Globalize Something Else

I wrote this in April 2002. Unfortunately, everything in it is still essentially accurate.

Last weekend, organizations like Mobilization for Global Justice took time out of their busy schedules to protest the existence of the International Monetary Fund and the World Bank. They also logged a simultaneous, perhaps inadvertent, protest against normal traffic flow in the downtown area. MGJ claims that the IMF and the World Bank work in the service of corporate interests, thus ensuring that the world's poor - and in case you haven't looked lately, that's still most of the world - stay poor.

While the IMF and World Bank have followed some pretty damn misguided policies in their history, it's still hard to believe that they act with the express intent of retarding international development. If MGJ and friends had wanted to protest a body that's taking deliberate steps to hurt developing countries, they should have ditched the IMF and World Bank and headed south down Pennsylvania Avenue. Soon, they'd be at the doorstep of an organization that regularly props up prices, sets illegal quotas, and manipulates the international trade system, all to ensure that the rich stay rich. It's called the U.S. Congress.

To understand just how our elected representatives are screwing over the world's poor, we need to back up and establish some basic principles. First: Free trade is good. If you happily trade your cookie for your classmate's Hershey bar, you both become happier without using any additional resources. Similarly, if you've been buying (say) sugar at one price, and someone else can sell it to you for less and still make a profit, it benefits both of you if you buy sugar from the new guy. There may be consequences associated with your transaction, and then the government should step in, but in general if two people (or firms, or countries) want to trade, they should be able to do so without interference.

Second: We do not have free trade in this world, nor are we as a country pursuing it. This may come as a surprise to those of you who actually believed that President George W. Bush was being sincere in (for example) the State of the Union speech, when he said, "In every region, free markets and free trade and free societies are proving their power to lift lives." Not in the United States, where President Bush just enthusiastically imposed punitive tariffs on imports of steel, adding to our previous trade-restriction mainstays of agriculture and textile tariffs and quotas.

How does this relate to developing countries? Well, you need a lot of labor to produce food and clothing, and developing countries generally have more and cheaper labor than we do. Thus, many developing countries would like to produce these goods and sell them to us. They would make some money, we'd get lower prices on goods we all use, and everybody involved would benefit.

But American farmers and textile manufacturers would be hurt by such imports; if less-expensive imports are allowed in and prices fall, some companies that make a profit now might have to go out of business. Farmers and textile manufacturers have powerful lobbies, and many powerful representatives and senators hail from states dependent on agriculture or textiles.

So Congress is currently preparing to pass a bill allocating $110 billion over ten years to commodity support programs whose purpose is to make farm products more expensive (or, in economics terms, to fix the prices of agricultural products above the world price). The agricultural quotas restrict the amount that countries can export to us, thus making farm products more scarce than need be and driving up the price; tariffs, by making imports more expensive than they need to be, do the same thing. Similar machinations take place in the textile realm. The result is an international trade system in which developing countries can't do what they're best at. And in economics, if you can't do what you're best at, you can't do much at all.

But that's not all, in terms of screwing poor people over. If you've checked the alleys of 18th Street at night lately, you know that we do not lack for poor people in this country either. You also know that poor people often have trouble putting together enough money to buy food and clothing. These programs are specifically designed to artificially raise the prices of food and clothing. We're planning to spend about $208 billion on Food Stamps and nutrition programs over the next 10 years to make food cheaper for poor people and $110 billion on commodities programs to make food more expensive for everyone. By my reckoning, that adds up to a huge amount of wasted money.

You'll note that all these tariffs and quotas are specifically permitted in the framework of the World Trade Organization; that's why the European Union, Japan and Canada (among others) take advantage of them as well. (These restrictions are supposed to be phased out eventually, but you know how rich countries sometimes forget to do things they said they would.) Meanwhile, products that developed countries have an advantage in producing, like machinery and medical supplies, enjoy the benefits of unrestricted trade right now, so that firms in developed countries may do business in developing countries without any undue governmental interference. Ain't international trade grand, if by "grand" you mean "rigged"?

In the past, it has been mostly rightists who have favored removing all trade barriers, not just the ones that developed countries find it convenient to remove, to improve everyone's welfare. But now some leftists are coming around; the famously liberal Oxfam recently took a firm stance for real free trade, noting that tariffs alone cost the world's poor at least $2.5 billion a year in lost foreign exchange. Hopefully right and left will come together soon to make their voices heard over the venal lobbyists and scared congresspeople currently subsidizing the few at the expense of the many. That would truly be a protest worth closing off streets for.

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