We are developing the social individualist meta-context for the future. From the very serious to the extremely frivolous... lets see what is on the mind of the Samizdata people.

Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]

Can trade ever be fair?

Sarah, after her first day (as an intern?) at the Fairtrade Foundation:

I don’t suppose trade can ever be fair. Someone always has to lose. It’s just they lose less with fair trade than with the regular variety.

Milton Friedman:

Adam Smith’s key insight was that both parties to an exchange can benefit and that, so long as cooperation is strictly voluntary, no exchange can take place unless both parties do benefit.

Tweet about this on TwitterShare on FacebookShare on LinkedInShare on TumblrShare on RedditShare on Google+Share on VK

17 comments to Can trade ever be fair?

  • Julian Morrison

    Brief summary, if Ms. Sarah follows this trackback:

    “Someone always has to lose” is the mistake. Why sell stuff for money? Because you wanted the money more than you want the stuff. And vice versa for the other guy. So, both parties end up with what they wanted more, and give away what they wanted less. They both “win”.

  • Good to see the lobbyists for this form of insanity are capable of constructing sentences. Hopefully they’ll be given the appropriate amount of respect. I thought it was very generous of you to capitalise what she wrote…

  • Stehpinkeln

    Andrew, I’m somewhat confused. I don’t suppose you could find a proper noun laying around somewhere to use in your sentence construction. The ‘Lobbyists’ for whom? NRA? Flat Earth Society? Guiness?
    Which form of insanity? One you made up. or is it an ‘offical’ insanity and on the no-no list of the American Psychiatry Association? I am assuming the ‘they’ll’ you’re directing our attention toward stands out in some way from the great unwashed masses of theys. Is it the they that is knee deep in respect or the they that is up to their eyebrows? I figured out which she is involved, which prevents me from being completly confused.

  • Della

    Why is Sarah consenting to be exploited by the fair trade association when as she says, trading labour for money is obviously making her worse off?

  • Nick Rogers

    Looking forward to seeing you at Royal Holloway next month, Alex!

  • Millie Woods

    Unfortunately, Sarah’s comment is par for the course. That’s what young students are being taught. I used to teach a course for HEC at the University of Montreal. During a discussion on profit, I used the textbook for the course as an example. I was the author and had been approached by a major publisher after giving a presentation on the course and its content at a conference and asked to formalize the course content in textbook format. I pointed out that I was low man on the totem pole of compensation in terms of whatever profit the textbook was producing and I was perfectly happy with that. The younger students in the class thought I was being exploited while the older mature types who were back in school to get an advanced degree understood that there are different satisfactions to be gained in transactions and as long as all parties were accepting of the end result it was a success. I tried to convince my younger students that if the winner/loser paradigm were the norm, the world as we know it would not exist. To no avail. This is the mantra alas that is being swallowed whole heartedly. Everyone is being shafted by someone else. It’s misery that makes the world go round. What a joyless outlook for young people. And what a wrong one.

  • Millie,

    I think you’re ignoring a few things.

    Students are too often not willing participants in their “education.” When I was growing up in New Jersey, we were compelled to stay in school until we were 16. Later on, if we wanted work in certain fields, we were compelled to finish various courses of study.

    Some years ago I visited Nottingham, UK and toured the science center there. George Green is a moderately prominent 19th century physicist. The center described his education. As the son of the town miller (a fairly wealthy man) he was treated to three years of tutoring as a child. Later on in life he developed an interest in physics. As a result of writing some original papers, he was admitted to Cambridge. That’s it. Three years of tutoring, then some years later Cambridge.

    Here’s what I had to do in the middle of the twentieth century. First there was elementary and high school — 13 years in all, counting kindergarten. It was illegal to leave school until I was a junior in high school. Then there was undergraduate university training in physics. It was possible to get some sort of job in physics then with just four years of undergraduate education. I did. I also pursued graduate studies.

    Some of this I liked. Some I really didn’t. A good bit of the time I was anything but a willing participant. Students see that. Oh, but you say, everything has a down side. That’s true. It just seems to many of us that “free” trade all too often really isn’t either “fair” or “free.”

    Let’s look at what’s going on between the United States and China. China, according to reliable reports, uses something akin to slave labor for many things. They can then undercut American companies prices. Walmart buys from China because of the lower prices. It might be a voluntary exchange between Walmart and a Chinese company, but what about between the Chinese company and their workforce? The American company goes out of business because it can’t compete with the Chinese company.

    Well, why not just get rid of the restrictions on American companies? Slave labor is effective only in the short term. Try forcing Americans to work like Chinese and you’ll see a labor movement that makes the one we had a century ago look meek and mild by contrast.

    I personally favor free trade — with countries that don’t have coercive policies and cultures like China’s.

  • Miles, you only need to click once, and then wait patiently…:-)

    “I tried to convince my younger students that if the winner/loser paradigm were the norm, the world as we know it would not exist.” To which they surely replied: “And why, exactly, this would have been a bad thing?” “Awsome, dude!”

  • toolkien

    Whether one loses in an exchange depends on perspective and timing. At the time of the exchange, both parties, presuming non-coercion, must feel they are getting a more advantageous position by exchanging or they wouldn’t do it. As time passes regrets may seap in for one or both parties, and a new, lower, evaluation may show that both feel worse off. But that is known as life.

    It takes a third party to assess a loss has been suffered at the time of the exchange. It is this third party, filled with their sense of righteousness, who feel free to use force to prevent the exchange in the best interest of one or both parties. The socialist is born.

    As always, the affliction besetting Sarah, as with all socialist/statists is the assumption of a universal, static value system. It doesn’t exist. It is beyond her comprehension that both parties may feel a gain, and continue to do so, disregarding her assessment of the matter, or both may come to regret an exchange. Imperfect knowledge afflicts all transactions, and has a chance of placing each participant in a worse position.

  • toolkien,

    You’re missing the point. There are all too many “exchanges” in the world where one or more parties are being subjected to various coercive measures. Calling people who want government to take some actions against coercive measures statists is ignoring some very real problems.

    Consider my example. Walmart picks a Chinese firm to fill an order. An American firm goes out of business as a result. One key difference between the firms is that the Chinese firm relies in part on something akin to slave labor. The American firm employs — or at least did — the free citizens of a free nation. That costs more — at least in the short term. That’s why the American firm lost the order. I personally think the U.S. government should take various actions on behalf of the American firm. Does that make me a statist — or a libertarian who thinks liberty is for everyone?

    What do you propose we do about such problems?

  • Cobden Bright

    Chuck – that’s a fair point. However, I think your moral priorities are a bit confused – IMO, the Chinese company would be guilty of quasi-slavery; and the American firm would be guilty of knowingly purchasing the produce of slaves. Both firms should be declared guilty of serious criminal offences, and their directors jailed if they knew what was going on (obviously the Chinese firm should get the worse punishment). I don’t see why you think the US firm is not doing anything wrong here.

    However, it would be outrageously immoral to impose punitive sanctions on other Chinese or American companies that did not commit crimes such as slavery, pollution of other people’s property, etc, since those other firms would be doing nothing wrong. Many Chinese firms will employ labour legally and without coercion, and to punish them for the crimes of others would be collective punishment – clearly an indefensible position.

  • Shawn

    Cobden’s post is spot on.

    There are a number of legtimate issues such as the one that Chuck points out that need to be dealt with. But opponents of free trade use these as an excuse to campaign against all open trade in goods and services, and to promote restrictions that would punish those firms and individuals who are not engaged in anything illegal and immoral.

    At the same time I’m weary of fundamentalist approaches to free trade. The situation we currently have in the US where many of our arms and military tech suppliers are situated in China is stupid beyond belief. Some industries, like those that are vital to national security, should be tightly regulated.

  • Rudolph

    Chuck, could you give me some examples of Chinese slave-labour?

  • toolkien

    You’re missing the point. There are all too many “exchanges” in the world where one or more parties are being subjected to various coercive measures.

    Well then it’s not an exchange is it?

    This is the original quote:

    I don’t suppose trade can ever be fair. Someone always has to lose. It’s just they lose less with fair trade than with the regular variety.

    Where was slavery mentioned? And I’m missing a point? All I was pointing out is that the mentality that someone must lose in a free market is what provides the mental state for interventionists. They seek to impose their own system of value on two other people because THEY deem they know better than the two who are about to exchange.

    The comparison and contrast here was between FREE trade and FAIR trade, as if there is a real difference. Again presuming non-coercion, both are simply people freely exchanging based on their value system. One simply is willing to pay above market to buy some warm fuzzy that they are doing Good, which they are perfectly free to do.

    Also, find me an example of a definition of TRADE that includes slavery.

    What do you propose we do about such problems?

    About slavery? I’m against it (though perhaps we should be perfectly clear about what we mean by slavery, coerced labor by force or threats, or wages a third party thinks is unacceptable). If somebody asks me my opinion, I’d rather slavery didn’t exist. Be forced by someone else to contribute my property or resources or blood to free someone half way around the globe, no (I then become a slave myself, which no solution, and hiring bureaucrats to wring their hands and gesticulate with pained expressions is no solution either).

    As a consumer how much time do I have to investigate every purchase to see if it all traces back to a 7 year old chained to a machine? How can I trust certifications that it doesn’t as the order can be sub-contracted from China to other countries. How is one guaranteed that something they purchase is not made with coerced labor (or with a fair trade label) meets standards-who certifies the certifiers? Faith is necessary at some point at the point of purchase by a consumer. Some may choose to have faith in the market, and some may need to pay for a bureaucracy to bless the transaction. So be it, as long as both methods are borne freely and not through State coercion.

    Is an alternative to have brigades roaming the country sides looking for unacceptable situations? At the end of the day, if someone is being coerced, they have the main obligation to secure their own freedom. I have an obligation to not knowingly benefit from coerced labor. Buying off the rack at JC Penney’s doesn’t assure me one way the other, it is in effect unknowable. I, personally, would be just as cynical of some label purporting ‘fair trade’.

  • Hagar TH

    Caveat: This is my understanding of the situation; I am not an expert, and I may be mininformed.
    China has a large prison population. It is large because China is large, not percentagewise. One can be imprisoned for doing things that Amnesty International finds deplorable. The government of China believes that if the prisoner cannot be “rehabilitated”, no time should be wasted on him, and he should be killed. In the mean time, prisoners are expected to be productive, this being a step toward being rehabilitated. This is the class of labor which is labeled as “slave labor”.
    In the United States, there are communities where workers work only long enough to fund a “vacation” (leave without pay, or LWOP). Employers may or may not put up with this kind of behavior. However, taken as a whole, the US work force works more hours per capita than any other work force in the world. The result is that the balance of trade may upset, but does not alarm Washington DC.
    I think that I have just closed the loop to the original statement of this blog.
    Incidentally, the US may make noises about human conditions in China, but Chinese ministers have been fired over issues that severely upset US financial circles.

  • Chuck:

    Your hypothetical is intriguing.

    However, it suffers from the basic-flaw of the Wal-Mart hater: it’s basically just a clever way for you to bash Wal-Mart.

    It also ignores numerous other considerations of such a transaction, including transportation cost, raw materials cost, and a host of additional externalities.

    But keep your eyes on the stars, and keep reaching for the top!

  • Rudolph

    Cheers Hagar
    Do you happen to know what sort of products these prisoners manufacture?