Sunday
My local church magazine, Connections, has taken to promoting economic illiteracy in every issue. So when a copy of the magazine landed in my house today, I decided to write a letter to the editor:
I am afraid the coverage of 'trade justice' in the May issue of Connections was based on economic illiteracy. The fact is that it is not in poor countries' economic interests to do what is preached in the name of 'trade justice'. The protectionism that the Connections article advocates does only one thing: prevent poor countries from getting richer.
Import barriers make it more expensive for poor people to afford to buy new machines that will enable them to increase production; they decrease access to medicines; and they raise living costs. When poor countries have tariffs, they reduce the purchasing power of their citizens' money, making them poorer. How is it just for governments to make poor people buy more expensive products?
When 19th century Britain unilaterally cut tariffs, we experienced unknown levels of economic growth. When post-WW2 Hong Kong unilaterally abolished all imports barriers, it speedily became rich despite having virtually no natural resources. All countries that have adopted free trade and free markets have become rich. But those countries - like Chad, Bhutan and Burundi - which adopted the ideas of 'trade justice' have remained some of the poorest and most unpleasant countries in the world to live in.
The article suggested poor countries should regard exports as good but imports as bad. This is known as mercantilism, and was a popular view among the educated in the Middle Ages. However, two economic breakthroughs in the 18th century debunked this view. The first was the law of absolute advantage, discovered by Adam Smith. This was later developed by David Ricardo into the law of comparative advantage. It is truly incredulous that Christian Aid is still promoting mercantilism in the 21st century.
The supporters of 'trade justice' may have the best of intentions, but far from helping the plight of the poor and needy, it makes them worse off. They are right that international trade is unfair, but this is not due to free trade, but lack of it. We need the European Union to abolish the Common Agricultural Policy, because it both makes us poorer, and also those overseas. But if poor countries want to experience decent economic growth, they need to liberalise too.

Of course, they have to support these policies. Without the third world poor to "save", all they have to fall back on to keep them busy is administer to their ever-shrinking Western flocks or bang on about how we're all immoral, hedonistic automatons.
Posted by James at May 9, 2004 10:01 PM
The counter to "exports good, imports bad" dosn't have to be as complex or academic as a "law" of economics. It can be debunked a priori by saying: in every voluntary, honest economic transaction, both parties gain. They exchanged whatever for whatever, because they each value what they obtained more than what they originally had. Thus "real wealth" increases on both sides regardless. No voluntary honest exchange can be detrimental.
Posted by Julian Morrison at May 9, 2004 10:14 PM
I agree with your comments. This is an area where ideology has taken precedence over fact and there are too many in the governing positions of "aid" organisations whose experience is limited to the university debating society chamber. It is a pity that they cannot see that there are two problems driving this issue 1)Excess population which the land cannot support, and 2) Systematic corruption and bleeding of resources to personal bank accounts held in Switzerland. Unless there is a concerted effort to redress these any "aid" is merely supporting the insupportable.
Posted by The Gray Monk at May 9, 2004 10:25 PM
Wouldn't it be wonderful if reality was so simple, if simplistic economic ideology was enough to explain outcomes? Maybe, but maybe it would just be boring.
Posted by back40 at May 9, 2004 10:49 PM
Crikey. If only the Swiss would regulate their banking sector more thoroughly these dictators could never salt away millions of their citizens' dollars.
Posted by Gorky at May 9, 2004 10:58 PM
Great letter. The "imports bad, exports good" argument is most especially ridiculous when we remember that imports are bought with exports. If we aren't to buy from people in other countries, how are we to sell to them?
Posted by Richard Garner at May 9, 2004 11:39 PM
I'm not shocked by a church supporting mercantilism. They focus on giving away money to the poor and are praised, but they try to raise money for themselves and are accused of greed -- the "imports bad, exports good" thought at work. I wonder how many people realize that buying foreign goods would help the third-world countries become richer, like an indirect donation to help the poor, especially since foreign success is being lamented by contries like the U.S.
Posted by alex at May 10, 2004 12:13 AM
We need the European Union to abolish the Common Agricultural Policy, because it both makes us poorer, and also those overseas.
Hear Hear. And if the EU won't do this, let's leave and abolish tariffs and subsidies on our own.
But if poor countries want to experience decent economic growth, they need to liberalise too.
Imagine the enormous boost in trade if the first proposal were enacted. I bet it would provide a powerful incentive for politicians in the 3rd world to liberalise and create legal structures to protect property rights. Perhaps it would also give citizens an incentive to adopt a more Western morality. So, there's a potential bonus of reduced tribal genocide and terrorism.
Posted by Tom Robinson at May 10, 2004 02:35 AM
Tom Robinson - Exactly. They can preach out the back of their heads in their puerile church magazines and they can send swag by the bagful over to Africa, when the only thing they need do is remove the bloody CAP and barriers to the Africans entering the free trade fray along with the rest of us.
They would benefit, and we would benefit by getting produce that tasted of something.
What the EU preachy, mealymouthed EU does to African producers is sickening and wicked. This Fair Trade is patronising and damaging. Get rid of the CAP. Let the African producers compete with the French producers and we will see whose produce finds the biggest market.
Posted by Verity at May 10, 2004 09:03 AM
You expect the church magazine to publish that? Though I cannot, and would not wish to disagree with your arguements, You seem more preachy than a nineteen year old curate celebrating his first mass.
One of the great disadvantages that rationalist thinkers have is the overweaning arrogance of the way in which we expect to convert unbelievers. In your first sentence you accuse them of economic illiteracy. Only too true, but that way no converts come. It is a dread phrase, but emotional intelligence, as well as being right is needed if we are ever to convince them of joining our flock.
Posted by Gawain at May 10, 2004 09:37 AM
I'm sure that no self-respecting editor would publish something that accuses his magazine of illiteracy. However, it is important that the letter is sent -- at best, the letter could be published with a few omissions, and at worst, at least someone else heard your opinion. Good job at placing the letter here so that people outside of the church can read it.
Posted by Alex at May 10, 2004 01:48 PM









