fairness

Exploiting the Poor: International Trade

by Alex Schibuola on October 20, 2010 · 3 comments

in International, Labor, Trade

On last week’s Stossel (no video available yet), was mentioned that rich countries gain their wealth through the exploitation of poor countries. Professor Marc Hill of Columbia University opined that businesses operating in poor countries ought to pay workers an extra dollar per hour for their services. It’s a very nice thought at first; however, there’s no such thing as a free lunch (as I’ve mentioned — but it’s one of those things one can never say enough).

While companies could pay an extra dollar per hour of work, this increases the costs of producing their output. Let’s say that it’s shoes. Higher wages increase the costs of production and lead to a reduced supply of shoes. A lower supply of shoes entails a higher price for shoes and a lower quantity of shoes demanded (because people can’t afford the same amount at the higher prices). The reduced supply of shoes also means something more subtle: you need fewer workers to produce a reduced supply. While the workers who keep their jobs do benefit, what about the workers who lose their jobs?

This is one aspect of “fair trade” advocates that I find abhorrent. After imposing fairness, they completely ignore the unintended consequences of their “fairness.” They forget about the workers who lost their jobs as a result of “fairness.” In instances where attempts at free trade were subverted under the guise of waiting for fair trade, they forget about the workers who never even got the chance to take jobs.

Fair traders, by virtue of their actions, say, “Yes, so they’re starving and impoverished, and have lower economic growth, but at least they don’t have to work in sweatshops earning unfair wages. Besides it’s not a consequence of my fairness, it’s because of greedy capitalists. Now, I can sleep better at night, knowing that I created some positive benefits.” Even though the costs were far greater.

This same logic applies to the minimum wage as well.

The Social Evolution of Markets

by Marc Scribner on March 23, 2010

in Culture, Economy, International, Trade, Zeitgeist

Socialists and other collectivists frequently argue that markets are inherently “inhumane” and “unjust,” among other things. Free-market advocates generally dismiss these claims on their face as inconsistent with reality and human nature. Collectivists then often respond by making ridiculous appeals to tribalism and defunct ancient societies. (ED: Why did these societies fail?) Repeat, repeat, repeat.

A new study (subscription required) published in Science aims to shed light on this issue, and the authors come to a surprising (for some) conclusion: human society evolved to foster the sort of anonymous trust characterizing market interactions, and that this in turn enforces a standard of equity. Until about 10,000 years ago, human beings were organized in familial units or tribal societies where members were protected and cared for, but outsiders violently shunned. Treating non-kin badly was not just a common practice; it was necessary in order to sustain the primitive social order. Odds are that the outsiders were gunning for you just as much as you were gunning for them.

The researchers found that adopting markets and setting a wider playing field, so to speak, based on shared ground rules was vastly more successful than the tribal system, and it spread fast. Once people discovered mutually beneficial trade with strangers was possible, they tossed aside their previous norms because kin- or tribe-based social interactions were incredibly limiting. And because everyone shared a common set of basic values (reinforced by the spread of global religions and population growth), fairness as defined by the society increased.

This gradual process continues to this day, say the authors, which will likely lead to a more complex, yet still fairer society in the future.

Confiscating wealth in the name of fairness

by Fran Smith on June 10, 2009 · 1 comment

in Economy, Features, Personal Liberty, Zeitgeist

An excellent article in the June issue of Commentary Magazine, taking to task President Obama’s broad attacks on the wealth-producers in American society in the name of fairness.  Author Francis Cianfrocca in “Wealth creation under attack”  points out the flaws in this reasoning:

The United States is organized on the principle of the consent of the governed. Power and legitimacy do not flow from the state to the people, but the other way around. In this respect, what individuals do is entirely their own business, just so long as they do not violate the law or the sovereignty of other citizens. Generating wealth is therefore no different from any other private human activity; it is and should remain private, outside the reach of government, until the point at which it impinges on others.

This is a philosophical understanding of American society with which Obama and his policymakers are not in immediate sympathy. They are not opposed to wealth generation; nothing they say indicates any such thing. But they do not see it as a private activity. Rather, they see it as a human endeavor that can and should be harnessed to aid in producing the social changes they believe are most beneficial for the greatest number of people. In the view of the Obamaites, private wealth is not a bad thing, but neither is it a good thing; it is only good if it can be used in furtherance of large-scale public goals.

But this understanding is deeply flawed, because it fails to take into account the factors that motivate the generation of wealth. Those who work to get rich are not doing so because they are seeking to provide enhanced tax receipts for the government, or to make it easier for government to do what elected officials and unelected bureaucrats think is best. They are, rather, fulfilling basic human desires—to excel, to succeed, to best the other person, to show the old man. Those desires provide the drive. The drive provides the wealth. The wealth provides the ancillary benefit for others. And the act of wealth creation itself creates opportunities for others. Americans pursue business and wealth for their own reasons, and we should be deeply hesitant to throw those out with the proverbial bathwater. The unintended consequences of such action could be catastrophic.

Cianfrocca concludes with an eloquent paen to freedom — and the ability to create wealth:

More generally, the United States under Barack Obama may be taking a hatchet to a pillar of the American social contract, which is that Americans should be free of encumbrance in their pursuit of private wealth. The pursuit of prosperity made America the most prosperous nation on earth. The excessive pursuit of fairness at the expense of wealth creation will not make America fairer. It will, however, make America poorer—and less free.