The socialist charity and political lobbying group Christian Aid, has a new campaign called Vote for Trade Justice.
Free Trade: some people love it.
Imagine getting mugged after a tough day’s work.
Every. Single.Day.
By the same muggers.
Grind you down, wouldn’t itThat’s what it’s like for people struggling to make a living in the world’s poorest countries. Why?
So called Free Trade. Our government claims Free Trade is the solution to the world’s problems. But that’s exactly what you’d expect them to say. Why? Because it allows the world’s richest countries and their fat cat companies to profit.
Ok, so let me get this straight… Western farmers, their operations subsidised with other western taxpayer’s money and their own domestic markets distorted by ‘protective’ tariff barriers which increase the price of imports, sell to African countries and that is… Free trade? FREE TRADE?
What the hell is free about it?
Western agricultural producers are a nightmarish mix of tax subsidy and production quotas, with bizarrely priced surpluses that are occasionally and erratically dumped on Third World markets… and at the same time western consumers are denied access to both First and Third World products at their true economic cost by a vast raft of arcane state and super-state imposed regulations. Please explain who exactly is engaging in laissez faire here. The only intelligent bit is calling it “so called” free trade.
The problem is that vested economic interests (big business and big labour) have zero interest in free trade. They do not give a damn about the Third World, all they see is the extremely low labour costs in the developing countries and what that implies for their own narrow sectional interests… and they have the state to protect those interests with laws.
So is Christian ‘Aid’ screaming “Remove all tariffs to imports NOW”?
Of course not. They are calling for an end to “Free Trade”. What is needed is not democratically sanctified politically managed trade (which we have now) but real, genuine, non-government regulated free trade. The fact that Kenya actually does manage to sell significant quantities of very high quality green beans in Britain is a testament to how some people will succeed in spite of western regulatory systems which would rather their producers just lived in abject poverty and that westerners pay more for their food than they need to.
If Christian Aid really cared about people in the Third World rather than just posturing for their own self-important gratification, they would be demanding true laissez faire free trade in which low labour cost agricultural nations could take on the western open air industrial chemical factories, sorry I mean farms, without having the state/super-state controlling access to the target market tilt the scales against them.
Demand for more ‘organic’ produce increases by the year and many Third World countries are well suited to serve that premium high margin market. That is where the foolish self-appointed Paladins of the Oppressed should be directing their attention rather than calling for mere tinkering with the statist system of trade controls that is so integral to the problem in the first place.
With friends like Christian Aid, people in the developing world do not need enemies.
excellent post.
“Western agricultural producers are a nightmarish mix of tax subsidy and production quotas”
Excuse me … I count New Zealand as a “western agricultural producer”. We’re undeniably part of the “west”, we depend on agricultural exports for a large part of our GDP, and in fact we are the world’s major exporter of several things, including milk products such as butter and cheese. We have no tax subsidy for farming (or anything else), no production quotas, no import quotas, no import tarrifs.
It’s been this way since as soon as possible after the November 1984 (twenty years ago!) election of the Labour Party into government.
If you amend your story to say “The European Union and North America” then I’ll happily agree with you.
Brilliant post, as usual, WHERE did you get the graphic? I want to spread it around…
Horray, NZs! Bring on the cheese!
And MORE brilliant movies, please!
“open air industrial chemical factories, sorry I mean farms”.
Very unfair. Maybe you mean Factory Farm, but a traditional country farm is not like that.
In fact thats one possible objection to “free trade” British farms are highly regulated, my dad often used to say if we were on a level playing field he’d prefer no subsidies and just compete on merit but its wrong for the government to force certain standards on us therefor pricing us out of the market and then buying from jonny foreigner.
I agree with your free trade principle but it cuts both ways, the British farmer must also be freed from regulation to the same standard as these third world countries then we see what happens.
Bruce: and the farming industry has strengthened without the stupid subsidy system hasn’t it?
Horray, NZs! Bring on the cheese!
And MORE brilliant movies, please!
PJ is working on King Kong not 5 km from where I’m sitting (which is here, btw). Will it suck? I don’t know. But I’m sure it’ll be highly original even though it’s a remake.
As liberals (Classic sense) we have a tendency to believe that charity is better than government action. Every now and then someone makes a serious challenge to that assumption, by demonstrating that charities can be worse than useless as well.
African countries as a whole are some of the most closed economies in the world. The idea that free trade is having any impact on them whatsoever is bizarre. To blame it for the woes of the poor takes a massive stretch of the imagination.
Bruce: and the farming industry has strengthened without the stupid subsidy system hasn’t it?
Yes it has, immensely.
There was a lot of land, mostly on steep hillsides, that it was economic to put sheep or cattle only because of subsidies (and dropping large parts of Nauru Island on it from the air). No subsidies meant not worth farming it any more and it is now reverting to scrub or else being used for growing pine trees.
In the same way, with the subsidies gone much of the sheep and beef farming has stopped, even on good land. But it’s now used for other things. In particular, dairy farmers have been making very very good money and milking sheds are springing up everywhere, even in parts of the country that never previously had any diarying at all. (This is happening in Australia as well, and I know a lot of NZ dairy farmers who have moved to Australia (especially Victoria, it seems), bought beef or sheep land and are doing well with dairy.
We’ve still got just as much farming — and just as many farmers (maybe more, since dairying is more labour-intensive than sheep or beef) — as before, but now it is all things that add to the economy rather than subtract from it.
EU-Serf has it right. While I’m sure adopting genuine free trade in agricultural produce would be a good thing, actually the Christian Aid ad (wrong and offensive in its misunderstanding of economics, though it may be) is well off the point.
Those mugging (in too many cases literally as well as metaphorically) third-world peasants aren’t EU and US bureacrats either, even if they make it easier to sustain by subsidising the process out of their taxpayer’s pockets. It is the bloated local political classes and their military and para-military henchmen.
The points about the subsidise/protect system of agricultural support are of course well made. But I do think its worth noting that things now do seem to be going in the right direction. Under the EU’s on going CAP reform process, production subsidies are being significantly reduced and in some cases cut altogether. Some anomalies remain, for example durum wheat, which is what is used to make pasta, will remain subsidised.
Also farmers will continue, for the time being at least continue, to get a payment – called a “single payment” – but it is less than they currently get. It wont be tied to production, they get it for nothing, but it can be lost if they fail to comply with various bits of environmental legislation. Personally, as this aspect of the reform is only slightly less reprehensible than what it replaces I don’t think it will last too long.
Here is how the Government have explained it to farmers.
http://www.defra.gov.uk/farm/capreform/implementation/docs/farmletter.pdf
http://www.defra.gov.uk/farm/capreform/implementation/docs/b01.pdf
The money saved by not subsidising farmers will be used to pay for environmental benefits. Landowners will be able, voluntarily, to enter in to contracts with the state conservation bodies to manage the land in a certain way. In the UK there will be two schemes, Entry Level Stewardship and Higher Level Stewardship. In effect there will be a market in environmental goods. It may be with the state as one of the contracting parties, but , at least to my mind its a better than the old system.
This explains it.
http://www.defra.gov.uk/erdp/schemes/es/default.htm#1
Meanwhile the EU is negotiating through the WTO to liberalise world agricultural trade.
http://www.wto.org/english/news_e/news04_e/dda_package_sum_31july04_e.htm
I know its not perfect, and there is a long way to go. But I do think those who have been promoting liberal economics can take some comfort that things are starting to go their way.
Super piece. An Indian NGO “Navdanya” run by Vandana Shiva regularly connects free trade with famine. They have a poster with a similar pic and FREE TRADE = FAMINE.
Vandana Shiva has won numerous awards for her work, but the best I think was the Bullshit Award for Sustaining Poverty
Pete,
That graphic was produced in the mid-80s by David Hoile back in the days of the Federation of Conservative Students.
That was before FCS was closed down by the Conservative Party for being, err, extreme.
*** Nostalgic tear wiped away from eye ***
Bono has a new manifesto out, usual billions demanded for collectivism in the developing world – GGO put out this critique [PDF].
Yes, these “fair trade” and “trade justice” pathomemes just refuse to die. So sad.
Imagine getting mugged after a tough day’s work.
Every. Single.Day.
By the same muggers.
Grind you down, wouldn’t it
I may use it for next rant on taxation.
Surely Third World consumers are actually better off, not worse off, if Europe sends them subsidised food? It’s a net wealth transfer from Europe to Africa. The people who suffer are European taxpayers, not Africans.
In fact, if they were being consistent, Christian Aid would be campaigning for more subsidies for European farm exports, not less.
Depends rather on local conditions, Julius. If it prevents farmers (still a majority in many countries) from selling their crops, so from doing anything but subsistence farming, then they don’t get to be consumers at all in the Western sense. We aren’t talking about open market economies, for the most part, remember.
There are quite a few states where the subsidised food from abroad goes to the government’s supporters. And it is not new. It’s how the Roman plebs was managed for the maintenance of power of your illustrious divus namesake once he had taken Egypt, after all.
Nor did Mugabe invent the technique of controlling the flow of aid as a political lever, either. It’s been in existence as long as there has been aid, and is particularly well entrenched in Bangladesh.
Surely Third World consumers are actually better off, not worse off, if Europe sends them subsidised food?
How many times will it have to be pounded through people’s thick skulls that welfare is BAD FOR THE RECIPIENT!
They are worse off because local farmers suffer from unfair competition, a culture of dependency is created, and local economic exchanges and development are snuffed in their grave.
Sorry, should be snuffed in the cradle.
Dunno. Grave and cradle are the same thing in this case. Glad we agree on something, RCD.
Whether free trade or “fair” trade, third world countries in general and Africa in particular will not develop much of anything as long as they have corrupt and nepotistic governments, no rule of law to speak of, and cultures which laud the “big man” however brutal he may be. Hideously incompetent government is the major problem they have, not trade subsidies.
I notice that a UN survey revealed that Africa is the only part of the world where people are actually worse off now than they were 20 years ago. Not to mention the brother of South Africa’s president pointing out that the average black man was better off under colonial administration than he is now.
Bad government, that’s all. However, it’s fair to say that many western aid agencies don’t exactly help matters. One of the factors keeping some of these awful governments in power is surely the knowledge that if things get really bad the west will cough up money, drugs and food – so the governments have no real incentive to imprive things.
And of course some agencies have their own agenda – witness the recent non-famine in southern Africa, and stories about food only being handed out to appropriately religious people.
EG
Paul: I share with you that bit of sadness for the FCS. Of course, Hague went and did the same thing with the Young Conservative and Conservative Graduates. What now exists, in their place, is the Kerry-loving wet bunch of (mostly) noxious little oiks.
Bruce:
Can I move to New Zealand?
I know I’m a bit off the reservation here, but I’m not sure that ending subsidies would help the African farmers much at least not more than one growing season.
My logic is that once the subsidies were ended prices will rise. That will indicate to the market to increase production. The western farmer with immeasurably more access to credit, markets and agricultural technology and the protection of contract law and property rights can take advantage of the market signals to produce more. The African farmer without these financial resources and legal protections will once again be at the mercy of low cost imports from western nations.
And how! British family farms are also victims of the insane subsidy system. I was arguing for feer trade for everyone, not just Africans.
Certainly the single greatest cause of Third World poverty are the kleptocratic statists who run so many of those nations, no one with a clue would deny that. The rotten heart of the world’s economic and social hellholes are the same people who preen and pose and lecture the developed world at the UN… however it is wrong to understate the role of western trade barriers in maximising the misery and economic woe. Moreover western aid (from the very nations keeping Third World product out of their markets) often has the exact opposite effect intended, fostering enervating dependence and corruption rather than innovation and reform.
Sorry but western statists in both government and business have much to answer for.
shadow,
you may be suprised how quickly the market balances. Part of the resoning for subsidizing western farmers is that prices are too low for profitability. Further subsidizing of exports makes the prices in Africa too low for the locals to compete. So prices would rise in Africa, making it more profitable for local farmers to farm. Prices in the West, since we would no longer pay farmers not to grow, would mean that many farmers might indeed grow more, but without the subsidizing to offset shipping costs, etc, the prices in Africa would still be high enough to encourage local farmers. Western farmers would find that glutting the market was not proffitable because food prices are too low to pay for shipping. Farmland would stay as dormant as it does now, with the exception of farms sold by frmers, or converted to better uses.
The access to credit and other resources by western farmers would more likely lead to non-farming ventures for many, since farming, without its subsidies, would no longer be so profittable for many. I think the African farmer can compete with the cost of western food plus the cost of overseas shipping, providing there is no charitable organization, or worse, charitable government, giving away food for free, paying for shipping, etc.
Sweetie, I don’t have to imagine it. I’m a British taxpayer.
One of the things they are calling for is this
By ‘protect’ do they mean subsidise? And with what?
RC Dean:
“How many times will it have to be pounded through people’s thick skulls that welfare is BAD FOR THE RECIPIENT!
They are worse off because local farmers suffer from unfair competition”
Undoubtedly the local farmers suffer until they move into some other business, but if the subsidised food is sold in the local market then the population of that country as a whole will plainly be better off. They are getting free food in instead of having to grow it. The Koreans (used to, maybe still do) subsidise their computer and chip makers. The result is that we in the West get subsidised computers. We are thereby better off; not worse, even though those who might have made computers in England do not do so any more.
“a culture of dependency is created”
That depends. Some domestic welfare undoubtedly has this effect, but it isn’t obvious that companies selling their food below cost into a local market creates dependency in any relevant sense. It’s just cheap food. Does the fact that the Koreans sell us subsidised computers create a culture of dependency? I hardly think so.
“and local economic exchanges and development are snuffed in their [cradle].”
This is the same as the “unfair competition” point; at to which see above.
My point is that the real objection to subsidy of Western agribusiness is not its effects, beneficial or adverse, upon Africans, it is that it amounts to naked theft from Western taxpayers in favour of the Agribusiness special interests. We should be careful not to lose sight of this fundamental point.
Julius: many in the Agribusiness don’t like the subsidy system, it is the EU who push it on the UK through CAP, it is an attempt by big (EU) government to control the markets thats all. Its not done for farmers, for consumers, or for anyone else.
I dunno Julius,
I see a developing country like a developing person. If you give a person too much, and said person never has to provide for it’s own necessities, then the skills that person does develop are potentially stunted versus what could have been developed.
Comparing the U.S. uses of subsidized computers is not the same. The US can make our own if we need to, indeed we did long before Korea figured out how. A country that cannot feed itself, nor produce enough of a product to pay for that feeding is dependent. If Korea either stopped shipping us computers, or jacked up the prices, we would easily adjust. If we stopped sending cheap food, or worse yet free food, some countries would be near starving. I still believe they would adjust, but this would be a developmental stage, rather than a luxury removed.
I do agree that the greatest issue is with the cost to us the taxpayer. I would also argue that the cost to the Korean economy is no picnic for them either, as evidenced in their current economic state. Totalitarianism with subsidies is worse than a republic subsidies, but thats no suprise to anyone. The truly fundamental issue is that both are ultimately destructive.
however it is wrong to understate the role of western trade barriers in maximising the misery and economic woe.
I am in no disagreement with you on this at all. I just find it strange that the statists continue to blame free trade for the ills of a region that is the most statist & corrupt in the world.
There is no doubt that allowing poor farmers free axcess to Western markets would reduce the power of the state in those countries, by freeing them to make money for themselves.
“[…] to protect their small farmers and traders, and help new industries to get off the ground […]” Assuming governments of poor copuntries could do that is an error of economic theory, perhaps excusable because vast numbers of professional economists appear to believe something of the kind. Assuming they would if they could is an inexcusable failure to observe the actual behaviour of governments in the countries where Christian Aid works.
The only comparison I can think of for wicked self-deception on such a scale are the Western socialist boosters for the great works of Comrade Stalin all through the 30s and the Soviet-Nazi pact.
Consider Nigeria, which could be a very wealthy country. Southern Nigeria has some of the most fertile land in continent, not to mention substantial deposits of oil and gas. In the central belt, the mountains contain many ores and precious stones. There are huge coal beds, as well. The population is large – Nigeria holds about 1/6 of the entire population of Africa – and large parts of it are highly literate. The people in general are inveterate traders, perhaps one reason why Communism was never very attractive there. You’d think it would do well, wouldn’t you?
However, the country is blighted by poverty and incompetence. Although Nigeria has all the raw materials to make cement, the vast majority of cement used in the country is imported. Although it has fertile soil, it imports casava (a staple food) in large quantities, and local produce is of atrocious quality. Nigerian palm oil used to be reputed as the finest in the world, yet now they import it from Malaysia – from plantations grown from Nigerian palms transplanted in the colonial days, at that.
Government at all levels is corrupt on a mythic scale. Land ownership is frequently unknown and regularly disputed – you see many signs advertising the fact that a plot of land is NOT for sale. There is no land registry, and has never been any domesday book type of exercise. Farming is on the “drop the seeds and come back 6 months later” model, where no care is taken of the growing crop. Seeing plantations from the air, you notice large gaps, swathes of diseased trees not dealt with, overgrown service tracks, etc. Anyone can start a business, but as soon as it shows signs of being successful, the local toughs come around and demand a share of the profit – hence there are thousands of small businesses, hardly any of which can grow. I can’t remember how many times I heard Nigerians say “independence was a mistake for Nigeria” and “you people should come back and govern us”.
How, exactly, is ending farm subsidies in the west going to make the slightest difference to that sort of culture?
EG
I have been to Nigeria on a couple occasions and know exactly how screwed up a place it is. It is a particularly dreadful hell hole and one of my least favourite places on this planet for a long list of reasons. As I said in a previous comment, western protectionism is not the sole cause of poverty in the Third World but it is evasive dishonest bullshit to pretend it does not have a significent role in the story.
The fact Nigeria is cursed with oil reserves makes it a particularly doomed place because the ruling class have no need to pursue policies that would create wealth in order to amass loot: yet even there, removing external trade barriers might allow more people to eak out a living away from the corrupting blight of the Nigerian state. I have never claimed the West’s protectionists are the only or even main cause of third world poverty, just that they are one of the causes: more in somemplaces than others.
I am recording your names.
You will all be shot after the revolution.
Limberwulf:
“A country that cannot feed itself, nor produce enough of a product to pay for that feeding is dependent.”
Few western countries can produce enough to feed themselves. That is simply a reflection of the fact that we are better at doing other stuff like tourism and financial services. Ability to pay for imports is just a reflection of how rich you are; and it seems obvious (at least to me) that if Africans don’t have to pay much for their food (because we are stupid enough to subsidise agri-exports to them) then they will have more money to spend on other stuff. Lucky them. Why Christian Aid should think this is a bad thing is entirely beyond me.
“I would also argue that the cost to the Korean economy is no picnic for them either, as evidenced in their current economic state”
Of course. The Koreans are being stupid and their taxpayers are being fleeced. But why should we complain if they want to send us cheap computers at their expense?!
Perry:
“I have never claimed the West’s protectionists are the only or even main cause of third world poverty, just that they are one of the causes: more in somemplaces than others.”
I entirely agree, if you are talking about restrictions on Third World imports into Western markets. Tariffs make everybody worse off except those who are protected. But as I have said earlier, subsidising exports is a different story. It makes us worse off, but it is hard to see why the recipient of a subsidised export would wish to complain.
If there are any economists out there, it would be interesting to know what they think …..
Back in 1995 Lew Rockwell wrote on this at a time when the U.S Government paid 2 billiion dollars to subsidise exports of U.S. wheat to China
(Link)
As he wrote
“Notice too that the Chinese aren’t accusing the U.S. of “dumping.” They, unlike our trade officials who spend billions litigating anti-dumping suits, know a good deal when they see it. The Chinese welcome below-cost wheat so long as it lasts”
My point precisely.
Much of the protectionism in the West is based on nostalgia for another age. There are people who would be loath to see any farm close. They think the rest of us should have to pay higher prices to preserve “a way of life.” Of course, the irony is most of the fools have a Disney-fied view of the countryside. Which ledns them to be so anti-fox hunting…
If you go beyond one simple ad, Perry, you might be surprised to learn that Christian aid somehow agrees with you. What the EU and the US call “free trade” is nothing like it, because of the tariffs and subsidies that the rich countries keep for themselves.
So what they are asking is that we shouldn’t push free trade on poor countries until we really do it for ourselves too.
You are quite over the mark!
Julius,
point taken, the only reason to complain would be ideological. The only caveat would be that if the best industry for many of the population in the aided African countries was farming, then an otherwise high-potential industry is being artificially stifled. I also question the idea that many western countries cannot feed themselves. What countries would those be? Countries in the Caribean come to mind, but what other countries in the Western Hemisphere produce too little food to feed their own population?
Mat: the fact is the campaign (not just a mere ‘ad’) is decrying what they themselves describe as ‘Free Trade’, not protectionist managed trade. I will start being nice to the confused collectivist folks at Christian Aid when they start demanding real laissez faire free trade as the only rational route to ending Thrid World poverty.
Limberwulf:
The “best industry” for any country is that industry which is best at satisfying demand for its products. Whether farming, tourism or football is the “best” industry for any African country (or any place at all for that matter) can only be found out on a free market. But a free market is not inconsistent with being given free stuff by other (stupid) countries. It just means that the industry which is “best” whilst the free stuff is available, might not be best when the flow of free stuff dries up. But that sort of adaptation is something that markets do all the time, if they are allowed to.
As for Western countries feeding themselves, since we all import food, by definition we do not feed ourselves. But that is a good thing, not a bad thing. The only country in the world in recent times that has aimed for total self-sufficiency is North Korea ….
Dear Desbian