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Home > Blog > Trade or Aid?
Out of Our Minds
Friday, July 29, 2005 6:49 PM
Trade or Aid?
Anita Sharpe on Business

minnie driver2.bmpWhat's the best way to help impoverished Third-World countries -- give them money or help make it easier for them to sell their products competitively?

'People think more aid will help, but it won't,' actor Minnie Driver told the New York Times. 'Trade is the surest way of decreasing the savage amount of poverty in our world. These countries have got to be able to trade fairly.'

That's why Driver, along with a group of other celebs, including Antonio Banderas and musicians Bono, Michael Stipe and Alanis Morrissette, are lending their names to an Oxfam America ad campaign that rails against farm subsidies paid by U.S., European Union and Japanese governments. These subsidies, the critics argue, flood the planet with artificially cheap crops and the poorer, unsubsidized countries can't compete.

Nevermind the actors and rockers, how can any true capitalist make a case for subsidies?


5 comments

Stephanie - 8/3/2005 9:53:57 PM
pardon my typos...I really can spell...I just didn't go back and proofread.. :-)
Stephanie - 8/3/2005 9:45:27 AM
I am a quilter, and I know how much work goes into producing textiles with embellishments and detailed stitching. So when I see textiles at Pier One, Ikea, Cost Plus and the like...and I see the 'great prices' that they are selling them for...I can only wonder how much they paid the people in those 3rd world countries that actually made it.

As far as I am concerned, I don't care if you live in an indutrial nation, a deloping nation aor a 3rd world nation...people are still human beings and should be paid accordingly...and not according to where they are geographically. I think that there ought to be a World Standard Minimum Wage...no one anywhere on planet earth could be paid less than that standard.
Julie - 8/1/2005 11:47:22 PM
Americans love to buy things cheaply, and we'll have to get over that if we choose 'Trade' rather than 'Aid.' We become outraged when prices go up and delirious when prices go down. IKEA just opened a store in my neighborhood. A friend this week boasted that she bought a set of bedlinens there for some silly price -- something like $2.59. She was giddy. I wanted to share in my buddy's excitement about her find, but instead I wondered aloud whether the workers who cut or sewed or assembled or shipped a set of $2.59 sheets could be paid more than two pennies. I really rained on her parade with that one.
Joe Briefcase - 7/31/2005 10:58:47 PM
There is a lot more to the subsidy issue than meets the eye. Altho it would seem any principled Capitalist might despise them, in this case the very system hangs on it.

This very thing is the focus of the Oxfam campaign. In short... .

Because subsidies allow us to sell something on the free market for far less than a farmer in a non-Western country (sometimes for less than it actually costs to produce), that farmer can't compete. Their governments don't have the means to pay all their farmers a huge chunk of what they need so they can drop their prices. We do. Our givernment taxes you to be able to do this. And before you say we have to do this to allow our farmers to sell their stuff, keep in mind some subsidies take the form of payoffs for crops NOT grown. We pay farmers not to grow things. It's not a matter of a bunch of food sitting there that has to be unloaded. We often pay farmers to produce nothing. The reasons for the subsidy system is darker than most of us know.

It effectively keeps a large number of farmers in developing countries out of the market. In a sense, they are not 'allowed' to compete

Many 'developing' nations have much better sustainable farming than we do, and would in some cases produce better produce for less money... if not for the subsidies which yank the rug out on the market. In a very real sense, we say who gets in the game and who doesn't, rather than letting the best farmer win the market.

If the number of 'developing nation' farmers allowed to compete increased by only 2-3% - if there were 100 farmers selling strawberries if only three more of them were from the nations left out currently - it would shift so much money to these countries there would be no more debt.

No. More. Third World. Debt. Yes, it's that big a deal.

Put another way, in a truly 'free' market, there would be no debt. These countries would compete well enough to sustain themselves. The entire system of debt between Western Countries and the Third World depends on these unfair trade practices. It is not merely a matter of a few bucks here and there. It's the entire system.

The institution of 'debt' as it relates to the developing world would become obsolete if famers were not paid so they can bring their produce to market at ridiculously low prices, As unpleasant as it is to consider, we subsidize farmers not as some sort of 'welfare', but in order to maintain that debt relationship.

Then you know how debt works.... We keep these countries paying off interest at numbers that prohibit them from investing in their own people and infrastructure. For many countries, it's like your credit cards, all they can do is pay down the interest.

Then we use this subsidy issue to control the market to make sure they can never emerge from that debt. God forbid there be an earthquake or tsunami... the budget is already so tight and their debt to us already so great. When they have to borrow more, they do so on our terms.... which usually means signing over much of their public infrastructure to US corporations.

Debt is the key to us taking over the principle industries in other nations. That's something a Capitalist WILL support.

This is why Fair Trade is interesting and important. The US and other Western Nations have effectively stacked the deck to keep half the world out of the market. It's not good old fashioned Capitalism.... debt is linked to every major problem in the developing world, from famine to civil conflict. It isn't just 'winning'. It's choking and starving entire nations. And Fair Trade is a people's movement, sort of an end around on the unfair practices of Western Governements spearheaded by their own people - we all want success and prosperity. Many of us just think we should play fair and don't think there needs to be a loser.

If you buy fairly traded goods, you give some of those farmers a chance. It is possible for the Fair Trade movement to affect that 2-3% shift as it mainstreams. You should follow these links to the Oxfam web site because there is a lot of info there on what I describe and much more.
James Stewart - 7/29/2005 8:03:41 PM
Those who are truly market fundamentalists would have enormous trouble arguing for subsidies, and it has long been one of the deep ironies of international politics that those who shout loudest about 'free trade' are some of the worst at implementing it.

But that isn't to say that there isn't an argument for subsidies, agricultural or otherwise. We need sane policies that will encourage consumption of locally produced agricultural products if we are ever to slow the rate of environmental degradation, and subsidies can help with that. Similarly subsidies can be very useful in poorer countries where local industry has yet to establish a foothold and faces stiff competition from abroad.

That is not, however, an argument for the current approach to trade subsidies employed by the US and EU. Those subsidies are largely received by the richest agribusinesses and often subsidise export products, meaning we as taxpayers are subsidising the destruction of indigenous business in dozens of poor countries.

Subsidies must not be entirely vilified, but they do need to be drastically rethought.

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