Posts tagged with: trade

Congress insults our intelligence when it tells us that Chinese currency games are to blame for our trade deficit with that country and unemployment in our own. Legislators might as well propose a fleet of men-o’-war to navigate the globe and collect all its gold: economics is not a zero-sum game.

An exchange on yesterday’s Laura Ingraham Show frames the debate nicely. The host asked Ted Cruz, the conservative Texan running for U.S. Senate, what he thought about the Chinese trade question. Said Cruz, “I think we need to be vigorous in dealing with China, but I think it’s a mistake to try to start a trade war with them.”

“The trade war is on, and we’re losing it,” Ingraham responded. “[China is] subverting the principles of free trade.”

We blockaded the ports of the Barbary pirates when they subverted the principles of free trade — is Ingraham looking for a similar response now? No, she wants weenier measures: just some punitive sanctions here and there to whip China back into shape (because those always work).

Conservatives who are looking through the Mercantilist spyglass have got to put it down, because it distorts economics in the same way Marxism does. Economic growth and expansion of the labor market don’t come by the redistribution of wealth; they come by allowing man to exercise his creative talents, to innovate, to produce.

Protectionists also tend to ignore the inverse relationship between the trade deficit and the inflow of capital to a country. We are a nation of entrepreneurs, and entrepreneurs require investment. All business requires investment. If it’s Chinese investment, then Chinese investors see long term value in the U.S. economy. Sorry I’m not sorry about that.

Our leaders do the country a disservice by proclaiming that unemployment is caused by a trade deficit, and that a build-up of retaliatory tariffs is the way to fix the trade deficit. And they do other countries a disservice also, because U.S. protectionism hurts our trade partners (or potential trade partners). Holding back U.S. economic progress by artificially retaining manufacturing jobs, for example, means that workers in China or Vietnam are denied employment opportunities. It’s mindless selfishness.

Roger Scruton has written an excellent piece on the moral basis of free markets; it’s up at MercatorNet. He begins with the Islamic proscriptions of interest charged, insurance, and other trade in unreal things:

Of course, an economy without interest, insurance, limited liability or the trade in debts would be a very different thing from the world economy today. It would be slow-moving, restricted, and comparatively impoverished. But that’s not the point: the economy proposed by the Prophet was not justified on economic grounds, but on moral grounds, as an economy of righteous conduct.

Our long-term economic malaise may mystify world leaders, but Scruton sees its causes clearly: ways intended to speed economic development have become ways to acquire luxuries without payment; we have confused trade in debts with others’ assumption of our debts. This moral confusion is as much to be found in governments as it is in private markets, because the incentives are exactly the same — anyone who denies it is lying.

If you borrow money you are obliged to repay it. And you should repay it by earning the sum required, and not by borrowing again, and then again, and then again. For some reason, when it comes to the state and its clients, those elementary moral truths are forgotten.

Scruton concludes that morality is inescapable — though we may delay it, judgment will come.

The moral sense emerged in human beings precisely because it has proved to be, in the long run, for their advantage. It is the thing that puts a brake on reckless behaviour, which returns the cost of mistakes to the one who makes them, and which expels cheating from the fold. It hurts to be punished, and states that act wrongly naturally try to avoid the punishment. And since they can pass on their hurt so easily to the rest of us, we turn a blind eye to their behaviour. But I cannot help thinking that the result is at best only a short term economic advantage, and that the long term costs will be all the greater. For what we are seeing, in both Europe andAmerica, is a demoralisation of the economic life. Debts are no longer regarded as obligations to be met, but as assets to be traded. And the cost of them is being passed to future generations, in other words to our children, to whom we owe protection and who will rightly despise us for stealing what is theirs.

Read the full text here.

Tomorrow evening economist Victor Claar will be leading an Acton on Tap where he will talk about fair trade. As a Christian and an economist, Claar brings a unique perspective to the discussion. He will be asking a number of key questions including: Is fair trade truly the best way to help the poor, and, if not, then what can we do instead?

The blog, Common Sense Concept, recently reviewed Claar’s new book, Fair Trade? Its Prospects as a Poverty Solution. This rerview provides a sneak peak of the discussion ahead at this week’s Acton on Tap:

But good intentions aren’t enough, and as economist Victor Claar in his new book, neither are manipulative trade initiatives. For Claar, author of Fair Trade: Its Prospects as a Poverty Solution, the fair trade movement simply “cannot deliver on what it promises,” and Christians would do well to pay heed.

[…]

Thus, Claar focuses the bulk of his critique on whether such initiatives truly achieve long-term and sustainable success and prosperity. Does fair trade actually lead to the enrichment of the lives it touches, or does it simply give them a temporary boost? Does it — or can it — lead to “transformational, lasting change,” or is it simply our way of giving them a few extra nickels for that week’s bread and milk (not wholly insignificant, mind you)?

Given that coffee is perhaps the most popular of fair-trade commodities, Claar focuses his attention there, providing an initial overview of the coffee market itself, followed by a discussion of fair trade strategies as commonly applied. Here, we learn a few important things: (1) coffee is easy to grow, (2) its price is inelastic, and (3) the “market appeal” of one’s beans is essential for success. Additionally, and most importantly, (!!!) demand is dropping while supply is rising.

“Simply put,” Claar explains, “coffee growers are poor because there is too much coffee.”

[…]

The book offers plenty of arguments against such schemes, but this often unspoken reality illuminates the most central: Artificial, top-down fair trade programs toy with price signals and manipulate individuals to do the wrong thing in the wrong place at the wrong time. “Incentives matter,” says Claar. “Once the stakes of any economic game have changed, people alter their behavior accordingly.”

Join us on Tuesday, May 17, from 6:30-8:00 PM at the Derby Station (2237 Wealthy St. SE, East Grand Rapids 49506) as what is sure to be a very enlightening and lively discussion.

For more information on tomorrow’s Acton on Tap click here.

Click here to read the entire blog post on Common Sense Concept.

The Acton Institute will be hosting another thought provoking and discussion orientated Acton on Tap on Tuesday, May 17. The event will begin at 6:30pm at the Derby Station (2237 Wealthy St. SE, East Grand Rapids 49506).

Leading the discussion will be Victor Claar, who is a professor of Economics at Henderson State University. The Acton on Tap with Professor Claar is titled “Clarifying the Question of Fair Trade: A Christian Economist’s Perspective.” Claar will bring a unique perspective of the discussion of fair trade by fusing Christian and economic principles:

Fair trade is an enormously popular idea in Christian and secular circles alike. Who, after all, could be against fairness? There are now fair trade certified products as varied as coffee, chocolate, fruit, and, most appropriate for an Acton on Tap audience, beer. Victor V. Claar, associate professor of economics at Henderson State University and co-author of Economics in Christian Perspective, however, raises significant economic and moral questions about both the logic and economic reasoning underlying the fair trade movement. Claar suggests that, for all its good intentions, fair trade may not be of particular service to the poor, especially in the developing world.

Claar has written extensively on fair trade including his monograph, “Fair Trade? Its Prospects as a Poverty Solution.” He wrote a commentary in 2010 discussing the economic obstacles for the world’s poor, and how to bring them out of poverty:

If we want to be effective agents in aiding the poor, we should focus our efforts in directions leading to the enhanced value of an hour of labor. That is, we should help poor countries wisely grow their stocks of human and physical capital, all the while bearing in mind that markets and their prices send the best available signals regarding where our efforts can have the greatest impact. The newfound success of innovative micro lending efforts such as Kiva can help show us ways to effectively invest in the accumulation of physical capital by the global poor. Compassion International is a marvelous organization that works to further the education—the human capital—of poor children worldwide, with a financial accountability record above reproach.

Further, markets work best when economic systems maintain the dignity of human beings. First, human beings grow and flourish—and accumulate human and physical capital—in systems that afford them considerable economic freedom. Economic freedom means that people are able to make personal choices, that their property is protected, and that they may voluntarily buy and sell in markets. Yet, economic freedom requires the protection of private property. When property rights are clearly defined and protected, people will work harder to create and to save. When they are confident that the fruits of their labors cannot be taken away arbitrarily or by force, people everywhere have greater assurance that their labors will lead to better lives for themselves and their families. Today’s rich collection of NGOs that work toward basic human rights play a critical role in this regard.

[…]

If we really care about the global poor, we should work to make trade freer for everyone in our global community: a level playing field for all. That means tearing down all of the barriers we use to keep the global poor from working in the very jobs in which they are perfectly positioned to make the greatest lasting gains.

To read the full commentary click here.

Click here for more information on next week’s Acton on Tap.

I’ve been meaning to write something on the “locavore” phenomenon, but nothing has quite coalesced yet. But in the meantime, in last Fridays’s NYT, Stephen Budiansky does a good job exploding the do-gooderism of the locavore legalists. Here’s a key paragraph:

The best way to make the most of these truly precious resources of land, favorable climates and human labor is to grow lettuce, oranges, wheat, peppers, bananas, whatever, in the places where they grow best and with the most efficient technologies — and then pay the relatively tiny energy cost to get them to market, as we do with every other commodity in the economy. Sometimes that means growing vegetables in your backyard. Sometimes that means buying vegetables grown in California or Costa Rica.

I’ve never liked the idea that its somehow immoral for me or my family to consume mangoes, even though they don’t grow all that well here in Michigan.

And as Budiansky points out, the only way to grow them locally would be to invest large amounts of capital and energy in artificially transforming the climate (via a greenhouse, for instance).

This is to say nothing of the virtue of interconnectedness that comes about when, for instance, I buy mangoes that originate in India, China, or Mexico and someone else buys cherries grown here in Michigan.

There’s something in the Bible about “doing unto others.” If you want other people to buy stuff from you, visit your town, and so on, you ought to be eager to reciprocate.

In this week’s Acton Commentary, “Lutheran World Federation Misses the Mark on Work and Wealth,” I reflect on the recently concluded general assembly of the Lutheran World Federation, held in Stuttgart. The theme of the meeting was “Give us today our daily bread,” but as I note, the assembly’s discussion of hunger, poverty, and economics lacked the proper integration of the value, dignity, and importance of work.

As I contend, work is the regular means God has provided for the maintenance of our physical needs. And work that is connected to the larger human community becomes increasingly oriented toward the service of others and productive of civilization. Lester DeKoster defines civilization in just this way, as

goods and services to hand when we need them. There are countless workers, just like ourselves—including ourselves—whose work creates the harvest that provides each of us with far more than we could ever provide for ourselves.

These words come from DeKoster’s little classic, Work: The Meaning of Your Life—A Christian Perspective, newly available in an updated second edition.

The omission of considering work in relationship to the development of wealth, globalization, and civilization is endemic to the larger mainline ecumenical movement, which I examine in greater length in my book, Ecumenical Babel: Confusing Economic Ideology and the Church’s Social Witness. In that book I look especially at the outcome of the previous LWF gathering in 2004.

The trend observable in LWF recent history looks to continue unabated. The newly appointed LWF general secretary, Rev. Martin Junge of Chile, has the pursuit of “economic justice,” conceived largely of opposition to globalization, as a high priority. (Full story after the break).
(more…)

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.

Blog author: jballor
Monday, February 1, 2010
By

Business Weekly, a production of BBC World Service, had an informative feature on Toby Sheta, a Zimbabwean mobile phone trader, who provided insights into the courage and tenacity required of entrepreneurs under Mugabe’s brutal dictatorship (you can download the original Business Daily story in MP3 format here).

During the worst times of the Mugabe regime, Sheta would illegally buy and sell fuel coupons, a profitable enterprise because of the chaos of governmental interference in international trade and domestic fuel markets. Sheta says in the context of survival the “black market actually became the formal market,” the place where products were available. “For us the black market was the real market.”

Sheta says that what he gained as an entrepreneur in the emergency economy translate into more normalized economic conditions: “The skills that were learned and some of the principles that we’re using apply in any situation.” Sheta says, “Zimbabweans overall have gone through a school, a very informal school that was first upon us, in some ways in a positive way for us, to actually think and work for ourselves, work with our hands and see where we can see opportunity.”

Risk is a constant feature of enterprise, and Sheta testifies to the survival of the human spirit of innovation: “What I’ve learned is, even as I think of Haiti right now, as long as you’re human, and you’ve got your two feet, your two hands and your brain is still functioning, you’ll survive.”

“As you go into the problems you also go in terms of our creativity and learn how to survive,” he says.

As put by dairy farmer Brad Morgan, featured in Acton’s The Call of the Entrepreneur, “You put your butt in the corner, you’d be surprised what you can achieve.”

In terms of Zimbabwe’s future, Sheta points to stabilization in 2010 and beyond, in part because of the dollarization of the economy, and he concludes that Zimbabweans have “graduated to another level” from the emergency school of economics under Mugabe, looking forward to “see opportunities where in the past we wouldn’t have seen those opportunities.”

Blog author: kschmiesing
Friday, April 25, 2008
By

My reaction to any politician claiming to offer “straight talk” is a knowing chuckle (“yeah, right”), and that includes John McCain. So I’ve got to give credit to the so-called Straight Talk Express for a recent campaign stop in Youngstown, Ohio, where the Republican presidential candidate offered some honest and accurate comments on a contentious subject in politically risky circumstances—straight talk, if you will.

The subject was trade, and McCain defended it in a region suffering from the real or perceived effects of the extension of free trade in recent decades. In the heart of labor union-friendly, manufacturing-dependent eastern Ohio, McCain said, among other things:

The biggest problem is not so much what’s happened with free trade, but our inability to adjust to a new world economy.

Protectionism and isolationism have never worked in American history.

I can’t look you in the eye and tell you that I believe those jobs are coming back. What we’ve got to do is provide [displaced workers] with education and training programs that work.

With pro-growth policies to create new jobs, and with honest and efficient government in Washington, we can turn things around in this city.

Pro-growth policies would include, one assumes, lowering the state’s state-local tax burden, calculated by the Tax Foundation as 12.4%, fifth-highest in the nation.

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?