Dr. David Cowan The last of of a 3-part discussion of so-called Fair Trade and Free trade
Part of being human is to want or feel compelled to act to make things better. However, in economic matters one should not confuse the policy option one believes will bring about such a change with the compulsion one feels. Our motive to act may be good yet produce bad results, or conversely it may be bad and produce good results. Even then, we can argue over the extent to which one policy is really more moral than another. What then can we do morally in this economy? I may have dismissed “fair” trade, but there is some big picture stuff and small picture stuff we can do, based on the "radical" idea that wealth is what solves poverty problems.
First, big picture stuff, we should have more cultural confidence that poor nations can help themselves, rather than beholden to a need for our generosity. This is what New York University economist William Easterly calls the new “White Man’s Burden”. The white man’s burden is the curse that our youthful idealism and aching hearts will be the catalyst for change. I recall reading a BBC report in the UK on poor nations, most of the online comments came from people in poor countries writing they don't need our pity and handouts, they need our knowledge and investment. The real solutions are less romantic, because their economies will change through a process of investment, restructuring, institution building and legal reform.
Second, more big picture stuff, dialogue needs to take place with all economic parties. The IMF and World Bank, for all their faults, have a mission to work for the poor, but they should be more private sector minded, not the bureaucratic behemoth they have become today. Commercial banking organizations like Citicorp have pioneered efforts in microfinance (more about that in a minute), in order to help the poor help themselves, so more of this will help. Corporations and wealthy individuals have contributed directly to poverty programs, but they should be a mix of direct aid and wealth creation through support of entrepreneurial activities.
To make these first two actions effective, the corruption at all levels in poor countries is the number one priority, because this is a stranglehold on any entrepreneurial evolution in these countries, and without entrepreneurs there is no dynamo for their economy. The bureaucracy of these countries promote and breeds this corruption, and only the political arrangements of capitalism will break this down. Wars, oppression and other political abuses in these countries are also part of the mix, and various regimes use maintenance of poverty as way to keep power, because wealth liberates.
What is required is investment at all levels, so third, some small picture stuff, we can invest our money in developing countries. There is microfinance, which involves helping the poor to help themselves through small business loans. You don't necessarily need to give your charity money away, as little as 50 bucks can go a long way to get a business off the ground. There are online services that can help you do this. You get paid your money back, and you then reinvest that return in another business. Maybe your own business, church or other organization can collect money to invest in a few projects.
This does something more than simple charity or hand-outs, because it helps create wealth. Believe it or not, the poor are very good at repaying their loans, especially the women. Charity can then be concentrated on helping those who cannot help themselves, so I’m not ruling out a role for charity. Wealth creation in the long run in these countries will positively impact those who need charity though.
Fourth and last, and small picture stuff, we can give up some of our time to help the poor in our own neighborhoods. It often appears that it is easier to pay our poverty Indulgences than to give up our time to help. A few cents is nothing compared to how much we cherish our time. As I’ve written before, much of the concern about the poor refers to an objectivized poor, a poor that those who talk and don’t do can use for their own ideological or moralist purposes.
The suggestions above are just a start to how you might think about the positive role of free trade, and doubt the effectiveness of fair trade and its underlying philosophy. Implementing policies to tackle poverty is not the preserve of the political ‘left’ or the charity organizations, themselves as much hidebound by bureaucracy and wastage.
Ultimately wealth creation is the solution and in our free trade economy, businesses and entrepreneurs move markets and create wealth. They also play a critical role in rebuilding societies after major shocks, like natural disasters or civil war. Socialism and dependency on the state causes people to abdicate care by passing it into the hands of the welfare organizations and government, and this abdication is a major cause of selfishness and greed of the worse sort. So, let's support and promote effective policies, rather than the pandering to feelgood moralism. The shock news is that wealth, not good intentions, is what solves poverty problems.