market system on the HIV/Aids pandemic are evident in the management and treatment of the disease.The policies and practices of transnational pharmaceutical companies have privileged profits over the health of people, and the high cost of HIV/Aids drugs and trade agreements exclude the poor from the effective treatment and prevention from infection.”

When Ahmadinejad blames AIDS on the West, he’s a pariah. But when the ecumenical movement says it, they’re seen as speaking truth to power.

While we await Pope Benedict’s first social encyclical, it has been interesting to note what he has been saying on globalization and other socio-economic issues affecting the world today. None of these amounts to a magisterial statement but there are nonetheless clues to his social thought.

So that makes his address to the Centesimus Annus pro Pontifice Foundation noteworthy. The Pope spoke about the current state of globalization, reminding the audience that the aim of economic development must serve the progress of man.

Benedict stressed that commercial interests must never become so exclusive that they damage human dignity. He expressed the hope that the process of globalization which has so far affected finance, culture and politics should in the future also lead to a “globalization of solidarity” and respect for all parts of society. This would be necessary in order to make sure that economic growth is never cut off from the search for the comprehensive development of man and society. The Pope pointed out that the principle of subsidiarity is vital in guiding globalization:

“In this respect, the social doctrine of the Church stresses the importance of intermediate bodies in accordance with the principle of solidarity. It allows people to freely contribute to give meaning to cultural and social changes and direct them towards the authentic progress of man and the community.”

The conference was entitled “Social Capital and Human Development” and the foundation’s name recalls John Paul II’s 1991 social encyclical of the same name, which drew together 100 years of history of the Church’s social doctrine.

What Benedict has said on globalization is very much in line with what John Paul II said before him. This may not seem like much, but when one considers the technical nature of economics and finance today, it is a humane and necessary message that supports the positive aspects of market economics.

UPDATE:

The journalist and author Will Hutton (described in his Wikipedia entry as “Britain’s foremost critic of capitalism”) was invited by the Centesimus Annus Pro Pontifice Foundation to address the conference. In an article for the Observer he shared his impressions. Interpreting Benedict within the framework of his own left-leaning ideas he failed to understand what the pontiff actually said.

According to Hutton, “the Catholic church is again alarmed by the way capitalism is developing” and has attacked “sweatshop call centres, declining trade unions” and “directors paid tens of millions”.

The Pope mentioned none of this and Hutton offers no evidence of why that should be Church teaching. Nor did John Paul II in his encyclical demand “stakeholder capitalism” as Hutton claims. Besides raising the obvious question why Hutton was invited to speak on a subject that he knows little about, this is a worrying example of how a defense of an ethical grounding of economics is misinterpreted as a call for socialistic solutions.

This sounds like a book with a compelling narrative: McMafia: A Journey Through the Global Criminal Underworld.

I’ve often thought about the connection between organized crime and legitimate governmental structures. In the NPR interview linked above, “Journalist Misha Glenny points out that while globalization may have given the world new opportunities for trade and investments, it also gave rise to global black markets and made it easier for criminal networks to do business.” There’s a lot of cogent analysis of trade issues and how government policy not only combats but also contributes to the existence of globalized “black markets.”

It has occurred to me more than once, in watching shows like HBO’s “The Sopranos,” that a good deal of the socio-political aspects of organized crime is explicable in terms of alternative (and often obsolete) forms of governance. That is, often when extorting money from business owners, superficially legitimate services are offered, like “protection,” i.e. protection that the official authorities like the police are unwilling or unable to provide.

Can Tony Soprano claim to be the “king,” or at least “kingpin” of a more feudal or monarchical socio-political structure? Perhaps, just perhaps, there is the hypothetical exceptional situation in which the “outlaws” represent a more legitimate form of governance than official but tyrannical structures (think of Robin Hood, for instance).

But there is at least clear precedent for understanding the reverse to be true; legitimate authorities can certainly degenerate into outright banditry even if bandits may not be able to rise to the level of authentic sovereignty. As Augustine has reflected on the nature of legitimate sovereignty,

Justice being taken away, then, what are kingdoms but great robberies? For what are robberies themselves, but little kingdoms? The band itself is made up of men; it is ruled by the authority of a prince, it is knit together by the pact of the confederacy; the booty is divided by the law agreed on. If, by the admittance of abandoned men, this evil increases to such a degree that it holds places, fixes abodes, takes possession of cities, and subdues peoples, it assumes the more plainly the name of a kingdom, because the reality is now manifestly conferred on it, not by the removal of covetousness, but by the addition of impunity. Indeed, that was an apt and true reply which was given to Alexander the Great by a pirate who had been seized. For when that king had asked the man what he meant by keeping hostile possession of the sea, he answered with bold pride, “What thou meanest by seizing the whole earth; but because I do it with a petty ship, I am called a robber, whilst thou who dost it with a great fleet art styled emperor.” (City of God, Book IV, Chapter 4, “How Like Kingdoms Without Justice are to Robberies.”)

And so the appeal to political legitimacy can only be made in recognition of the rule of law, the higher law or the “law beyond law,” that governs all human endeavors.

On Friday April 11, the Vatican newspaper, L’Osservatore Romano, featured a front-page article on the progress made in international development since Pope Paul VI wrote the encyclical Populorum Progressio in 1967. The author of the article, Fr. Gian Paolo Salvini, S.J., is director of the journal La Civiltà Cattolica. He has a degree in economics and since he has lived in Brazil for many years, he has first-hand experience of development issues.

Salvini’s article is entitled “Incomplete Development” (“Uno sviluppo incompleto”) but his overall assessment of what has happened over the last 40 years is positive. He cites various statistics showing that “spectacular progress” has been made in terms of reducing absolute poverty. The number of people who have to live on less than one dollar a day has fallen from 29 to 18 per cent between 1990 and 2004. Also the data for longevity, child mortality and literacy show clear improvements.

Salvini identifies international trade as one of the key factors that has contributed to this trend. He is aware that progress has been uneven and that improvements in Asia have been far more marked than in Africa. This highlights that “the greatest success stories are due to the formula industrialize for exports”.

His most striking example to illustrate this point is that of South Korea. The fact that the country’s economic indicators were similar to those of Zaire (today the Democratic Republic of Congo) in the 1960s reflects the central importance of engaging with international trade: Korea’s achievement is largely due to its ability to export its manufacturing products to North America and Europe. This also explains why Dependency Theory, which was fashionable in the sixties and which advised developing countries to disengage with global trade, “is not taught anymore”.

The power of trade to transform poor countries is nowadays beyond doubt and Salvini notes that today it is often “the developing world which is asking for more free trade”, whereas Europe and the United States are obstructing the free flow of goods in agriculture.

But towards the end of the article, Salvini raises a more critical point regarding achievements in international development. He says that in contrast to absolute poverty, relative poverty is increasing: “The distance between those who are doing well and those doing badly, or to put it better, those who are doing well and those who are doing less well is growing.”

Salvini does not provide any data to illustrate this point and his assertion is, in fact, questionable. At the Populorum Progressio conference organized by Istituto Acton in Rome in February, Prof. Philip Booth from the Institute of Economic Affairs in London, specifically addressed the issue of relative poverty:

We should recognise that relative poverty has decreased during the process of globalisation .… Most dramatically, the gap between countries that have recently seen rapid growth and those countries that have been relatively well off for many decades has narrowed significantly … Whilst European Union countries, the US, the UK and Japan grow well below the world average (indeed disposable incomes are broadly stagnant across much of the developed world), over half the world’s population now lives in 40 countries that are growing at more than 7% per year. Development is happening and is benefiting huge numbers of previously-poor people.

Salvini may be referring to an increase in income inequality within countries but in that case he is not looking at poverty in terms of human needs and real deprivations, but as compared to an abstract “ideal”.

Reducing income inequality may seem like a noble aspiration, but it is of minor importance. Prioritizing the alleviation of relative poverty would yield the absurd situation where society as a whole is made poorer only to make it more equal. A desire for greater equality should not justify giving up the real and tangible benefits globalization has brought the poor over the last couple of decades.

Hostility towards globalization is not the exclusive territory of the left in Italy. Giulio Tremonti, a former minister of the economy in Silvio Berlusconi’s centre-right government, has written a book called Fear and Hope (La Paura e la Speranza), largely arguing against free trade and the opening of international markets.

Tremonti blames the recent rise in the prices of consumer goods on globalization and says that this is only the beginning. The global financial crisis, environmental destruction, and geopolitical tensions in the struggle for natural resources are also fruits of globalization, according to Tremonti. He identifies the main problem as a lack of international governance of the process of globalization and calls for a new Bretton Woods-like system to confront the multiple crises caused by what he calls “marketism”.

The “dark side of globalization” can only be countered by a return to European values: tradition, the family, and the nation, adds Tremonti. Europe “needs a philosophy which makes politics and not economics the primary mover [of globalization]. This can only work if we go back to the roots of Europe, these are the roots of Judeo-Christianity”.

This “cure” to the ills of globalization remains vague (as one would imagine in a book of only 112 pages). Still more puzzling is his insistence on a contrast between market principles and traditional European values. The idea that a return to values must be coupled with a stronger politicization of the world economy clashes with experience. More regulation and state interference not only tend to reduce growth and living standards but also create new opportunities for rent-seeking and corruption, and thereby undermine the traditional virtues that Tremonti supports.

He misses the opportunity to discuss how certain values are enhanced by the market and how international competition has in fact strengthened Europe by highlighting its best qualities, both technologically and culturally, while repressing its worst.

Tremonti’s vision is inward-looking and profoundly pessimistic. Some market-oriented Italian commentators have pointed out that his ideas seem dangerously close to old-style protectionism. It is clear if Europe followed his analysis, it would be led on a path of future irrelevance both as an economic and a cultural model.

I’ve been on record more than once regarding my own doubts and criticisms of the precise political pronouncements made by various church groups, especially offices and branches seemingly representing the institutional church. So when I see something sensible and good coming from these same sources, it’s only right and fair that I acknowledge and celebrate them.

Here are two items worthy of notice:

The first is from the newsletter of the Office of Social Justice and Hunger Action (OSJHA) of the Christian Reformed Church, which linked to an article, “Can Violence Ever Lead to Peace?” In this piece Paul Kortenhoven explores how “the use of violence in reaction to an extremely violent attack by an extremely violent rebel force simply stopped them. Along with the British stance in Sierra Leone, this also was a main catalyst for peace.”

I have to say I was pretty surprised to see an explicit acknowledgment of the positive role that military and coercive intervention can play as a backdrop for lasting peace. Kortenhoven’s piece is the diametric opposite of what IRD’s Mark Tooley has called in another context the attitude of “pseudo-pacifist academics and antiwar activists.”

It’s an article that takes seriously the complexities involved in answering such questions as, “How, in a world of such strife, are Christians to build peace? How should we think about war? And how do we talk to one another about these issues with open hearts and minds in patience, love and humility?”

The second item of note comes from the ecumenical world, where at the end of last month leaders of WARC “called for the lifting of the United States’ economic embargo against Cuba in the interest of justice and right relationships.”

Unfortunately, this position shouldn’t be construed as part of a broader agenda pursuing economic liberty and international openness, linked as it is to the overall “covenanting for justice” outlook of the 2004 Accra, Ghana meeting. How can you decry embargoes and at the same time militate against “neoliberal economic globalization”? Your guess is as good as mine, but at least on the issue of the Cuba embargo, WARC leaders are in the neighborhood of a prudent approach.

Beyond this, I do have a word of concern as well as praise. Regardless of the rightness of the positions espoused above, there is the methodological and eccelsiological issue of whether these are the appropriate groups to be campaigning for such things. That is, should the institutional church, which the ecumenical clearly fancies itself as representing, be speaking so clearly and particularly on prudential policy matters?

AGAIN Magazine has published my “Conflicted Hearts: Orthodox Christians and Social Justice in an Age of Globalization.” The magazine is produced by Conciliar Press Ministries, Inc., a department of the self-ruled Antiochian Orthodox Christian Church of North America.

Excerpt:

Just as there is no real understanding of many bioethical issues without a general grasp of underlying medical technology, there is no real understanding of “social justice” without an understanding of basic economic principles. These principles explain how Orthodox Christians work, earn, invest, and give to philanthropic causes in a market-oriented economy. Economic questions are at the root of many of the problems that on their face seem to be more about something else—poverty, immigration, the environment, technology, politics, humanitarian assistance. In the environmental area, for example, the current debate on global warming is just as much focused on how to finance the means of slowing the rising temperatures of the earth as it is on root causes. And the question always is: Who will pay?

What, exactly, is social justice? It is an ambiguous concept, loaded with ideological freight. No politically correct person would dare oppose it. To be against “social justice” would be tantamount to opposing “fairness.” Today, the term is most often employed by liberal-progressive activists and a “social justice movement” that advances an economic agenda which includes such causes as a “living wage,” universal health care and expanded welfare benefits, increased labor union powers, forgiveness of national debts in the developing world, and vastly increased transfers of foreign aid from rich countries to the poor. Because religious conservatives tend toward support for free market economic systems, they have largely shunned the “social justice” agenda and its government-based solutions.

Read the entire article here.