Kruse Kronicle

What is Fair Trade

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mwkruse
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Last Thursday night, I visited Village Presbyterian Church to hear my former grad school professor, Tony Campolo, speak about “What is social justice?” He was in great form, as usual.

During the conversation, he briefly touched on the issue of fair trade. I didn’t take detailed notes, but his observations went something like this:

“People talk about wanting free trade. But then we give billions of dollars in subsidies to agriculture and raise tariffs against imported foods to protect domestic agriculture. So what we need is not free trade but fair trade where subsidies and tariffs are eliminated.”

Now Campolo is not the only one who talks this way. Those who are more left-leaning social justice types also conceptualize things this way. I need some help to understand. Let me elaborate.

Wikipedia gives this (I think adequate) definition of “free trade:”

In international trade, free trade is an idealized market model, often stated as a political objective, in which trade of goods and services between countries flows unhindered by government-imposed tariff and non-tariff barriers.

Now the fact is, I oppose farm subsidies and tariff practices. Why? Because that is not free trade, and I think free trade is what leads to the most beneficial growth for all concerned. I advocate for more free trade. (Most people I know who advocate for free trade mean the same thing.) But then a social justice guy or gal gives me the evil eye and accuses me of being an evil exploitive capitalist. So, wanting to repent from the error of my evil ways, I ask, “What must I do to repent?” I am told to advocate for “fair trade.” I inquire as to what “fair trade” means. The defining feature, I am told, is eliminating unfair trade practices like subsidies and tariffs.

(Mike is now scratching his head.)

Am I missing something?

Comments

37 responses to “What is Fair Trade”

  1. Jordan Avatar
    Jordan

    Michael,
    I don’t think Campolo was giving a comprehensive description of fair trade philosophy…there is something missing from that summary of fair trade outlined above.
    As you note, opposition to subsidies and tariffs rises from free trade principles. If you look at the rhetoric and agenda of the fair trade movement, you see that the foundational assumptions are not from the free market but socialistic: i.e., the prices of commodities should be determined not by the forces of supply and demand but rather by institutional fiat.
    I’ve written on this to some extent elsewhere. You might find this commentary a helpful starting point.

    Reply
  2. Michael Kruse Avatar
    Michael Kruse

    Thanks for the link, Jordan. I seem to recall reading it awhile back.
    “I don’t think Campolo was giving a comprehensive description of fair trade philosophy…”
    And that is really my key point. What Campolo highlighted is the way Fair Trade is popularized. Many people don’t dig much deeper and “fair” sounds like a noble thing so it is supported. Those who are really into the “Fair Trade” movement know they have in mind much more than subsidies and protectionism, as you commentary demonstrates. With this post, I am being somewhat tongue-in-cheek hoping to challenge folks to think about this stuff.
    Thanks for adding a helpful resource!
    (I should also add in Campolo’s defense that he went out of his way to insist to a largely left leaning crowd that conservatives DO care about the poor and actively seek to be faithful stewards in responding to issue of poverty. His statment about Fair Trade was made in passing and not by any means central to his talk.)

    Reply
  3. will spotts Avatar
    will spotts

    How does one counter this misleading use of words? What I mean is that almost any bad / harmful policy can be made to sound appealing as long as the details remain sparse and words that sound good are used to describe it. When debating public policy, full information is essential, but MOST people thrive on giving less than full information, and relying on words. This is by no means a ‘left’ issue – it is equally prevalent on both sides of the aisle. But it is dishonest, it appeals to ignorance, it is often harmful, and it lets people feel good about themselves for doing harm.
    So what do we do about it? How does one get through that layer of ‘spin’ – which is ALWAYS wrong and appalling for any church.

    Reply
  4. kent Avatar
    kent

    I wonder if the issue is not tariffs or subsidies, but who is the beneficery of these items. If it is people I advocate for then they are fair, if not then they are oppressive. To remove all tariffs and subsidies will then not allow me to stack the deck for the people I advocate for. Not fair all at.

    Reply
  5. Michael Kruse Avatar
    Michael Kruse

    “This is by no means a ‘left’ issue – it is equally prevalent on both sides of the aisle.”
    Amen.
    “How does one get through that layer of ‘spin’ – which is ALWAYS wrong and appalling for any church.”
    I wish I knew. I think some of things you have blogged about at your site are need. The national level of the denomination needs to rachet down considerably its public policy advocacy “on behalf of” the Church. Instead, I think the national level of the church could be more effective at creating forums where differing Presbyterians can discuss “specific” policies without having to translate things into a denominational policy.
    William Webb writes about a “ladder of abstraction.” At the top are ethical imperatives like “love you neighbor as yourself.” Farther down the ladder are imperatives like “there shall be no poor among you.” At the bottom would be “leave the edge of the fields for the poor to glean.” Clearly the last ethical instruction is no longer valid so we “climb up the ladder” to the ethical imperative that does apply and ask what would that look like today. Someone says “Raise the minimum wage.” It strikes me that here is where you provide forums for debate and allowing a diversity of advocacy by Presbys across the denomination as they struggle put the higher ethical imperatives into action. This is no the place to establish definitive policy and claim to be speaking on behalf of the denomination.
    There is no neat line as to where diversity of tactics meets with ethical imperatives but I think something along this line would actually improve our communication. I find it ironic that we are implored to exercise diversity when it comes to claims about Jesus Christ but when it comes to a tactical policy like the minimum wage it garners all the passion of a fundamentalist guarding the virgin birth.

    Reply
  6. Michael Kruse Avatar
    Michael Kruse

    Kent I agree with the sentiment you express at the abstract level but I think implementation is highly problematic. It all comes down to who is the arbiter of what is beneficent and what is oppressive? An example from real life.
    A few years ago, a shirt factory in Bangladesh was making product for a US corporation. They were paying wages well below anything people would pay for such work in the West. (Though they were above average for the area where there was massive poverty and unemployment.) These people had zero skills and mechanization was FAR from state of the art. People worked 14 hours a day in hot dirty facilities.
    Justice groups and NY Times reporters targeted the US corporation that was buying shirts from this operation accusing them of exploitation. Mind you, none the Bangladeshis were complaining. Finally, under pressure from congressional types who were threatening to open hearings, the corporation stopped buying. The result was that this shirt factory would be put out of business and the workers would quickly sink back in to poverty.
    However, a few of the people who had worked in the factory had developed enough skills amassed enough capital that they began to open their own shirt factories and see to nations in SE Asia. They began to employ even more workers working under the same conditions as before. After a couple of years, as they moved up the learning curve, productivity escalated, wages rose as individual workers became more productive, and working conditions improved.
    So what was the just option here?
    The market is an information system that tells producers and buyers what they are willing to exchange at what rates. Interference in the market mechanisms distorts the information system and sends suppliers and buyers false messages about supply and demand in the market. However, none of this precludes charity, technology transfers or other things being done alongside the market process that will speed up a community’s emergence into prosperity. But no one alive has the wisdom to ultimately decide what is beneficent and what is oppressive as long as we have relatively uncoerced parties negotiating in the market. That is my take.

    Reply
  7. will spotts Avatar
    will spotts

    Michael – you provide an interesting framework of how to approach this. I *think* I agree with the most progressive in the sense that Christianity does require action in life. However, I’m far from persuaded that the actions often taken (by either progressives or dominionist conservatives) will have a good reaction – and are, in fact, Christian. (I did not say unchristian – just extra-Christian. On the detail level, circumstances change, and oversimplifications help no one.)
    What I’d like to see re: our denomination is a Washington Office that specialized in providing full and accurate information to Presbyterians – for them to then consider and act upon. That is far cry from what is currently happening. (Such a resource would be extremely useful – and, if the actions currently being taken could withstand scrutiny, they’d likely be the same. Fact is, some can and some can’t withstand this scrutiny. I won’t provide a list here *grin*.)
    Your statement: ‘I find it ironic that we are implored to exercise diversity when it comes to claims about Jesus Christ but when it comes to a tactical policy like the minimum wage it garners all the passion of a fundamentalist guarding the virgin birth.’ Sad but true.

    Reply
  8. will spotts Avatar
    will spotts

    Your example from Bangladesh is interesting. If I understand you correctly, you’re saying that in a non-coercive environment people will tend to choose what is best for them – and we approach this from the our bias? Thus we object to ‘unfair’ conditions when they may be ultimately beneficial?

    Reply
  9. Michael Kruse Avatar
    Michael Kruse

    “What I’d like to see re: our denomination is a Washington Office that specialized in providing full and accurate information to Presbyterians – for them to then consider and act upon. That is far cry from what is currently happening.”
    Agreed. I also think that we have within our denomination such a diversity of politcial stances that the denom. might be able to help dialog between these diverse groups and then trust Presbyterians in their daily lives to advocate and vote responsibly. I see at the difference as between bogusly purporting to have a lobbying arm that “speaks for” the denomination vs having a denomination full of “salt and light” Christians having an informed impact in political circles of influence where they are. (The two are not mutually exclusive but the emphasis needs to be the later.) The central lobbying approach tends to de-emphaisize the concept of local empowerment and weaken the churches corporate witness when people know they are not truly speaking for vast numbers (sometimes the majority) in the denomination.

    Reply
  10. Michael Kruse Avatar
    Michael Kruse

    “If I understand you correctly, you’re saying that in a non-coercive environment people will tend to choose what is best for them – and we approach this from the our bias? Thus we object to ‘unfair’ conditions when they may be ultimately beneficial?”
    Pretty much, although examples like these make me squirm. Am I willing to justify any practice under this rubric?
    If we are doing business with a nation that provides goods produced by slave labor, is that ethical? I think not. The workers are coerced. Yet I doubt there is anything that is a perfectly free labor market. So we are always working somewhere in between. My main point is that this is not an easy challenge for someone who really wrestles with the ethical questions and sometimes I feel as though I am merely getting in touch with my inner weasel.
    I get the sense that sometimes people in the West think that workers in these situations are moving from very poor, but more or less sustainable lives, to hard toil in factories, when in fact many of these people are moving from desperate life-threatening poverty into lives of hard toil in factories. Hard toil in factories is a step up that leads more steps up! It really is the industrial revolution that happened in the West over a couple of centuries compressed into a few years or couple of decades.
    I tend to default to free markets supplemented with aid, education, and appropriate technology transfers. Too often we want to take economies from undeveloped to developed in one gesture and I think what we have learned over the past fifty years is that just doesn’t work. We have to get economies spiraling upward by developing the institutions and values that under gird prosperity while engaging with them in trade. The early stages are often disturbing for us to watch from our post-industrial perspective and while we should work to minimize the growing pains of moving through industrialization I don’t think they can be fully eliminated.
    How is that for an nice weasely reflection? 🙂

    Reply
  11. dlw Avatar
    dlw

    Fair trade is a slogan that reminds people that there are always rules for markets, including int’l markets.
    Fair trade is generally concerned about the effects of higher mobility of capital and the state of labor markets in countries.
    “Free trade” ideally leads to potential pareto improvement of efficiency, but there rarely is compensation of “losers” in real life and so it effectively tends to be a matter of Kaldor-Hicksean efficiency, which by def’n rules out distributional concerns in normatively judging commercial policy regimes. “Fair trade” selectively tends to want to bring back in distributional considerations into commercial policy-discussions, both for parties that would lose from free trade and for the poor of the third world.
    You shd check out FAIRTRADE products. In Europe, Christians have helped to get these products into most stores so people can have the option of paying somewhat more for basic products and knowing that the workers are treated better and paid significantly better by the nonprofit FAIRTRADE companies…
    Its a reasonable idea…
    dlw

    Reply
  12. Michael Kruse Avatar
    Michael Kruse

    “Fair trade is a slogan that reminds people that there are always rules for markets, including int’l markets.”
    When I speak of free trade I am fully aware of the need for commutative and remedial justice. Almost anyone I have ever dealt with who advocates free trade, advocates this as well. The “fair trade” name (with regard to this aspect) feels cynical to me and seems like an attempt to be pejorative of people who use the more standard term of “free trade” to describe what is going on.
    And in line with what some of Jordan’s concerns, it also strikes me as an attempt to create a language that is more amenable to statist and socialist interventions. I prefer to use the traditional term of free trade within the confines of just juridical framework. I think Fair trade confuses, not clarifies.
    If I understand what you are talking about with FAIRTRADE products and from what I have seen with those products in the past, this sounds like free trade to me. Customers have of their own volition chosen to pay a premium over the low cost provider to receive what they value as a superior good: Goods produced under specific circumstances. More power to them! Yet I think even here when we create a two tier market for producers who can meet fair trade standards versus poor farmers who maybe can’t meet some standard (environmental, for instance). I think Jordan’s article does a good job of illustrating some of these concerns.
    I came across this article last spring: Coffee Farmers Find Connection With God It is about an organization called Growers First.
    I have gotten off on a particular product but my point is the larger macro long-term issues. Markets that accurately reflect supply and demand, embedded in a sound juridical system, integrated with international trade, are what will set prosperity in an upward spiral. I believe this has to be the foundation and the goal. Organizing to create demand for products made under certain conditions is fine by me unless those conditions begin to become a heavy handed statist attempt to control markets. Aid and charitable assistance are critical in accelerating economic growth.
    That is my take.
    Peace!

    Reply
  13. dlw Avatar
    dlw

    The long and short of a response is that the state is involved in “markets” willy-nilly. Losers do not usually get compensated and there tends to be an imbalance between the freedom of movement of Capital and Labor.
    Also, it more often than not are “institutions” not free trade that are critical for economic growth/development. Lowered trade barriers tend to be benificent when an economy is more mature. Lowering trade barriers is not always a positive. See the work by Dani Rodrik at Harvard on Empirical findings in Growth.
    You’re taking a stand on a model that is becoming dated…
    dlw

    Reply
  14. Michael Kruse Avatar
    Michael Kruse

    I am not sure which institutions you have in mind but if you are referring to things like property rights and the institutions that allow for effective capital formation I couldn’t agree more.
    In the past, aid organizations have come into countries with all sorts of draconian reforms for currency, labor and a host of other issues expecting free trade to take hold. All the time they were overlooking the fact that 80-90% of people in developing nations live outside the formal structures of society. It is the structures, supporting institutions, and values surrounding property rights and capital formation that allow the markets to work in the first place. These factors emerged very haphazardly in the West over the last few centuries and are now so ubiquitous and seamless that we are blind to how essential they are. Hernando DeSoto points out in “Mystery of Capital” that he has searched for a scholarly detailed history about how this process developed and has yet to find one (at least as of seven years ago.) Thus, nations need help in learning how to develop the appropriate institutions and enfolding their entire populations into those institutions. Yet we don’t even fully understand how we did it ourselves.
    So if you hear me saying that we need to impose shock treatment measures to kick-start free market economies, that is not what I am advocating. I agree that that is failed policy. The distinction I am angling for is that I am Free Trade Plus (as in “plus development of property rights, and appropriate institutions and values”).
    The “Fair Trade” lingo says to me abandonment of free trade for some new model of government run economy. It shifts the language in much the same way the term “pro-choice” is really “pro-abortion” and seeks to marginalize opponents as “anti-choice.” Here the term “Fair Trade” to me is suspiciously sounds like “government run trade” (what could be more “fair” than having government pick winners and losers) and cast “free trade” as anathema like being “anti-choice.” It is that that I stand adamantly against on both economic grounds and ethical grounds.

    Reply
  15. will spotts Avatar
    will spotts

    Free trade can only operate where there is (at least in general) the rule of law – where, among other things, contracts can be enforced. Fair trade products are a different thing. It is still ‘free trade’ in the sense that the consumer chooses to pay more for what he or she believes is moral. This is a marketing niche – and if works, so be it. In the PC(USA) we have encouraged fair trade coffee, now eco-palms, wood products from Bethlehem, etc. All of these fall into that category. Similarly, ‘environmentally friendly’ products sell for a premium.
    My only concern here is whether or not these initiatives can ever be self-sustaining. What I mean is this: if people are encouraged to pursue industries where they cannot compete except through this market niche – then when the market niche dries up, they’ll not be better off long term – they will still not have viable industries. But that would be true of any market trend, I suppose. I’m also not persuaded that buying products out of guilt is a good long term strategy.

    Reply
  16. David Stanley Avatar
    David Stanley

    Mike, you were supposed to invite me to this! You better tell me if he comes to town again! 🙂

    Reply
  17. Michael Kruse Avatar
    Michael Kruse

    But Dave, I have already told you all of his stories. What would be the point?
    🙂
    I actually had not planned to go but changed my mind the day before. I am sure he will be back. Sorry about that.

    Reply
  18. Michael Kruse Avatar
    Michael Kruse

    We are in a similar play, Will. My hope is that economic prosperity becomes diversified and diffused enough to spark economic growth in other ways.
    As Jordon points out in his article, the tremendous growth in the amount of coffee being produced is exceeding the demand. Some coffee farmers need to heed market signals and produce other crops. But then many other foodstuff markets are out of whack because of subsidies and protectionism in the West.
    I am not opposed to some of the “Fair Trade” tactics. I am concerned about these tactics becoming the center piece of the Christian response to addressing poverty in developing nations.

    Reply
  19. dlw Avatar
    dlw

    Mike, look up Dani Rodrik. That is the cutting edge work being done right now… Please, I know this, I have a PhD in Economics(clearing of throat). The Washington Consensus is very soiled and people doing research on int’l political-economy are well aware that the issues are more complicated than free vs fair trade.
    i think traditionally freer trade has been an endogenous policy sort of thing. A country builds up its industry(like with an infant industry argument) and then opens up to freer trade on its own terms. And voila, we observe that countries with lower trade barriers are doing better, but the causality is not necessarily from the lower trade barriers. So the point is that the Plus generally has tended to come before the freer trade and it is not wrong that people focus on it under the rubric of “fairness”.
    Now, I have no problems against pushing for less subsidies to agriculture and lower barriers for trade with cars. I think lower barriers will generally come about from a healthy democracy the mutes the volume of the freedom of $peech.
    But the long and short of the matter is that there is not a categorical imperative for lowering barriers to trade everywhere and for all time. Abstract economic models that promote this view often inculcated what was historically called free-trade dogmatism. Let’s take the issue on a case-by-case basis and work out all the likely consequences of changes in the rules and help the concerned parties work out compromises that will generally tend to ween down unfair concentrations of market power, while providing some security to the increased vituperations of int’l markets.
    It is pointed out by int’l economists of the free-trade variety(which is predominant in the profession) that the poorest are predicted to be made better off by freer trade. The problem with this reasoning is that it abstracts from volatility. The poor are usually the most risk averse and so even if their expected real income goes up, they may perceive themselves as worse off, due to the possibility of things going bad. Protective trade policies do reduce some of the volatility of the domestic economy and people value that. When we disregard that, we are wearing our developed country blinders. It is a fact that in the US, only a relatively small fraction of our economy is open to int’l competition, so that and our relatively high levels of income make it so that volatility from freer trade is less important. The opposite is often the case for many countries in the two-thirds world.
    dlw
    dlw

    Reply
  20. Michael Kruse Avatar
    Michael Kruse

    “I have a PhD in Economics(clearing of throat)”
    LOL
    I got now PhD here. Just an MBA in econ dev.(and friends doing development in different parts of the world.)
    “So the point is that the Plus generally has tended to come before the freer trade and it is not wrong that people focus on it under the rubric of “fairness”.
    I generally agree, although I think there is an interactive affect that trade creates demands for instituions and better institutions faciliate more trade.
    “Let’s take the issue on a case-by-case basis and work out all the likely consequences of changes in the rules and help the concerned parties work out compromises that will generally tend to ween down unfair concentrations of market power, while providing some security to the increased vituperations of int’l markets.”
    Generally I agree again. I think the ultimate vision has to be fully intergrated players in the world market but just as it took the West two or three centuries to evolve, developing nations need to make the transition. The learning curve should be shorter for developing nations than for the West becasue models now exist to borrow from but it can not be done with the flip of a switch.
    “The poor are usually the most risk averse and so even if their expected real income goes up, they may perceive themselves as worse off, due to the possibility of things going bad.”
    Very true! I think there is also the simple issue of hope. How do you dream and sacrifice for something you have never really tasted?

    Reply
  21. David M. Smith Avatar
    David M. Smith

    ”You shd check out FAIRTRADE products. In Europe, Christians have helped to get these products into most stores so people can have the option of paying somewhat more for basic products and knowing that the workers are treated better and paid significantly better by the nonprofit FAIRTRADE companies…”
    I don’t have a PhD in anything, but I do know enough to know when a common word has been misappropriated.
    FAIR trade is when the worker who produces the most value receives the benefit of his or her work. Value can be a better price or a better product. With commodities, value is usually based on a lower price.
    Consumers are FREE to pay whatever they want to pay for any product or service, but if consumers choose to pay a higher price, they are not being FAIR to the worker who is willing to charge a lower price in order to receive the business. It does not matter whether or not the worker is an owner or an employee as long as the worker is FREE to choose whether or not to work and how much to charge for the work.

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  22. dlw Avatar
    dlw

    go easy on the koolaid, David.
    Bargaining power matters for labor markets. If too many workers are too poor then there can be a cutthroat competition that keeps wages lower than they shd be. It is in these situations that “interventions” are needed and these situations are more likely to occur in the two-thirds world.
    dlw

    Reply
  23. dlw Avatar
    dlw

    Mike,
    I disagree that freer trade by itsefl makes for better institutions.
    I think it matters that the underdeveloped nations be given the right to determine for themselves when they want to become more integrated into the global economy and how. Which isn’t to say that we can’t promote greater human rights and other freedoms that will tend to make its choices reflect the itnerests of a larger portion of its population. That seems to me more import than getting them to have freer trade. Though, providing supports for Foreign Direct Investment, provided that investment is committed to stay for a reasonable period of time, is undoubtably a good thing for countries. Though, I know that in Mexico, the German Volkswagen plant is in Puebla in large part because of trade barriers…
    dlw

    Reply
  24. David M. Smith Avatar
    David M. Smith

    Go easy on the elitism, dlw.
    Freedom, not bargaining power, is what matters in all fair markets. Group bargaining reduces freedom and by extension fairness. Group bargaining picks winners and losers, it does not level the playing field, and is therefore, the opposite of fair.
    The insult was unnecessary, but very revealing of your sentiment. It is possible to disagree on principle without insulting those who disagree with you.

    Reply
  25. dlw Avatar
    dlw

    bargaining power is part of freedom, dude.
    Perfectly competive markets exist only in utopia-land, which you can get to only if you drink way too much of the spiked Koolaid they serve at U of Chicago.
    We all are both individuals and parts of groups in our economic relations.
    I’m sorry if you think I’m being elitist, but I’m telling it to you straight. In real life, things are more complicated than what Neo-Classical models say and these models are more problematic when applied to 2/3rds world countries. I shd know, I lived and taught Economics in Mexico for two years…
    dlw
    dlw

    Reply
  26. Michael Kruse Avatar
    Michael Kruse

    “I think it matters that the underdeveloped nations be given the right to determine for themselves when they want to become more integrated into the global economy and how.”
    Again, I agree in general sentiment. I just see a more a “chicken or the egg” kind of thing. You can not “parachute” economic or politcal freedom into the middle of a culture that is not prepared to accept them. Yet what is it that would create the demand for more economic and political freedom? From what I know of economic history and studying the demographic transition phenom, rising prosperity tends to be what drives the development of needed institutions and government reforms.
    If we had fewer barriers in developed nations to goods from developing nations, people in developing nations could more easily choose alternate economic paths. Thus free trade provides opportunity. When the opportunity is accessed with a modest degree of rule of law in place, it tends to generate prosperity. Prosperity creates demand for more of the insitutions.
    Like you say each, each nation has its own nuances, but I go back to seeing an interative affect between prosperity/freedom and the development of the institutions that enhance it. That general theme seems to be the theme that has played out in nations.
    I go back to my obseravtion again that there clealy is role for charitable, NGO and government assistance. Insufficient support from these instituions will not provide the environment for the economy to take root in. However, we also have many cases of sufficating healthy economic growth through over control, subsidies, etc. I see these inputs more like a catalyst than sets an organisms growth in motion not a computer program the designers forever tweaking to accomodate some preconcieved desgin as to how shold all be developed. That is the anxiety you hear me expressing with the model I think you highlighting. As with many of these issues we may just be differing about degrees of emphasis. But I do believe that trade is an important catalyst not just downstream add on.

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  27. David M. Smith Avatar
    David M. Smith

    dlw,
    You are free to advocate collective bargaining. You are free to practice collective bargaining. You are even free to call collective bargaining fair trade, but I am also free to point out how collective bargaining is the exact opposite of fair trade, dude!
    There is a reason perfect markets don’t exist. They don’t exist because markets are manipulated by people who believe markets need to be manipulated. Collective bargaining is a market manipulation that is unfair to workers and buyers who are not part of a collective bargaining agreement.
    Mexico is a perfect example of a completely manipulated non-free/non-fair market. Adding more manipulation does not make it any more fair or any more free. However, removing manipulation will make it more free and more fair.

    Reply
  28. Michael Kruse Avatar
    Michael Kruse

    I am I bit distracted by other pressing concerns so I’ll stay out of the labor questio for now. Feel free to carry on if you would like but everyone play nice.
    (And as for me, I like my Koolaid grape.)

    Reply
  29. David M. Smith Avatar
    David M. Smith

    Hi Michael,
    I have only been reading your stuff for a short time, but I can still say with certainty, you do not hold a position or form an opinion based on the status of other people who hold a similar position or opinion.
    “spiked Koolaid” verbiage sounds much more like the verbiage of an undergrad than the verbiage of an experienced PhD.
    I don’t how someone can attain a PhD, yet never develop the ability to participate in a respectful conversation with others who hold opposing points of view.

    Reply
  30. Michael Kruse Avatar
    Michael Kruse

    Thanks for you affirmation David. Can’t say that I always behave myself as well as I should but I am trying. (Some would say very trying.)
    🙂
    dlw has some passionate views. I like his passion (even if he finds mine misguided.)

    Reply
  31. Julie Clawson Avatar
    Julie Clawson

    FAIR trade is when the worker who produces the most value receives the benefit of his or her work. …Consumers are FREE to pay whatever they want to pay for any product or service, but if consumers choose to pay a higher price, they are not being FAIR to the worker who is willing to charge a lower price in order to receive the business. It does not matter whether or not the worker is an owner or an employee as long as the worker is FREE to choose whether or not to work and how much to charge for the work.
    Does it really matter how you want to spin the words if that is not what most of us mean by them? Of course a worker is considered “free” to work or not, but if that freedom to work requires them to give up their rights and their dignity is it really freedom? And I really don’t care if paying some people a living wage is unfair to the big corporations that use near slave labor.
    This discussion is usually held on the ethics level. The mandates of economics are one thing, but ethical treatment of humans is another. I am wary of using economic excuses to justify harming people.
    Your Bangledesh example ignores the aspect that the conditions improved only once the workers had ownership of the factory. If they had continued working under a western corporation which threatens union activism with violence would improvement ever had occured. And of course the workers weren’t complaining – any job is better than starvation and since I’m sure there was a waiting list for their job, to complain would have meant they were out of a job. That is not FREEdom, that is not fair.
    But I’m an idealist, not an economist.

    Reply
  32. David M. Smith Avatar
    David M. Smith

    Hi Julie,
    I understand what you are saying.
    Here is the simplest way I can explain my point of view:
    As a society, we can tell other people what to do for a living, what they should charge for their products and services, and what we should pay for their products and services.
    Or we can allow each individual to determine for themselves what to do for a living, what to charge, and what to pay.
    Or we can do a little of both.
    I believe freedom and fairness are both achieved when we allow each individual to choose. I would also allow an exception for the physically and mentally handicapped.
    The evidence is overwhelming that free markets reduce poverty. Eliminating poverty completely is not possible because some people choose personally destructive behavior and some people are ruthlessly manipulative.

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  33. Michael Kruse Avatar
    Michael Kruse

    Thanks for these observations Julie. Don’t know that I can briefly address all that you raise but I will say you hit the nail on the, IMO, with your last line. I am not an idealist. Nor am I formally an economist. I am someone who is passionate about the plight of the poor and believes it is my obligation as Christ’s disciple to match good intentions with sound policy.
    “Does it really matter how you want to spin the words if that is not what most of us mean by them?”
    First, “Free trade” is an economic term with a specific meaning. If we are engaging economic issues then distorting the terms makes productive conversation untenable. Why intentionally distort and confuse the meaning of terms for political ends rather than facilitate an honest conversation.
    Second, society has an obligation to make sure the basic needs of its members are cared for. But let us not conflate business with society. Business is one institution in addition to others like family, church, voluntary associations, and government. The role of businesses is to effectively and efficiently coordinate the production and distribution of resources. By doing this well, they keep costs low and create a better standard of living for everyone. Raise wages significantly beyond the productivity a what a person actually contributes to the business and you make everything more expensive for everyone else thus causing the higher income to purchase less. A business’ role is to pay a just wage, which is a wage mutually agreed upon by two uncoerced parties. If either party is unhappy they are free to negotiate other arrangements. And that goes to my next point.
    Three, there are places where the economy is so devastated that people are in desperation. There are also totalitarian societies where workers can not negotiate for wages. In both cases the workers are not “uncoerced.” Justice might require some minimum wage but it would also require other institutions to reform raise up a productive economy. Fiat wage laws will not create a wealthy economy and will in fact horrendously distort the supply and demand information systems, thus preventing a healthy economy from emerging.
    Fourth, “The mandates of economics are one thing, but ethical treatment of humans is another. I am wary of using economic excuses to justify harming people.”
    Let reflect back how this sounds to me altering the topic a little.
    The mandates of the law of gravity are one thing, but ethical treatment of humans is another. I am wary of using the law of gravity excuses to justify harming people.”
    Supply and demand is not an ethical choice or an optional arrangement. We can no more repeal the law of supply and demand than we can the law of gravity simply because we wished things worked otherwise. Justice requires that we work within the confines of world God has ordered and discern justice accordingly.
    Fifth, in the Bangladesh case, the shirt factory was owned by the Bangladeshis. They were simply dependent on their American buyer. Because they were dependent on that buyer, they were not yet sophisticated enough to know how to attract other buyers. In some ways, severance from this American buyer was the best thing that happened because it forced them to broaden their horizon and diversify.
    I have read several reports on the impact of corporations on nations that do business in lesser developed nation and while there is no question that there are instances of abuse the overall impact is usually positive. Corporations pay above average wages and effectively raise the skill sets and productivity of workers.
    Finally, I was just reading that 12,000 years ago the world per capita annual income was $90. By the time of ancient Greece that had risen to $150. By 1750 it was at $180. Now, just 250 years later, it is at $6,600!
    The UN rates poverty as living on one dollar a day. The percentage below that level was nearly 40% in 1970. It was 19% in 2000. They expect it will be less than 10% in 2015. These are the “evils” that freer trade and capitalist economy has unleashed on the world.
    Economic prosperity is one aspect of the shalom to be found in the New Creation. I am not saying that recent change has been without exploitation and abuse. I am asking for the alternative model that achieves these ends. Ultimately as Christians, we have to ask whether we are going to expound positions that make us feel good about our ideals or do the messy work of incarnating Christ in economic realties and move things toward the vision of the New Creation.

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  34. Michael Kruse Avatar
    Michael Kruse

    David you managed to respond in one quarter the length it took me. You are making me look bad.
    🙂

    Reply
  35. Julie Clawson Avatar
    Julie Clawson

    A few thoughts from an uneducated perspective…
    But let us not conflate business with society.
    But should not society (or at least the ethical members thereof) insist that businesses behave ethically? If that isn’t the purpose of a business, there seems to be a need to re-examine the whole system. Why would we promote the needs of business above the humanity of a person? Just because a business has to act a certain way to function does not make it right or justified.
    Supply and demand is not an ethical choice or an optional arrangement. We can no more repeal the law of supply and demand than we can the law of gravity simply because we wished things worked otherwise. Justice requires that we work within the confines of world God has ordered and discern justice accordingly.
    Yes – to a certain extent – supply and demand does exist, but it does involve ethics. Any time we choose to allow freedoms to be violated, workers to be abused, or families to starve just so we can get crap cheaply it is an ethical choice. Our choice is involved in all economics and therefore economics involves ethical choice.
    Economic prosperity is one aspect of the shalom to be found in the New Creation
    I’m not sure I would say this. Everyone’s needs will be met, yes. I just can’t support the idea that just because certain economic systems are in place in the world, that means we have to play by their rules. Why support concepts before people?

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  36. will spotts Avatar
    will spotts

    “I’m not sure I would say this. Everyone’s needs will be met, yes. I just can’t support the idea that just because certain economic systems are in place in the world, that means we have to play by their rules. Why support concepts before people?”
    Personally, I agree with this. But I don’t think it is a matter of supporting concepts before people. It is just that there is not a better concept that currently exists – and most changes (e.g. govt. or populist imposed changes) run the great risk of making things worse. By all means change what can be changed without doing harm.
    The examples you mention are exploitations based on poor laws or violations of laws – the rule of law is necessary for our system to work, and many western countries have had hundreds of years to develop those laws and civil structures.
    However, there is a very good reason to play by the rules of the economic systems in place – specifically that these rules are often non-negotiable. They operate whether one wants to play by them or not. Acknowledging them and trying to do the best one can around them strikes me as a better path than trying to act in spite of them to the detriment of the very people one is motivated to help.

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  37. Michael Kruse Avatar
    Michael Kruse

    Pope John Paul II wrote the following in Centesimus Annus:
    Can it perhaps be said that after the failure of communism capitalism is the victorious social system and the capitalism is the victorious social system and that capitalism should be the goal of the countries now making efforts to rebuild their economy and society? Is this model which ought to be proposed to the countries of the Third World which are searching for the path of true economic and civil progress?
    The answer is obviously complex. If by “capitalism” is meant and economic system which recognizes the fundamental and positive role of business, the market, private property, and the resulting responsibility for the means of production as well as free creativity in the economic sector, then the answer is certainly in the affirmative, even though it would perhaps be more appropriate to speak of a “business economy,” “market economy,” or simply “free economy.” But if by “capitalism” is meant a system in which freedom in the economic sector is not circumscribed within a strong juridical framework which places it at the service of human freedom in its totality and which sees it as a particular aspect of that freedom, the core of which is ethical and religious, then the reply is certainly negative. (Centesimus Annus, 42)
    Almost all people I know who advocate for free markets have John Paul II’s first conceptualization in mind. In economics, capitalism has the following basic feature.
    * Privately owned, relatively well organized and stable firms (from small to large) pursing complex commercial activities.
    * Relatively free and uncoerced trade between firms, and between firms and labor.
    * Systematic long-term approach to investing and reinvesting wealth in productive activities using a hired workforce guided by anticipated returns.
    This is basically is all capitalism is. It is an operating system, kind of like on your computer. If your intentions are to model ways you can swindle your employer for more money, publicize hateful materials about some minority group, or access pornography, then it will help you be degrees of magnitude more efficient in doing so! Similarly, if you feed in intentions of greed, materialism or individualism into a capitalist economic system it will be very efficient in producing outcomes that are consistent with those values. The issue is not the system but the values placed into the system.
    But anyone who studies these issues knows two things need to happen.
    First, there has to be commutative and remedial justice. The former speaks to the need for truthfulness of parties to an economic exchange. The second to just compensation and punitive action when there has been malicious or careless damage done to life, liberty or property.
    Second, while free markets are the best at efficiently distributing goods throughout society they are not perfect. That is where the biblical concept of charity enters the picture. There is both a call to be productive stewards of the resources entrusted to as individuals but there is communal responsibility to see that “there are no poor among you.” Ideally we want to restore every person to a role of productive steward but in a fallen world that simply isn’t going to happen.
    I would come back again to the notion that prosperity, not just needs being met, is one central piece of the promise shalom God gives to Israel as a consequence of obeying his covenant. It is the picture of the New Jerusalem adorned with jewels and with streets of gold. But it is a prosperity into which everyone is brought, not some at the expense of others.
    Economic freedom of the development of complex capital markets is what has fueled the breathtaking rise in life-expectancy and the surge in wealth creation that is now spreading through out the earth. We are still sinful humanity and there are enormous challenges and problems that all this change has brought on but let us not loose sight of what it has brought.
    I don’t know if I have addressed your concerns but I hope this at least gives a better picture of where I am coming from.

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