In answer to the query in the headline of this week’s Acton Commentary, “Who’s Afraid of Free Trade?”, I submit the following: the ecumenical movement. Note the following news item from Ecumenical News International:
Geneva (ENI). Faith groups have joined activists around the globe in calling for fair, equitable and just trade policies while urging churches to join a Trade Week of Action that seeks to promote alternatives to the global system of commerce. “During this week, the churches and other organizations will tell the world that enforced free trade is causing poverty and that there are viable alternatives,” said Linda Hartke, coordinator of the Geneva-based Ecumenical Advocacy Alliance, which has organized the 14-21 October Trade Week of Action. “When the systems we have created to buy, sell and share goods cause hunger and suffering then these systems are wrong. Every voice counts, and every action makes a difference,” Hartke told Ecumenical News International. [ENI-07-0798]
Society is changing as economic freedom and diversification gradually creep into the Middle East. Dr. Samuel Gregg, director of research at the Acton Institute, explores the effects of free trade on nations including Kuwait, Bahrain, Qatar, and the United Arab Emirates and, in turn, the effect those nations are having on their neighbors.
The diversification of economies, notably the development of new products and services for export, allows nations to grow out of reliance on oil production as the main source of capital. The emerging economies create an entrepreneurial atmosphere open to all and encourages foreign investment. The result is a rise out of poverty and more open foreign relations.
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.
Les Picker summarizes the findings, “Not surprisingly, the entry of many developing countries into the world market in the last three decades coincides with changes in various measures of inequality in these countries. What is more surprising is that the distributional changes went in the opposite direction from what the conventional wisdom suggests: while trade liberalization was expected to help the less skilled, who are presumed to be the relatively abundant factor in developing countries, there is overwhelming evidence that they are generally not made better off relative to workers with higher skill or education levels.”
There’s a lot more here to digest and the article has some predictably necessary nuances and caveats, not least of which concerns the problematic elements of trying to find a causal link between temporally related phenomena: “The authors’ findings suggest a contemporaneous increase in various measures of globalization and inequality in most developing countries, although establishing a causal link between these two trends has proven more challenging. However, the evidence has provided little support for the conventional wisdom that trade openness in developing countries would favor the less fortunate.”
It’s one thing to say that globalization proportionally rewards more highly educated and skilled workers relative to less educated and skilled workers. This by itself is not obviously unjust, and indeed, it seems to pass a basic sense of justice that jobs that require more skills and training ought to command a higher wage. Maybe a system that distributes more unevenly according to a measure of merit such as education or skill-level is more just than another system which is more equitable in purely distributive terms.
That said, it’s quite another thing to say that low-skilled workers are not made better off in absolute terms by globalization. I’m inclined to think that we shouldn’t be so concerned about relative disparities as we are by comparing in absolute terms the state of the working poor under systems of liberal versus illiberal trade.
If the working poor are better off under a liberal trade regime than an illiberal one, and higher educated workers are paid relatively more, there is a simultaneous increase in the poor’s immediate economic prospects as well as a relative increase in the economic incentive to improve their skills.
But his latter point only is effective in a situation where labor mobility is a real option, and as the NBER paper points out, “the strict labor market regulation that many developing countries had in place prior to the recent reforms is a potential source of labor market rigidities.”
So, for the promise of globalization to be realized, trade not only needs to be liberalized, but so does labor. Workers need to be free to move between sectors, both within and without national boundaries. As I’ve argued before in another context, we need both free trade and free labor.
A few weeks ago I was listening to a very engaging American RadioWorks documentary, rebroadcast from last October, “Japan’s Pop Power.” The show focused on the increasing cultural imports to America coming from Japan, which by some estimations will soon dwarf industries typically associated with American-Japanese trade like automobiles, technology, and electronics. Japan’s economic success is a sure sign that human creativity and inventiveness are more important factors in human flourishing than mere material concerns or natural resources.
Some of the commentary expounded the typical pattern and dynamics of a sub-culture movement becoming mainstream. A great deal of the program focused on Japanese art, film, and media products, including the form of Japanese comic known as manga. Beginning with Mighty Morphin Power Rangers, the growing Japanese dominance of programming oriented toward youth is especially noteworthy (I’m a Yu-Gi-Oh! fan and my wife likes Ninja Warrior).
One portion of the program interested me especially because we have been discussing the importance of narrative here lately. As Chris Farrell and John Biewen spoke with an American teenager, it became clear that in part what draws our youth to contemporary forms of Japanese storytelling, beyond the inherent exotic elements, is the disjointedness of the narrative. It’s often a challenge to figure out who the main characters are and what they are doing. Some of the attraction is no doubt the mental agility that is required to induct a logical flow from the sometimes confusing morass.
But on another level, the attraction is undoubtedly a reflection of a post-modern mindset, which isn’t so concerned with logical plot progression. Japanese shows are renowned for their emphasis on glitzy effects, explosions, and action (oftentimes at the expense of sanity) such that they’ve become a staple of American parody:
It’s always a challenge for Christians to determine when and how to engage cultural movements. Some businesses and industries are without a doubt beyond the realm of moral permissibility, and the Christian is barred from licit participation. The message to those who are involved must be only, “Go and sin no more.”
But other times keen discernment is called for, and Christians at different times and places have come up with very different answers about how to engage the broader culture. At some point soon, for instance, we’ll look in more detail at the Christian Reformed Church’s synodical reports from 1928 on “Worldly Amusements” and from 1966 on “Film Arts.”
One approach I’m familiar with in a professional capacity is the attempt by some Christian publishers to transform the manga genre into something that is a positive and constructive influence, conducive to Christian piety, rather than one that celebrates moral depravity (for which manga is infamously renowned).
Zondervan, for example, has newly available a number of new manga series aimed towards youth or “tweens” audiences (full disclosure: I provided theological review services for a number of these products). On example is a series that follows the fictional exploits of Branan, the son of the biblical judge Samson. Other series follow a team of time-travelling flies and relate the biblical narrative in the form of a Manga Bible (the latter produced by a Korean author/illustrator team).
Whether such ventures are judged to be successful depends on the standards applied by individual Christians. No doubt many will be thankful for offerings in a pop culture genre whose contents are sincerely counter-cultural.
What is certain is that there is no better place to address the needs for a new generation of readers eager for meaningful narrative than to rely upon mythopoeia and, indeed, the greatest story ever told, the “True Myth,” the biblical drama of creation, fall, redemption, and consummation.
Is Dr Gregg right? Is a market economy the primary tool for addressing poverty, are other economic approaches better, or are there still-deeper issues that underlie the economic? And what about the churches? Vatican teaching on economics in the past century has been socially liberal, endorsing the right to trade unions for example. The churches still play a leading role in welfare, usually with some government funding. (Often this dissatisfies Christians, who think the agencies become hostage to government policy, and non-believers, who feel the churches are an anachronism who should have no role.) Is this partnership a problem? Should the churches do less – or more? Do other faiths have a better approach? What is the morality of welfare, and how does it apply? Should the old notion of the deserving poor regain some purchase or is welfare simply an obligation of a civilised society, as part of which we accept that some people will take unfair advantage? Is poverty an institutional or a personal responsibility – what do you do to help?
“Eliminating billions of dollars in federal subsidies to American cotton growers each year would reduce American cotton production and exports, raise world prices by about 10 percent and modestly improve the incomes of millions of poor cotton farmers in Africa, according to a new study by Oxfam, the aid group.”
About how many other industries could a similar thing be said? It’s also good to see that some of these multinational aid groups sometimes focus on liberalizing trade, rather than simply on direct government-to-government compensatory aid packages. Apparently Oxfam “has long campaigned for reductions in rich country agricultural subsides as a means to fight rural poverty in the developing world.”
One reason Oxfam is critical of bilateral free trade agreements is that they “do not address the adverse impacts of rich-country subsidies on poor countries through dumping, or the plethora of non-tariff barriers that continue to impede access to rich-country markets.” Their claim is that the bargaining power of individual developing nations is reduced under such agreements, so that the developing nation ends up giving up concessions to the wealthier nation, while the latter does no such thing. Reducing tariffs without addressing subsidies and other “non-tariff barriers” works to undermine the interests of developing nations.
The NYT piece ends on a bit of a pessimistic note, and no doubt the elimination of subsidies alone will not be enough to combat the grinding poverty that is so prevalent in the developing world. But it would do a lot to level the playing field and give resources and products from the developing world a fighting chance in the global market.
“Subsidy reform alone will not resolve all the challenges facing the cotton sector,” Oxfam said. “But it could significantly ease the burden on poor cotton farmers struggling to support their families.”
In the film The Pursuit of Happyness (review here), there’s a scene where Will Smith’s character arrives late for an interview with a stock brokerage firm and has no shirt on. The conversation goes like this:
Martin Frohm: What would you say if man walked in here with no shirt, and I hired him? What would you say?
Christopher Gardner: He must have had on some really nice pants.
Well, what would you say if you interviewed someone and they wore a suit looking like this?
Aaron Igler shows off the suit to thunderous applause. Photo: Paul Adams
This is the end result of a project undertaken by Kelly Cobb, an educator and designer at Drexel University. The task was to try and create a suit using only materials and workers within a 100-mile radius. Here’s the full story from Wired (HT: Mises Economics Blog).
As the piece relates, “Cobb’s locally made suit turned into a exhausting task. The suit took a team of 20 artisans several months to produce — 500 man-hours of work in total — and the finished product wears its rustic origins on its sleeve.”
Seriously, it looks like an Unfrozen Caveman Lawyer suit or something. The exercise is really an object lesson in “the massive manufacturing power of the global economy.”
For most of us, that’s a good thing. Others, though, might think that “how far removed we are from what we wear” is an overwhelmingly negative feature of modern existence.
But if nothing else, the 100-mile suit should offend your aesthetic, if not your moral, sensibilities.
The Wired.com blog Autopia passes along this NYT story outlining some of the fundamental challenges facing plug-in hybrid electric cars. The basic formula for the appeal of such hybrids is as follows: “The electric system runs mostly on coal, natural gas and uranium, all relatively plentiful. Cars run mostly on oil, oil and oil, which lately has been expensive. Wouldn’t it be nice to connect the two?” And as attractive an option as this might be, the NYT story writes that “despite the hopes of policy makers, engineers say there is no prospect of this happening in the near future.”
Coal Burning With Scrubbers
John Gartner is not so pessimistic about the short-term prospects for plug-in hybrids, and concludes, “The competition between the oil companies and electric companies will result in cleaner and more cost-efficient choices for consumers, and that we can all be happy about.”
But here’s the kicker for advocates of plug-in hybrids: The main source of electricity for the United States is fossil fuels, according to the DoE providing “nearly two-thirds of our electricity,” and more than half of that comes from coal. So it isn’t the case that moving from gasoline-powered engines to plug-in hybrids will move us away from the use of fossil fuels. It will, for the most part, simply shift the consumption from oil to coal.
That has some attractive national security implications, since “one quarter of the world’s coal reserves are found within the United States,” as opposed to our need to massively import foreign oil. It is on this basis that Frank J. Gaffney, Jr. argues, “It makes eminent sense to make as rapid a transition to those plug-in hybrids as we can.” This of course assumes that the withdrawal of international trade actually improves rather than worsens the prospects for international peace. Let’s leave that questionable assumption aside for now, which contradicts Bastiat’s observation, “When goods don’t cross borders, soldiers will.”
With respect to the “green-ness” of plug-in hybrids, their environmentally-friendly image belies the fact that such hybrids will to a large extent be running on the energy provided by coal. Until our nation’s electricity comes from renewable and alternative sources of energy, such as nuclear power, the environmental attractiveness of hybrids will remain illusory.
In a previous commentary examining some related aspects of these issues, I ask rhetorically, “Just how many coal-powered SUVs have you seen lately?” Well, if there were plug-in hybrid SUVs, they would to a great extent be coal-powered…and not so green as you might first think.
“This essay surveys the evidence on the linkages between globalization and poverty. I focus on two measures of globalization: trade and international capital flows…. The collected evidence suggests that globalization produces both winners and losers among the poor. The fact that some poor individuals are made worse off by trade or financial integration underscores the need for carefully targeted safety nets.”