Free Trade v Fair Trade
A Debate Organised by Christian Aid
St Margaret’s Church, Westminster
The Evening of Friday 15th April 2005
12:15am – 1:15 am
A Speech Together with Introduction and Brief Commentary
by Sean Gabb
I took a telephone call about a week ago from a young man called Leo Bryant. He worked for Christian Aid, he said, and was organising a joint conference with Oxfam on world poverty. Would I like to sit on the panel and debate the issue? The provisional title of the debate was “Free Trade v Fair Trade”. Would I speak for free trade? I should normally have said yes at once. The conference was to be in St Margaret’s Church in Westminster, and would draw an audience of around 700. I had long been scandalised by the socialist takeover of English Christianity, and this would be the closest I might ever get to addressing one of my sermons to a real congregation.
The problem was the timing. The whole event was set for Friday evening, and my debate was to be after midnight. I thought of having to wander round Central London with nowhere to go between the closing of my university and the beginning of the debate, and was inclined to turn Mr Bryant down. But he offered me a bed for the night, and urged on me the size of the audience. So I agreed.
As it happened, Central London was just as cold and lonely as I had expected. But there I finally sat last night, about 20 feet in front of the altar in St Margaret’s. Beside me was Alex Singleton from the Globalisation Institute. Beside him was Alan Beattie of The Financial Times, who would chair the meeting. Beyond sat Martin Khor from Third World Network and Prosper Heoyi from Oxfam. Before me was the large audience I had been promised. They were a fragment of a vast procession that had streamed all evening through Westminster, waving banners and candles and singing the rather feeble stuff that has since the 1960s passed for religious music.
Not all was grim, though. I had some friends there. David Carr, David Goldstone, Paul Coulam and a few others had braved cold and boredom to be there. More would have come, but were appalled by the timing of the event.
We began with Alex Singleton. He put the case for free trade in its most orthodox form. Trade benefitted both parties, he said. It was not an act of charity for us to open our markets to poor countries, but obvious self-interest. As for the poor countries themselves, those that had liberalised their domestic economies and opened up to foreign trade and investment had enjoyed the best growth rates over the past few decades. It was all true and all very well said.
I had expected to speak at the end of the debate. I had agreed with Mr Singleton that he should use the first five minutes to put the case for, and that I should use the next to last five minutes. However, Mr Beattie turned to me and asked me to go next. This was a nuisance. I had been settling into a gentle doze in preparation for the fair traders, and I think it was amusingly plain to the audience how I unprepared I was for immediate action. However, I had written and largely memorised a speech, and I delivered this, cutting where necessary to fit it into the time available.
Though I was praised afterwards, I know that I am a poor speaker for short occasions. I am not frightened by large audiences. I can speak clearly and grammatically. Give me 40 minutes to outline a case, and I can do a fine job. I am, after all, a lecturer. But I do not shine when it comes to the short speech. So it was last night. I had been awake for nearly 20 hours. I had given four lectures during the day. was half asleep. I found my eyes wandering to my text. If praise was due at all, it was for the content of what I was saying, not for my manner of saying it. Yet the speech was a good one. I can write well.
These reservations being made, here is what I said::
If you think that I came here tonight to defend multinational corporations and the international government institutions, you have chosen the wrong person. These are dishonest. They are corrupt. They are incompetent. They have blood on their hands.
But do not suppose for a moment that the world trading order as it actually exists is liberal or more than incidentally connected with free markets. A free market is a place where individuals and groups of individuals come together to transact voluntary exchanges without any backing of government force. To call the actually existing order liberal – or “neo-liberal” – is as taxonomically accurate as calling the old Soviet Communist Party syndicalist. That order is based on tariffs, subsidies and a web of other often invisible regulations. The international institutions are a projection of Western states. The multinational corporations are creatures of these states. They shelter behind the privilege of limited liability. They get their political friends to cartelise markets, and do favours in return.
This is not market liberalism. It is a fraud played on us all by our ruling classes – these being those politicians, bureaucrats, educators, lawyers and media and business people who derive wealth, power and status from an enlarged and activist state.
But this being said, the fair trade solution is easily worse than the problem. The ruling classes in any country never have at heart the best interests of their subjects. But in the West, we can just about afford corporatism. We still have some heritage of market liberalism. Our ruling classes are to some degree restrained in their predations. That is not so in poor countries. The ruling classes there are naked kleptocracies. All that keeps them from utterly starving their unfortunate subjects is their own idleness and incompetence. The fair trade talk may well be of “import substitution” or “rational planning” or “picking local winners”. The reality will be to turn poor countries into sealed territories ruled by the law of the jungle – a jungle in which only the well-connected will survive. Presented in the lilting, caring tones of “helping the poor”, what we have is nothing more than the old Nazi policy of autarky.
Let me give one example of how fair trade works in practice. On the 1st January this year, import taxes were raised in Kenya and in several other African countries on second hand clothing from the West. The stated purpose of this was to give local textile manufacturers the chance to grow big enough to face foreign competition. Of course, the textile interests will never be able to face open competition. Infant industries never grow up. Protect them, and prices rise. Money that would otherwise be saved and invested is spent on paying the higher prices. Money that would otherwise be spent on other goods is spent on paying the higher prices. The country gains a sector in which it may have no comparative advantage—or in which it might have a comparative advantage only in less well-connected hands. Those sectors in which there might be a comparative advantage suffer. But the lucky capitalists who are protected make big profits, and their friends in government collect the usual gifts. And the people at the bottom? Norman Nyaga, a Kenyan Member of Parliament can answer here. Writing in The Kenya Times last month, he accused the Government of deliberately rigging the textile market in favour of some foreign investors. He said the effect would be to damage the livelihood of 10 million Kenyans who work in the second hand clothing sector, and to lower the incomes still further of the 56 per cent of Kenyans who live below the official poverty line and who must buy second hand clothes or go without.
I do not support the present system of world trade. But give me a straight choice between this and the economics of the jungle that is fair trade, and I will choose the present system. Global corporatism may be unfair. But it does at least allow some wealth to be created. It does allow at least some rational economic calculation. Fair trade simply gives even more power to politicians and bureaucrats and favoured business interests in poor countries—that is, to the very people and interests that made and have kept these countries poor.
If you really want to improve the lives of the poorest, forget all this “kumbaya socialism”—which is a cocktail of bad economics and bad theology, held together by self-righteous candle-waving. Either settle for what we have —which, unfair as it is, delivers something—or campaign for a system of real voluntary exchange. Fair trade can never be fair. But free trade can be free.
Had I been giving a lecture rather than a brief speech, I could usefully have elaborated on some of my points. I have written at length elsewhere about the political and economic implications of the Christian faith, and so will not repeat myself here. But I grow increasingly convinced that allowing the creation of joint stock limited liability corporations was one of the greatest legislative mistakes of the 19th century. Their existence is based on a separation of ownership from control. The owners are released from all responsibility. The controllers form a separate class of corporate bureaucrats little different in outlook from civil servants. The usual psychology operates. They will commit immoral acts for their organisations they might not consider committing for themselves. The owners will assent. The legal privileges and unlimited lifespan of these corporations let them grow to enormous size and wealth. The opportunities exist for highly effective immorality. Collectively, they become part of the state apparatus, and work to destroy true, unregulated enterprise.
These corporations could not exist in any natural economic order. I have heard other libertarians argue that they might emerge without legal privilege on some loose contractual basis. But I do not agree. The shareholders would still be liable in tort, and that alone would deter them from any involvement with a business that they did not personally control. As for the utilitarian argument, that large undertakings need large companies, I also disagree. So long as it showed an acceptable return on investment, there is no project too big to be taken on by clusters of sole traders and partnerships. No doubt, things like the Channel Tunnel would not have been built – but I fail to see how not having that would have made the world a poorer place. Even if some highly valuable projects might not be undertaken, their lack would be compensated by the greater general innovation to be expected in an order of small, unregulated firms.
Indeed, the matter of what to do about the corporations is more interesting to me than world poverty. As I said in my speech, people in places like black Africa are poor because they have maniacally corrupt and oppressive governments. They would do better even with the most cartelised global corporatism than left in the clutches of their own rulers. And that is it. But how can this corporatism be replaced by a system of voluntary exchange between legally responsible small firms? I think I have a few answers here, but will give these at another time.
Outside the church, I bumped into the personal assistant for one of the Conservative leaders. The usual sort of well-dressed, well-connected young man on the make who appeals to such people, he insisted I might have brought a few people over to my side had my speech been less “abrasive”. I replied by noting how eight years of being soft and gentle had got his Party nowhere. I also pointed out that five minutes speaking time is best given up to blunt expression, when what is expressed is probably new to the audience. I know that a few mouths had fallen open at my dismissal of “self-righteous candle waving”. But that effect was my intention. I wanted the audience to go away with a few memorable phrases. These might eventually provoke a chain of thought in the hearer’s mind, or be passed on in conversation to someone else more receptive.
There are times when arguments can be won by moderate expression and compromise. But this was not such a time. It was not even a time for argument. An hour chopped into little blocks of comments from the panel and questions from the audience does not allow for argument in any meaningful sense. As said, it was a time for blunt expression.
I wish I had been able to stay longer and have some real arguments, but I could now feel great waves of tiredness sweeping over me. So I went off to bed. The audience remained in the church, singing responses in a language unknown to me and set to music that might have been more suited to lullabies for an idiot child. The rest of the procession had taken to resolute candle waving, and had moved down Whitehall to Downing Street, where hopes were expressed of waking up Tony Blair. A pity, I thought at the time, the Salvation Army had not sent a few of its brass bands to join in the parade.
And that is it. A fuller account would mention the grotesque nonsense uttered by the other speakers. They had obviously never opened an economics textbook in their lives. Nor had most of the audience that so warmly applauded their nonsense. But I cannot be bothered to record any of what was said on the other side. There will be a DVD of the whole event, and this will speak for itself.
On balance, it was worth attending. I waved the flag for the Libertarian Alliance. I handed out several dozen business cards. I might be invited to speak at other events where I can outline my objections in more detail to the heresies of theological socialism. Together with Mr Singleton, I might even have started a few trains of thought in unknown minds.