Owen abroad

Archive for February, 2005

The prolific Brad DeLong, an economist here at Berkeley (where I am a visiting scholar), makes a good case for the US to do everything it can to help China and India to develop.

It is very important for the late-twenty first century national security of the United States that, fifty years from now, schoolchildren in India and China be taught that America is their friend and that did all it could to help them become rich. It is very important that they not be taught that America wishes that they were still barefoot and powerless, and has done all it can to keep them so.

The Adam Smith Institute is known for its robust support for free markets. Their blog is always interesting and often well-informed; and they enjoy taking unconventional positions on topical policy issues. But every so often, the position they take is not well thought through, and not consistent with their general philosophy. It feels as if they are just being contrary for the sake of it.

Today’s blog by Alex Singleton on Fair Trade is an example of this. He criticises Fair Trade, because he says it depresses world coffee prices.

Of the 2 pounds that you pay for a normal cappucino in London, the coffee producer may earn about 5p. Some consumers – me among them – prefer to buy products that pay a fair price to the producers who supply them; and are willing to pay extra for this. This is a legitimate preference. The Fairtrade system enables us to do this, by buying products that have a symbol that tells us that the producers have received more than the market price for the commodities they have produced.

Fair trade is a good example of the market supplying goods and services in response to demand. Consumers are not required to buy fair trade products; but if this is what we prefer, the fair trade certification system enables us to do so. The Adam Smith Institute should welcome the expansion of consumer choice that this provides us.

Fair traded coffee alone results in more than $30 million a year additional income for coffee producers, which in turn supports them, their families and their communities. I would have expected the Adam Smith Institute to support, not criticize, a mechanism that enables the poor to trade their way out of poverty.

With apologies for the length of the post, I think it is worth rebutting each of Mr Singleton’s points in turn. In most cases, it is not that the point is factually inaccurate: just that Mr Singleton has drawn the wrong conclusion from it.

We do not have free trade in farming. Rich countries engage in unfree trade. Developing country farmers are held back by unfree trade, not free trade.

Agreed. The hypocrisy of rich country trading arrangements is one reason why some consumers in rich countries want to choose products which provide some redress, if only a little. It is entirely consistent to want to see the Common Agricultural Policy reformed or abolished, and to want to buy fair traded products.

Fairtrade appeals to a minority of buyers. Only 1% of the world’s coffee is Fairtrade. Most people buy according to price and quality.

It is true that fair traded products have a small market share, though this is changing fast. The market share for fair traded coffee is doubling every two years, and it is the fastest growing segment among speciality coffees. But in any case, why should the relatively small size of the market (so far) be a reason for consumers not to have this choice?

Fairtrade helps relieve middle-class guilt. By so doing, it takes the emphasis away from the real problem: Europe’s agricultural policies.

Fair trade and reform of the Common Agricultural Policy are basically unconnected. But if anything, the opposite is true. By buying Fairtrade, consumers are demonstrating that they care whether farmers in developing countries get a decent price for their product, and so adding to the pressure to reform Europe’s agricultural policies.

Mechanization means that only a small proportion of the world’s coffee producers are actually needed. In Brazil five people and a machine produce the same amount of coffee as 500 people in Guatemala. We should help people adapt, not encourage them to stay in outdated jobs.

Buying Fairtrade gives developing country producers additional income which enables them to invest, in themselves and their children, and so provides opportunities for them to adapt.

Coffee prices are low because there is too much being produced, not because of the actions of multinational companies. Companies like Starbucks have helped increase consumption of coffee, which is good for producers.

Absolutely. Fairtrade seeks to increase, not reduce coffee consumption. But it allows consumers to choose to buy and drink coffee that pays a fair return to coffee producers.

25% of the world’s Fairtrade coffee comes from Mexico, a relatively affluent country where the average income is $9000 (compared with $700 for Ethiopia). Mexico enjoys free trade agreements with the USA and Europe, and most of its jobs are industrial and service sector jobs. By helping Mexicans stay in the market, the Fairtrade scheme keeps the world price of coffee down and takes business away from poor coffee producers.

It is true that Mexico is, on average, richer than Ethiopia, though it is also very unequal, and there are still many poor people in Mexico. More than a quarter of Mexicans live on less than $2 per day. More importantly, it is economic nonsense to suggest that for consumers to be willing to pay more for coffee, in order to ensure a proper return for the producers, can somehow depress the world price of coffee.

Markets convey information through prices. The low price of coffee tells producers to produce more cheaply or exit the market. At the end of the day, too much coffee is being produced.

Markets do indeed convey information through prices. One piece of information that prices can convey is that some, though not all, consumers have a preference for products which have not been supplied at the expense of very low and uncertain returns to the producers. The Fairtrade scheme enables the market to translate this consumer preference into purchasing decisions. Without it, there would be no way for consumers to express this preference.

If too much coffee is being produced, it is not because of fair trade coffee. (If the Adam Smith Institute wants to make a well-informed point about this, it could look more closely at World Bank subsidies to coffee production in Viet Nam, which may well have depressed world coffee prices; but that is a quite separate debate).

Jeff Sachs, the economist who heads the United Nations’ Millennium Development Project says in "The End of Poverty":

Every morning, our newspapers could report, ‘More than 20,000 people perished yesterday of extreme poverty.’

The New York Times rose to that challenge with its editorial yesterday (27 February – registration required).

This country is going to spend more than $400 billion on the military this year, and another $100 billion or so for military operations in Iraq and Afghanistan. But that amount is never going to buy Americans peace if the government continues to spend an anemic $16 billion – the Pentagon budget is 25 times that size – in foreign aid that addresses the plight of the poorest of the world’s poor. Throughout the continent of Africa, thousands of people die needlessly every day from diseases like AIDS, tuberculosis and malaria. One hundred years ago, before we had the medical know-how to eradicate these illnesses, this might have been acceptable. But we are the first generation able to afford to end poverty and the diseases it spawns. It’s past time we step up to the plate. We are all responsible for choosing to view the tsunami victims in Southeast Asia as more deserving of our help than the malaria victims in Africa. … Yesterday, more than 20,000 people perished of extreme poverty.

I am ready to criticise the press when they report inaccurately or (more usually) fail to report at all what is happening. So I am happy to give the New York Times the credit it deserves for this excellent editorial.

Brian Sedgemore, who is retiring from Parliament at the next election, will be sorely missed. His speech during the recent debate on the Government’s proposals for the prevention of terrorism, is a model of passion and clarity. Here is an extract:

However, our debate here tonight is a grim reminder of how the Prime Minister and the Home Secretary are betraying some of Labour’s most cherished beliefs. Not content with tossing aside the ideas and ideals that inspire and inform ideology, they seem to be giving up on values too. Liberty, without which democracy has no meaning, and the rule of law, without which state power cannot be contained, look to Parliament for their protection, but this Parliament, sad to say, is failing the nation badly. … Many Members have gone nap on the matter. They voted: first, to abolish trial by jury in less serious cases; secondly, to abolish trial by jury in more serious cases; thirdly, to approve an unlawful war; fourthly, to create a gulag at Belmarsh; and fifthly, to lock up innocent people in their homes. It is truly terrifying to imagine what those Members of Parliament will vote for next.I can describe all that only as new Labour’s descent into hell, which is not a place where I want to be.

The UK Government has launched a new website to provide information about IT security. This suggests a somewhat strange idea of what Government is for. The private sector does this sort of thing pretty well – there are lots of websites providing useful and free information about viruses, and there are tools, both free and paid-for, to help you remove viruses if you have a problem. I’ve got nothing against socialist governments: but why can’t we have the kind of socialist government that believes in not locking people up without trial, raising taxes to improve public services, and not going to war unnecessarily and without the backing of the United Nations, instead of the sort that believes in spending taxpayers’ money unnecessarily on doing things that are done perfectly well by the private sector?

Today is my birthday: I am 38. Which is the same age as Carlos Lopes was on April 20th, 1985, when he set the world marathon record of 2h7m12 s. It all just goes on getting better. So far.

The existing powers of imprisonment without trial lapse on March 14. Charles Clarke, the Home Secretary, apparently intends to introduce new counter-terrorism legislation to replace them. (The existing laws were heavily criticised by the law lords.) The proposals will give the Home Secretary the power to order that a terror suspect, British or foreign, be placed under surveillance, curfew and other restrictions, up to and including house arrest (though the Home Office never uses this phrase). Three fundamental principles of justice and liberty are stake.

First, it should be for the courts, not politicians, to decide who should be imprisoned.

Second, the powers will apply not only to crimes that have been committed, but also to crimes that the authorities expect to be committed. In other words, you will be liable for punishment even if you have committed no crime. (The recent film, Minority Report, portrayed a society with pre-emptive punishment.)

Third, you will be liable to be imprisoned on the basis of evidence that you have not seen and which you have had no opportunity to rebut. Dismantling these basic principles of freedom and justice is not a way to win the so-called war on terrorism: it is a victory for terrorism.

My father has been running an energetic campaign against these laws, including by resigning his position on the Special Immigration Appeals Tribunal, in protest at the extension of the powers of that tribunal (the powers which the law lords subsequently criticised). You can read his writings about the issues here. Please write to your MP about this. Our freedoms are at stake.

Tony Hatfield's blog quotes a majestic passage from A Man for All Seasons, by Robert Bolt.

“Father”, says Margaret “That man is bad”. “There is no law against that”, More replies. And he continues: “The law, Roper, the law. I know what’s legal, not what’s right. And I’ll stick to what’s legal”. Meanwhile, Richard Rich has scarpered. “And go he should”, says More “if he was the devil himself until he broke the law”. But Roper protests. "He would cut a great road through the law to get after the Devil." More replies. “And when the last law was down, and the Devil turned round on you – where would you hide, Roper, the laws all being flat? This country’s planted thick with laws from coast to coast, and if you cut them down do you really think you could stand upright in the winds that would blow then?”

Take a trip down memory lane. Mobile PC has compiled a list of the top 100 gadgets of all time.

See if you can guess what number one is going to be. (It is obvious to anyone who lives in San Francisco.)

You may not have noticed the footer on every page of this website which allows the use of the content of the site under the creative commons licence. The Creative Commons organisation has announced today that the number of sites linked to one of their licences now exceeds 5 million.

And the firefox web browser has topped 20 million downloads. On some websites, especially those visited by the technically aware, visitors using Firefox outnumber those using Microsoft IE (see the Boing Boing stats page, for example.)

There’s a slow-burning revolution going on.

Steven M Walt – academic dean and Professor of International Affairs at the John F. Kennedy School of Government at Harvard University – has a long, balanced article in the current edition Boston Review about US Foreign Policy. He concludes:

What is needed instead is greater confidence in America’s fundamental principles and institutions and greater wisdom in understanding what its power can and cannot accomplish. America’s core values of liberty and opportunity provide the energy upon which our economic prosperity is built. That prosperity, in turn, provides the sinews of our military power and the core of our international influence. But our ability to defeat other armies and our influence over the world economy does not give the United States either the right or the ability to impose these principles on others, and it hardly gives five percent of the world’s population the capacity to govern vast areas of the world by force. Instead of telling the world what to do and how to live-a temptation that both neoconservative empire-builders and liberal internationalists find hard to resist-the United States should lead the world primarily by its example. If we have faith in our principles, we will expect to win hearts and minds because others will see how we live and see what we have, and they will want those things too.

I tried hard not to comment on the debate about Ken Livingstone’s remarks; but if the Prime Minister thinks it is important enough to express an opinion, I suppose it is open season.

First, some facts. Livingstone did not say that Mr Finegold was "behaving like" a concentration camp guard, contrary to reports on the BBC, Times, CNN, etc.

According to this transcript, this is how the conversation went:

Finegold: Mr Livingstone, Evening Standard. How did tonight go?