Waylaid Dialectic

January 13, 2012

iPods don’t exploit people, people do…

Filed under: Trade — terence @ 7:36 am
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Update: Read this first. It turns out that Mike Daisey was making stuff up.

Chris Blattman finds himself on the horns of a familiar dilemma:

Mike Daisey was a self-described “worshipper in the cult of Mac.” Then he saw some photos from a new iPhone, taken by workers at the factory where it was made. Mike wondered: Who makes all my crap? He traveled to China to find out.

That is the tagline from this week’s This American Life, freely available as an mp3 this week. Often funny but also often horrifying: Child workers, terrible workplace injuries, and police state tactics. They have released reports on the Apple subcontractor from October 2010May 2011, and September 2011.

I am of two minds. If even a tenth of the abuses are systematically true, then even the most ardent capitalist among you should be incensed.

On the other hand, I am in the midst of a randomized control trial of factory labor in Ethiopia. One reason is because I believe–and the early results suggest–that the improvements in poverty and work conditions and risk and well-being are huge. Huge huge.

When this choice is presented as a simple binary it is a very unappealing one. Buy iPods and support a system that is exploitative and abusive. Don’t buy iPods and leave people condemned to rural poverty. It’s an agonising choice. For what it’s worth I think the least worst option here is to buy the iPod. But the least worst option in this binary is not the same as the actual best available option in reality. There is a third way. It’s simple.

Continued global trade but with workers’ rights. Workers in factories in China and Ethopia would still receive low wages but they probably wouldn’t be quite as low as is currently the case, and their working conditions definitely wouldn’t be so bad.

And how could this happen? In a world of developing countries that were democratic and well governed, it would be easy: trades unions to offset the bargaining advantage of bosses; and the progressive implementation of some workplace safety laws brought about via the democratic process.

Trouble is, neither China and Ethiopia are democratic or well governed (although I guess the situation is slightly better in Ethiopia???).

Then what? This is where I think there is a very real role for consumer activism in developed countries. As much as possible, avoid products produced in situations where workers’ rights are violated. As much as possible, buy fair trade products. Write to companies to let them know that you’re doing this and why you’re doing this. Don’t tell them “don’t make stuff in China?”; tell them “make stuff in China but protect your workers?” Share this information. Fund entities devoted to obtaining this information.

This is an imperfect, partial solution. But it’s better than either of the horns of the dilemma presented above.

As a footnote. The other potential improvement here is to write labour standards into trade agreements (and actually follow up on this). Most economists hate this (“oh noes don’t limit teh free trade!”). Me I’m kind of in favour: I think in theory it would work. Although in practice, in the messy world of enforcement, political economy, unequal power, and trade agreement negotiations, it may well not.

September 24, 2010

All the Views Fit to Print

Filed under: Aid,Trade — terence @ 8:29 pm
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More Aidwatch watching. Sorry…

Poor old Bill. Such is the life of a sceptic. While Jeffrey Sachs gets actual print column inches he’s reduced to the online edition.

Although having read his column, I’m inclined to think the FT may have been doing its print subscribers a favour.

I mean, the guy’s academic papers are great, and he clearly knows and cares a lot about development, but his polemics are excruciating. The FT missive being a case in point.

The problems:

1. He writes:  “Of the eight goals, only the eighth faintly recognises private investment, through its call for a “non-discriminatory trading system”. Which, although you’d never learn this from Easterly’s column, is because the first seven goals are not about means at all. They are measures of ends. And for what it’s worth teh aid (boo! hiss!) gets the exact same weighting as trade under goal 8 (have a look yourself).

2. He writes: “But current experience and history both speak loudly that the only real engine of growth out of poverty is private business, and there is no evidence that aid fuels such growth.” Except that there is evidence that aid leads to higher rates of economic growth. For example, here and here). It is true that the methodological issues associated with aid growth regressions mean that such evidence isn’t particularly reliable. But it’s evidence nonetheless. And the fact that we have difficulties finding more evidence may be as much a result of the difficulties inherent in cross country growth regressions, as a product of the limitations of aid. Complicated – yes. Uncertain – yes. But definitely not the same as “no evidence”.

3. Throughout the column he implies that almost all the campaigning effort associated with the MDGs has been about aid while there’s been near silence on trade. Once again, this just isn’t true. I mean have a read of Sachs’ book the End of Poverty. Trade is most definitely mentioned. Or have a look at the campaign platforms of MakePovertyHistory (NZ, UK) or the One Campaign. People campaign on trade. They really do.

4. And if you’re going to be pedantic about it, the econometric evidence that reducing remaining trade barriers would lead to sustained increased economic growth (different from static benefits) is, to be generous, about as strong as the evidence for an aid-> growth relationship.

Easterly laments the fact that aid sceptics get so little press. This is a dubious claim but let’s grant it for now. If it’s really so hard for Bill to make his voice heard, why, when he finally gets the chance, does he waste it with platitudes and erroneous claims? Why? I really have no idea.

[Update: More evidence for point 3 - Chris Blattman stumbles across Bono arguing Africa needs trade more than aid. Yes, Bono. Myopically aid focused advocates do. not. exist.]

September 7, 2010

Lazy linking…

Filed under: Random Musings — terence @ 6:58 pm
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Yikes. All of a sudden, the year has caught up with me, and I’m frantic. Which means too busy to post normally. And so, just to keep things ticking over, some links…

First, a gated NBER study from Krishna, Mitra and Sundaram. The interesting bit from the abstract:

Our study confirms that though trade liberalization can bring gains, there is scope for policy to ensure that these gains are distributed more equally across sub-national regions. Our results highlight the importance of developing infrastructure including equipped ports, better and more extensive roads and communication links in exploiting gains from international trade.

Did anybody say aid for trade?

Meanwhile at VoxEU industrial policy takes a turn:

Why have China and India been able to grow so quickly? This column argues that while the industrial policies pursued by both countries up until the 1980s led to gross mistakes and inefficiencies, China and India would not be where they are now without them. Their export baskets are far more sophisticated and diversified than expected given their income per capita.

On to papers that I really must read once they come out. Deaton and Kahneman look to have something very interesting coming up on wealth and happiness. Diminishing marginal returns? Oh yeah.

Over at Aid Thoughts, prompted by the ongoing Hayek adulation at Aidwatch Ranil has a great post on human rights.

While we’re at it, now’s probably as good a time as any to link to Delong on Hayek on Democracy. As yes, teh Hayek, wasn’t he just allll about freedom?

Next, Johnny Blades has an article in the Guardian about New Zealand Aid work in Tuvalu. Johnny’s a great journalist and an old friend of mine, and the article’s good. However, in a perfect world I reckon it might have contained a bit more debate on just what’s good practice in the world of aid. From reading it, it certainly seems like New Zealand is opting for a the ‘give a man a fish’ approach to ODA in Tuvalu. This, in case you were wondering, is contrasted with the “teach a man to fish” approach (both taken from the old aid cliché). In other words, is sounds like we’re just getting in there in doing stuff rather than working carefully to strengthen the Tuvaluan government so that they do stuff themselves. And, on one hand, that’s fine. If you want a job done do it yourself and all that. On the other hand, we did try an awful lot of that sort of aid in the 1970s only to find it wasn’t really sustainable – communities that didn’t own and participate in the development of aid projects subsequently tended to neglect them. Might this be the ultimate outcome of the Tuvalu work? Who knows? If it was would it matter? Perhaps not, I guess, if you don’t mind giving the same aid more or less again and again. Which is problematic. But then again, if it gets things done…

Finally, three cheers for the Queen! (and Owen Barder) Her Majesty’s government has a parliamentary library, which has online a great series of statistics for beginners type articles. And her Majesty’s aid blogger has very kindly linked to it. :)

July 9, 2010

Link Friday

Filed under: Aid,Governance,Institutions,Social Justice,Trade — terence @ 12:13 pm
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Starting with industrial policy…

At VoxEU Ann Harrison and Andres Rodriguez-Clare make the case for “soft industrial policy”…

…whose goal is to develop a process whereby government, industry, and cluster-level private organisations can collaborate on interventions that can directly increase productivity. The idea is to shift the attention from interventions that distort prices to interventions that deal directly with the coordination problems that keep productivity low in existing or raising sectors. Thus, instead of tariffs, export subsidies, and tax breaks for foreign corporations, we think of programmes and grants to help particular clusters by increasing the supply of skilled workers, encouraging technology adoption, and improving regulation and infrastructure. While “hard” industrial policy is easier to implement than “soft” industrial policy measures, tariffs and subsidies become entrenched and are more easily subject to manipulation by interest groups.

The article is an excellent overview of the industrial policy debate, and their suggestion certainly has appeal. As always though, I’m still not confident that what they’re arguing for could really work in the institutional environment of developing countries, or that it would be any less subject to manipulation by interest groups than traditional industrial policy. Still, well worth a read.

Meanwhile, industrial policy is now on the menu at the World Bank, courtesy of their interesting new chief economist Justin Lin. And at Poverty to Power Duncan Green reviews some of Lin’s suggestions for industrial policy, offering similar concerns about feasibility in less than optimal institutional environments. To which Lin offers a thoughtful response.

Sticking with Oxfam, Oxfam New Zealand, spurred by last year’s Ministerially mandated change of focus to New Zealand’s aid programme (the core focus now being on economic development), have produced a really interesting piece of research [pdf] on what might work in terms of aid for economic development in the Pacific.

Also on the subject of aid, Owen makes an uncharacteristic error in attributing an incorrect figure to William Easterly. And yet the underlying point of his post is correct and bares repeating. The West really, really hasn’t given that much aid to developing countries:

The G-20 countries have, over the whole history of aid, given less aid to sub-Saharan Africa than they spent on fiscal stimulus in the single year of 2009.

Keeping the segues flowing, William Easterly is at least 50 percent correct in his most recent post at AidWatch:

Here’s why direct solutions to problems cannot foster development. Each direct solution depends on lots of other complementary factors, so the solutions can seldom be generalized across different settings; Solutions must fit each local context. Solutions that generate the highest payoff in each setting should be a higher priority than the lowest payoff solutions. Since there is little or no feedback on how well each solution is working in each local situation, there is little possibility for any such adjustments.

Hear, hear.

Where his post falls apart is in it’s extolling of markets and democracy as the best possible means of finding solutions to the complexities of context. The invisible hand is a miraculous allocational tool, and functioning markets have a critical role to play in enhancing human welfare. But markets are embedded in institutions and when institutions are poor markets are often absent or have perverse outcomes. And in most developing countries institutions are poor. Similarly, democracy is an incredibly good thing. And it’s certainly the least worst means of governance that humans have developed. But in countries where the nation state sits awkwardly against identity and informal institutions, democracy struggles. It’s not a panacea.

Which isn’t to say that economic markets or democratic polities are bad things, even in the most troubled developing countries, but rather that they aren’t the sole answer to the curly problems of aid and development. They’re only part of the answer: compliments to good aid and hard work in determining what works in governance; not alternatives.

Finally (and by now I’m all out of segues) Johann Hari attributes the commodity price crisis, not to rising demand in China, not to supply shocks, not even to ethanol, but rather to investment banks working the futures market. Is he correct? I don’t know. If he is, he’s certainly right about one thing: morally, if not legally, that’s an incredible crime.

May 19, 2010

Hunger thy Neighbour

Filed under: Trade — terence @ 1:21 pm
Tags: , , ,

Walden bellow writes:

The Philippines provides a grim example of how neoliberal economic restructuring transforms a country from a net food exporter to a net food importer. The Philippines is the world’s largest importer of rice.

At a first glance this seems like a meaningless charge to lay at the feet of neo-liberalism. As a country develops, it makes perfect sense that it will start producing less of its own food. Moreover, if rice can be imported cheaper from elsewhere, consumers of rice benefit, and factors of production previously involved in rice growing can reallocate into other enterprises or be compensated. This is hardly the end of the world. England imports most of its food. Is anyone suggesting it should de-industrialise to change this?

On its own a change from being a food exporter to being a food importer is consistent with rising welfare, and orthodox trade theory would suggest it is unproblematic.

However

Imagine for a moment you’re living in a world where demand for food is about to outstrip supply. Where food prices are about to start rising rapidly. A world a bit like this one described by Jeremy Harding in the London Review of Books. A world a bit like our own prior to the Great Recession. What happens in that kind of world? One thing which might happen, if you’re really lucky, is that some bright spark will come up with a new Green Revolution, a way of producing food much more efficiently. If this happens the day of reckoning gets postponed a while.

But if it doesn’t happen things get scary. In the Philippines case, initially, if the price of rice rises enough, the country might become a net food exporter again. Farmers will be better off; urban consumers worse. Walden Bello might be happy. However, if prices keep rising, acquiring food becomes a real problem for anyone who is not either wealthy or benefiting from rice exports. Then political economy kicks in. All of a sudden the masses start asking: ‘Why are we exporting rice when people here starve?’; ‘Why should farmers get rich while others suffer?’ These are perfectly reasonable questions. And if prices rise enough, and if enough people are made worse off, governments will likely act. Ideally, by taxing farm profits and redistributing income to those hurting from food prices. But such policies – tax and transfer – don’t always work very well in the shaky institutional environments of developing countries. Instead, what is likely is export controls – preventing or restricting the export of rice. This is pretty much what Argentina did with beef in 2006.

Such policy makes sense for an individual country. Just like raising tariffs did for individual countries in the face of the Great Depression. They make sense for any one individual country acting on its own. But if everyone does it (or at least all the big food exporters do) then everyone becomes worse of. Global trade in food starts to unravel compounding the already existing issues and everyone has less of everything. Call it hunger thy neighbour. Coming to a planet near you*.

*Or, more accurately, maybe coming to a planet near you. But let’s really, really hope it doesn’t.

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