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Trade & Development

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John Medaille

on 8 November 2016

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Transcript of Trade & Development

Trade, Development & Justice
Justice as a Practical Problem
The World Bank & Development Strategies
The Values & Problems of Trade
Trade & Development
Justice & Development
Flawed Philosophy
The Growing Gap
Donor Fatigue
Donor Fatigue
A Growing Gap
Flawed Philosophy
Justice & Development
Opened our markets
Opened our borders
Great institutions for development
Transferred trillions
And we give
Each day, a new appeal
A less stable world
"Development" which did not take place
Un-repayable debts
Going backwards
Within countries
Between rich & poor countries
Kuznets Curve (1955)
Kuznets remains dogmatic!
Data has contradicted it
...tainted by wishful thinking."
...95% speculation...
"5% data...
...then decreases
Initially, inequality increases...
Need real examples
Import poverty
and the developed
both the developing country
Injustice destabilizes
No development w/o justice
The Volta River Dam
A Tale of Two Nations
The Failed SAPs
Bretton Woods
Bretton Woods
Structural Adjustment Programs
A Tale of Two Nations
The Volta Dam
World War II
The Tragedy of Versailles
The Marshall Plan
Rebuilding Europe
Dams, airports, highways, etc.
Instant Westernization
Three phases:
"Third World" Aid
An enlightened policy
US Agency for International Development
World Bank - International Monetary Fund
Fixed exchange rates based on the dollar
John Maynard Keynes
The threat of Communism
Or a different problem?
A model for the developing world?
Quick recovery
Credits to buy American goods
Europe & Japan were "flat"
"Structural Adjustment Programs" (SAP)
"Human Development"
"Instant Westernization"
The "Gold Coast"
Ghana
1968 - 1980's
"Human Development"
LDC's could not service debt
Debt Service
Reversion to autocratic rule under KGB agent
Russia
Dams displaced 10 million people
Enriched elites at public expense
Disrupted local economies
Big projects
High debts, Low value
Little impact
More expensive then dams
Birth control, education, etc.
Balanced budgets
Conditions
Stagnant Growth
Failure
Was it designed to fail?
Why Did It Fail?
Free Market Evangelism
Required to follow "pure" free market
WB/IMF imposed conditions for rescheduling
Cut social programs
Labor market "flexibility"
Open stock markets
"Privatization"
Currency devaluation
Trade liberalization
Resource extraction
Loss of ownership
Instability
Economic disaster (Argentina)
And never worked
Enforced a doctrine that had rarely been tried
No country--ever--developed on "pure" free market principles
...but not a sufficient one
Market a necessary condition..
An economic "science" that knows all
Social Engineering
Neither sought nor accepted loans
China
Russian Collapse
IMF/WB aid & advice
Harvard "wunderkind"
Knew nothing of the Russia
"Shock therapy" and "instant" free markets
Ignored de facto property rights
Coops, employee buyouts, etc., not tried
Russia & China
"Instant" stock market
Imposed solutions that had never worked
Outsmarted by gangsters, KGB agents
Ordinary Russian stripped of rights
Wealth passed to the "oligarchs"
Financier of America
Industrial powerhouse in 10 years
Extend successes nationally
Try it locally
"Incrementalism"
Blame is always local
"Backward" nations have nothing to teach
Divorced from politics, culture, etc
.
"Backward people"
The Blame
First President
Kwame Nkrumah
80,000 displaced farmers
Ghana got..
Cheap labor
Kaiser Got...
Nkrumah's dream for Ghana
Akosomba Dam
WB/USAID 50% financing
Kaiser Aluminium
Cocoa trade
Educated elite
Foreign reserves
Independence 1957
Wealthy & advanced
Bauxite
Rapid industrialization
Embarrassed by native economy
"Osagyefo" (Redeemer)
Pan-African Socialism
High value exports
"Instant Westernization"
Development of the mines
Smelter
Electrification
Nkrumah overthrown in CIA-backed coup
Smelter took all of the electricity
Refused the local bauxite
Demanded free electricity
Kaiser to build the smelter
Pliant regime
Subsidized electricity
And something worse...
Military dictatorship
High, un-repayable debts
Tribal war
Loss of 4% of their arable land
These conditions were imposed on Ghana
Fits a racial stereotype
Unsuited to the modern world
Unsuited to democracy
Corrupt
Protectionism
"Free" Trade
Perversions of Trade
Benefits of Trade
Self-Sufficiency?
We are made for cooperation
Absolutely dependent
Relatively independent
But not for exploitation
Benefits of Trade
To the traders
To The Traders
Each of the parties benefits
Economic Benefits
Specialization
Justice in Trade
Fair values on both sides
Perversions of Trade
Success depends on justice
Social Benefits
Greater employment
Free Trade & Fair Trade
Comparative Advantage
Social benefits
Economic benefits
Can the trader be a traitor?
Just the traders, or their nations as well?
Who are the "parties" to a trade?
Lowest, but indispensable, value
More stability
Greater range of goods
Wider markets
Constituency for peace
Broadening of culture
Spread of learning
Oppression/Insecurity
Lowers wealth (& well-being) in both countries
Constituency for War
Seek control of resources
Nationalism
Injustice creates pressure to emigrate
Nationalism
Constituency for war
Insecurity
Oppression
Fair value to both sides
Tends towards balanced trade
Become trading partners
Creates internal markets
Living wage appropriate to each culture
Forget how to make things
Lose manufacturing base
Both countries sink into debt
Workers compete with subsistence wage
Imports poverty
Iraq & the Middle East
War party mentality
Control of trade routes
Competition for jobs creates fear of immigrants
Comparative Advantage
Both sides benefit from specialization
Protectionism
Tariffs to keep goods out
Free Trade & Hypocrisy
There are no "free trade" agreements
Fair Trade
Use of tariffs & trade policy to:
Hypocrisy of Free Trade
Fair Trade
Protectionism
Balanced trade
Full employment
Immobility of capital
3 Conditions:
Even if one does everything better
Useful tool for short-term goals
...protection is not the solution
If trade is not the problem...
Political problems
Ensure balance
Account for regulatory burdens
Rectify injustice
Dutch butter in Nairobi
Mexican farmers & NAFTA
Examples:
Poor countries forced to compete on an unequal footing
Complex documents detailing terms of trade
Successful development...
...downward slope.
Neo-colonialism
Examples
"Backward" Cities
Cycles of Development
Cycles of Development
Initial Wealth
Trade begins in cities
Failures
No internal markets
Foreign Aid
Disaster relief
Processes this wealth for shipment
Farm, fisheries, mines, etc.
Initial wealth of countryside
"National" economy = sum of city economies
With proceeds, imports products
Import Substitution
Crucial step
But also increases imports
Increases exports
Enriches business life of the city
Make imported products locally
Cycle of Trade
Real Wealth
Substitution
Imports
Exports
The purpose of trade:
E.G., China
Export dependency = fragility
Business breeds business
Develop internal markets
Examples
Ended in poverty
No import substitution
Cattle wealth
Uruguay
Most important city of Renaissance
Followed trade cycle
Supply region for Constantinople
Venice
Trade & Development
Debt slavery
Replaces production
Financial control
Imbalance
Mercantilism
Signature of injustice
Export dependency
Increasing poverty
Internal imbalance
Neo-colonialism
Strategies for Development
Invest in human capital
Technology transfer
Moderate outsourcing
Continuous improvement
Operational experience
Strategies for Development
Strategies for Development
Access to land & Capital
Substitute high- cost goods
"Backward" cities need each other
Partners at same level
Human creativity
Breakup large holdings
Right technology
Replace high-cost imports with local products
Import substitution
Multi-purpose
Simple
Health, safety, education
Example
Servant of foreign policy
Israel $3.1B
Afghanistan $2.3
Pakistan $2B
Egypt $1.7B
Props up dictators
Military aid
Corruption
Taiwan in 1947
Immanent danger of invasion/subversion
2 million refugees
Small group of landowners
Tenant farmers (50%)
Feudal Backwater
"Land to the Tiller"
Landlords became urban capitalists
466,000 families became owners
Landlords got industrial bonds
Japan, Korea, Taiwan
Tenants got land at low cost
Results
Farmers
High-value, labor intensive crops
Disposable income
Expansion of 5.6%/year thru 1970
Work harder on your own land
Multi-cropping
Landlords
Instant consumer market
Became power in steel, ships, electronics
Started with crude products
Became urban capitalists
"Invest or die"
Society
Literacy 45% -> 93%
Stable, equitable society
Unemployment 2-3% (5% in 2000)
Living space/person 4.6 sq/m to 24 sq/m
Caloric intake 2,000 -> 3,000
Life expectancy 59 -> 74 years
Justice
Economic Order
Increased access to land/capital
Increased demand precedes increased supply
Bottom-up vs. top-down
Cannot develop in presence of wealth concentration
Decreasing inequality
Justice the key to development
Development is the key to peace and stability
Removes standard of judgment
Kuznets curve as excuse for failure
Full transcript