Free trade, globalisation and development

shotamoose

So I asked the question on
another thread of how free trade is supposed to help poor countries, when in my view it doesn't. I didn't think being told to read an economics textbook was really a satisfactory answer. So here's what I think, and if anyone disagrees (like some of those from that other thread) I'd like them to say why.

It's a long post, so here it is in a nutshell:
-Rich countries didn't get rich through 'free trade'
-Liberalising trade is bad for poor countries when other countries subsidise their exports
-There is no evidence that liberalising trade has been good for poor countries in recent decades.

First thing to say is that 'free trade' is an academic concept that has never existed in reality. When people talk about free trade they often mean liberalisation of trade, ie a country dropping its import taxes, no longer protecting its native industries and cutting off subsidies to business. The theory of free trade is that if every country did this then we'd all be better off, because every country would be forced by competition to focus on producing what it is naturally best suited to producing - so France makes wine, Switzerland makes cheese and Japan makes 64-bit games processors.

This theory is revealed to be no good as soon as you try to apply it to the real world. Firstly, history shows that today's rich countries didn't get that way by liberalising their trade. No, they protected their industries, destroyed those of competitors in any way they could, expanded overseas markets by fair means or foul, and only liberalised trade when they had a fully developed home economy. The US in particular was extremely protectionist, while Britain used the proceeds of the slave trade and its military might to leap ahead technologically and prise open the markets of anyone it chose. China and India were both subjected to military-economic conquest (their markets opened, their exports blocked or taxed very highly), and both countries regressed from estimated parity with Europe as imperial forces imposed an early, very one-sided version of free trade.

Today, even those who believe in the theory of free trade must eventually accept that it can't be implemented on an unlevel playing field, for example when one or more participants is using subsidies to distort the market. And someone will always be trying to distort the market in their favour.

Take the example of Jamaica's milk industry. In 1992 Jamaican import tariffs on milk powder were reduced and the parallel subsidy for local dairy farming was abolished as a result of conditions attached to a structural adjustment loan, negotiated with the World Bank. The result was that imports of cheap powdered milk from the EU - cheap because the EU was never told to stop subsidising its farmers, and with all that free money they can afford to sell their goods at a cost below even that of a much poorer country - rocketed, and thousands of Jamaican farmers lost their jobs. In this case, liberalising imports was economic suicide for Jamaica.

In fact, it should be obvious that for any developing country, liberalising trade in a context of subsidies that massively distort trade in favour of competitors is not a bright developmental strategy. Yet that is exactly what so many economists and policy experts are telling poor countries what to do. It follows that their motivation cannot be either a desire to see truly free trade or a desire to see poor countries develop.

It's interesting, then, that the present arrangments fit nobody better than the richer countries, who are more likely to subsidise their industries to an extreme (certainly as experienced by other countries) and to get away with it, since the punishment, if any, is so insignificant. After years of talks in the WTO, Jamaica or anyone else might get to slap sanctions on the USA, which is unlikely to even notice. As someone once said on this forum, you need to evaluate each system on how well it reacts to participants refusing to play by the rules. As the Jamaicans and countless others have found out, the 'free trade' regime reacts appallingly poorly.

To repeat: if you believe in the theory of free trade, it is not enough to call for rich countries to stop subsidising. You should be calling on poor countries to refuse to liberalise while subsidies are still used. Anything else is anti-poor, pro-rich propaganda.

That's a reason why free trade fails even on its own terms. Here's a reason why the whole theory should be thrown out - who says everyone has a comparative advantage in something? For example, research indicates that if the international trade in sugar was completely liberalised, only Brazil would significantly benefit. Dozens of other sugar-exporting countries - mainly dirt-poor and in Africa and the Carribbean - would lose out heavily. Free trade theory says they should switch to something more profitable, but what if they can't - what if they only know how to grow sugar? Tough, according to the free trade lobby.

Almost the opposite situation is if lots of countries have a comparative advantage in the same thing, for example growing coffee. So they all produce the same thing, the market is deluged, the price plummets, and hordes are suddenly out of work or can't grow enough to feed themselves. Sure, the 'market' will eventually fix itself - e.g. the amount of people growing coffee will drop and the price will rise - but that 'adjustment period' (a favourite phrase of economists) may involve years of misery and early death for many.

A better policy to avoid both problems might just be to bring back the commodity boards of the early post-war period to set prices. With various kinds of flexibilities built in, it could provide everyone who produces a certain commodity with a fair and liveable wage. The price of our coffee needn't go up to much or even at all, since it is the global food corporations who have been taking an increasing share of the profits as the raw material price has fallen. The same, by the way, goes for all sorts of commodities, the prices of which have been on a downward trend for decades. Sure, it's not 'free trade', but I don't think we should put the hypothetical realisation of an abstract theoretical concept above the livelihoods of hundreds of millions of people.

Someone suggested that I go look up the empirical evidence on free trade and poverty reduction, so I did. What I found was that the fifty or so Least developed countries (LDCs) have gone further than other developing countries in liberalising their trade, yet they lag farther and farther behind, with some even poorer now than they were at the end of the 1980s. The UNCTAD 2002 LDCs report shows that "poverty is increasing unambiguously in those economies that have adopted the most open trade regime and in those that have continued with the most closed trade regime. But in between these extremes, there is a tendency for poverty to be declining in those countries that have liberalized their trade regime to a lesser extent, and for poverty to be increasing in those countries that have liberalized their trade regime more". If he was looking on the bright side, a free trader could claim that there was no clear and unamiguous evidence either way, which if you ask me says that governments need to be very careful indeed before liberalising and that the IMF/World Bank have no business forcing these kinds of policies down the throats of debtor nations.

But hold on, doesn't Philippe Legrain show in this article that countries that embrace free trade do better than those that don't. Well, no, he doesn't. What he says is:

whereas income per person rose by only 1.4 per cent a year on average in the 1990s in developing countries that are turning their backs on globalisation, it soared by 5 per cent a year in those that are embracing it. Rich-country incomes rose by 2.2 per cent a year.

He doesn't cite a source so I had to go looking for it. It turns out to be a World Bank book called "Globalization, Growth and Poverty: building an inclusive world economy", which claims to show that "24 developing countries that increased their integration into the world economy over two decades ending in the late 1990s achieved higher growth in incomes, longer life expectancy and better schooling".

First question is, why those 24 countries? They include India and China, but as Dani Rodrik shows , "In both India and China, the main trade reforms took place about a decade after the onset of higher growth. Moreover, these countries’ trade restrictions remain among the highest in the world".

But it turns out the World Bank is not claiming these countries as free trade success stories at all. They just have a higher level of trade as a % of GDP than other countries. In the report the WB says that it applied the label 'more globalized' to some countries "without in any sense implying that they adopted pro-trade policies [i.e. liberalisation]. The rise in trade may have been due to other policies or even to pure chance” (see the footnote to this Rodrik article)

So when Legrain is trying to debunk someone else's "Free trade fallacies", he relies upon statistical evidence which says nothing at all about free trade. Which suggests to me that his argument might be bollocks.

Well, I think that's enough to kick things off.

Meh

Originally posted by shotamoose
Take the example of Jamaica's milk industry. In 1992 Jamaican import tariffs on milk powder were reduced and the parallel subsidy for local dairy farming was abolished as a result of conditions attached to a structural adjustment loan, negotiated with the World Bank. The result was that imports of cheap powdered milk from the EU - cheap because the EU was never told to stop subsidising its farmers, and with all that free money they can afford to sell their goods at a cost below even that of a much poorer country - rocketed, and thousands of Jamaican farmers lost their jobs. In this case, liberalising imports was economic suicide for Jamaica.

Aren't you ignoring the millions of Jamaican consumers who got cheaper milk?

To repeat: if you believe in the theory of free trade, it is not enough to call for rich countries to stop subsidising. You should be calling on poor countries to refuse to liberalise while subsidies are still used. Anything else is anti-poor, pro-rich propaganda.

There are potential benefits to free trade even if it's not reciprocal. However, I agree with you in principle -- poor countries should not be forced to open up their markets if rich countries aren't willing to.

TheUNCTAD 2002 LDCs report shows that "poverty is increasing unambiguously in those economies that have adopted the most open trade regime and in those that have continued with the most closed trade regime. But in between these extremes, there is a tendency for poverty to be declining in those countries that have liberalized their trade regime to a lesser extent, and for poverty to be increasing in those countries that have liberalized their trade regime more".

Are we talking about absolute poverty or relative poverty? It makes a very big difference...

He doesn't cite a source so I had to go looking for it. It turns out to be a World Bank book called "Globalization, Growth and Poverty: building an inclusive world economy", which claims to show that "24 developing countries that increased their integration into the world economy over two decades ending in the late 1990s achieved higher growth in incomes, longer life expectancy and better schooling".

First question is, why those 24 countries? They include India and China, but as Dani Rodrik shows , "In both India and China, the main trade reforms took place about a decade after the onset of higher growth. Moreover, these countries’ trade restrictions remain among the highest in the world".

So what about the other 22 countries? Don't they count?

So when Legrain is trying to debunk someone else's "Free trade fallacies", he relies upon statistical evidence which says nothing at all about free trade. Which suggests to me that his argument might be bollocks.

Not really. His argument goes like this:

1. Trade reduces poverty
2. Relaxing trade restrictions increases the amount of trade
3. Therefore relaxing trade restrictions reduces poverty

Seems fairly straightforward to me...

shotamoose

Originally posted by Meh
Aren't you ignoring the millions of Jamaican consumers who got cheaper milk?

When cheaper milk is accompanied by the decimation of a key industry and thus increased poverty you have to wonder if it's worth it. Free trade theory seems to value prices over jobs every time, but I think I'd rather have a job than cheaper milk.

Are we talking about absolute poverty or relative poverty? It makes a very big difference...

Absolute poverty - the incidence of people living on less than $1 a day.

So what about the other 22 countries? Don't they count?

I haven't been able to find out who the other 22 countries are, but India and China would be the two most signficant in measuring change in income per capita because of their high growth rates and massive populations.

Not really. His argument goes like this:

1. Trade reduces poverty
2. Relaxing trade restrictions increases the amount of trade
3. Therefore relaxing trade restrictions reduces poverty

Seems fairly straightforward to me...

On the first point, do increased imports reduce poverty as much as increased exports? Can we be so sure that increased trade causes growth, or is it that growth causes increased trade?

On the second point, it's not clear that relaxing trade restrictions increases the amount of exports, though it can be expected to increase the amount of imports. India and China have not experienced export booms because of lower tariffs, since their tariffs are still very high. The East Asian 'tiger' economies of the 1950s to 1980s did not increase their exports by lowering trade barriers - they increased their exports by just exporting more.

So it's not straightforward at all.

Meh

Originally posted by shotamoose
When cheaper milk is accompanied by the decimation of a key industry and thus increased poverty you have to wonder if it's worth it. Free trade theory seems to value prices over jobs every time, but I think I'd rather have a job than cheaper milk.

Obviously the Jamaican consumers who bought cheaper European milk instead of expensive Jamaican milk disagree with you there.

On the first point, do increased imports reduce poverty as much as increased exports?

As much? I don't know. But it's indisputable that cheaper goods means less poverty.

Can we be so sure that increased trade causes growth, or is it that growth causes increased trade?

It's a bit of a chicken-and-egg situation. I reckon that both are true -- trade and growth form a feedback loop.

On the second point, it's not clear that relaxing trade restrictions increases the amount of exports, though it can be expected to increase the amount of imports. India and China have not experienced export booms because of lower tariffs, since their tariffs are still very high. The East Asian 'tiger' economies of the 1950s to 1980s did not increase their exports by lowering trade barriers - they increased their exports by just exporting more.

Which is all very well until the rest of the world decides it doesn't like your trade restrictions and imposes tarriffs on you.

shotamoose

Originally posted by Meh
Obviously the Jamaican consumers who bought cheaper European milk instead of expensive Jamaican milk disagree with you there

And the thousands of out-of-work Jamaican farmers and their further thousands of dependents (and people in connected trades) would disagree with you.

it's indisputable that cheaper goods means less poverty.

Unless job losses outweigh the gains from cheaper goods. In which case cheaper goods will have caused more poverty. Which happens a lot.

Which is all very well until the rest of the world decides it doesn't like your trade restrictions and imposes tarriffs on you.

Which is why I think developing countries should be allowed selectively protect their key industries until they have reached a stage where they can compete agains the rest of the world. After all, it's a provenly effective developmental path - the US and Britain did it, the East Asian tigers did it. Maybe it strikes some people as unfair, but it sounds perfectly fair to me.

shotamoose

Originally posted by Meh
I agree with you in principle -- poor countries should not be forced to open up their markets if rich countries aren't willing to.

Just to come back on this point: that's not what I said. Subsidising exports is very different from putting tariffs on imports. The first (subsidies) is immediately and obviously damaging to other countries which have opened their markets; the second (import duties) damages their interests in a notional sense. Which is not to say that I think all import tariffs are just fine: arguably, rich countries have a moral obligation to grant more access to their markets for imports from poor countries.

chill

Your understanding of free trade is clearly inaccurate and your arguents against it are fragmented and based on weak historical arguments.

You say that it is wrong because it hasn't been done before. What a pathetic argument.

You say that rich countries got rich by avoiding free trade. So what again ? Is this your attempt at serious argument ? because it is certainly not an agument about why free trade is bad.

The rest of your lame arguments are made up of examples of unbalanced liberalisation of trading situations where disaster was inevitable. They had and have nothing to do with free trade.

Real free trade is the only true path out of poverty for the developing world. Allowing third world countries to sell their goods without tarrifs and taxes to the consumers of the first and second world and vice versa. You rail against it using tired old stories about how difficult it is. I don't accept that difficult equates to wrong.

Free trade is not a thoretical concept. It is a real concept and a poweful one. Because it is difficuelt to implement is not an argument against it. Because it hasn't been achieved yet isn't either.

Free trade has been the driving force behind the success of the US internal economy and the internal EU economy and will do the same for the world economy if enough countries work toward it.

In all of your diatribe you have no single argument why free trade is bad for the third world. Instead you discuss other irrelevant hobby horse issues.

Chaos-Engine

Originally posted by chill
Your understanding of free trade is clearly inaccurate and your arguents against it are fragmented and based on weak historical arguments.

You say that it is wrong because it hasn't been done before. What a pathetic argument.

You say that rich countries got rich by avoiding free trade. So what again ? Is this your attempt at serious argument ? because it is certainly not an agument about why free trade is bad.

The rest of your lame arguments are made up of examples of unbalanced liberalisation of trading situations where disaster was inevitable. They had and have nothing to do with free trade.

Real free trade is the only true path out of poverty for the developing world. Allowing third world countries to sell their goods without tarrifs and taxes to the consumers of the first and second world and vice versa. You rail against it using tired old stories about how difficult it is. I don't accept that difficult equates to wrong.

Free trade is not a thoretical concept. It is a real concept and a poweful one. Because it is difficuelt to implement is not an argument against it. Because it hasn't been achieved yet isn't either.

Free trade has been the driving force behind the success of the US internal economy and the internal EU economy and will do the same for the world economy if enough countries work toward it.

In all of your diatribe you have no single argument why free trade is bad for the third world. Instead you discuss other irrelevant hobby horse issues.

Chill: Did Shotamoose affend your Religion. You speck about Globalisation as if it was to be believed in and not studied or examined???

On Internal-Market trade liberalisation within the EU and US. The qualifiers that exist for entry into these markets are numerous. Least not we forget Irelands position in the EU.
For years Ireland had been a Net-Reciever from the EU. Germany and the more wealth EU states contributed more to the EU than Ireland.
Your sited example of the EU market of free-trade is in fact Fair-Trade. The Richer countries(Germany, France, BeNeLux) of the EU helped the poorer countries(Ireland, Portuagal, Greece and Spain) grow to a level of equal playing field.
I would gladly welcome this model for the rest of the world

bonkey

Originally posted by chill
Real free trade is the only true path out of poverty for the developing world.

Unsupported Supposition.

Free trade is not a thoretical concept. It is a real concept and a poweful one. Because it is difficuelt to implement is not an argument against it. Because it hasn't been achieved yet isn't either.

If it hasn't been achieved, then :

a) How can it be more than a theoretical concept, and

b) How can it have been "the driving force behind the success of the US internal economy and the internal EU economy"

On the other hand...if it has been achieved, then perhaps you'd explain where and when....and why you said it hasn't been.

and will do the same for the world economy if enough countries work toward it.

Yes - unfortunately, the countries most opposed to working towards it are the developed economies - the very ones who are apparently trying to sell the notion as a good one.

They want the poorer nations to open up so the richer nations can sell to them....but institute protectionist measures at the drop of a hat whenever foreign industry threatens their own.

This is not the way to prosperity for the poorer nations.

In all of your diatribe you have no single argument why free trade is bad for the third world.

Well, several valid arguments have been put forward, its just that you have dismissed them out of hand - apparently because you fail to (or choose not to)recognise that people are criticising what is in place, and being termed "Free Trade", rather than the ideals of Free Trade itself.

I dont think anyone seriously doubts that Free Trade would not be to the benefit of the developing nations. What they are saying is that the pseudo-Free Trade we see in practice is not the best way forward for these developing nations.

jc

shotamoose

Originally posted by chill
You say that rich countries got rich by avoiding free trade. So what again ? Is this your attempt at serious argument ? because it is certainly not an agument about why free trade is bad.

It shows how protection has worked for some in the past, and how countries sought to open up the markets of others to their own advantage. It is extremely relevant to today.

The rest of your lame arguments are made up of examples of unbalanced liberalisation of trading situations where disaster was inevitable. They had and have nothing to do with free trade.

So unbalanced liberalisation makes disaster inevitable? Then it should come as no surprise that the last two decades of structural adjustment and liberalisation by developing countries - oh and continued protection of agriculture and textiles by developed countries - have seen mostly negative results, with frequent disasters, for the Third World? This is exactly what I've been arguing. I just don't assume that things have suddenly got better - the examples I used are very, very recent. Power inequalities continue to steer the course of trade liberalisation and protection, and while that situation persists so will poverty.

Free trade is not a thoretical concept. It is a real concept and a poweful one. Because it is difficuelt to implement is not an argument against it. Because it hasn't been achieved yet isn't either.

No, the argument is that rich countries didn't liberalise until they were rich, and they got rich partly by protecting their markets and 'liberalising' those of others. Now they still refuse to liberalise markets in which poor countries have an advantage, while continuing to insist that those poor countries open up their markets. Poor country governments should not be punished for demanding similar freedom to follow their chosen developmental paths.

You keep trying to drag this argument down to 'free trade is good' versus 'free trade is bad'. It's a total over-simplification. Which brings me on to:

Free trade has been the driving force behind the success of the US internal economy and the internal EU economy and will do the same for the world economy if enough countries work toward it.

Thus ignoring all the other factors which have contributed towards the wealth of the US and EU. And you say that I'm putting forward weak historical arguments????

As Chaos Engine has pointed out, those internal markets have also featured heavy redistribution, certainly at a far higher level than the fractions of percent of GNP that rich countries send to the developing world.

In all of your diatribe you have no single argument why free trade is bad for the third world. Instead you discuss other irrelevant hobby horse issues.

I've given reasons and examples aplenty. You've just produced a lot of angry flapping.

SkepticOne

It seems to me there are two issues being discussed here:

1. How rich countries stand in the way of international free trade by subsidising their own industries and imposing tarifs.

2. What if free trade were to be implemented? Would it help poor countries? What would be the overall consequences?

With regard to the first issue. Many of these countries got rich (as has been stated) through conquest and a combination of pillage of natural resources and the force opening of markets in those poor countries while maintaining protections on their own domestic industries.

Today, many of these countries maintain heavy subsidies on agriculture to the direct detriment of farmers in poor countries. The US and others have tarrifs in place to protect their steel industries.

Proper free trade does not exist.

As far as the second issue is concerned, I believe that free trade (if it were to exist) would be in the interests of poor countries overall. On the positive side, foreign currency would enter the country through the sale of agricultural products to rich countries. This money could then be used to develop industry and pay for education.

There would be difficulties too. In a theoretical global market (ignoring for a moment the issue of transport costs), local prices would be influenced by global demand rather than just local demand. The consequences of this might be that the local price of rice might go up significantly once subsidies and tarrifs in places like Japan are removed. This would cause problems for the population in the transitionary period.

Of course, international free trade is going to remain a theoretical concept unless it can be shown to be in the interests of rich countries. Rich countries, after all, want to remain rich. I think rich countries could benefit too from free trade but, once again, there would be a difficult period of adjustment.

When rich countries subsidise industries and agriculture or impose tarrifs, I believe they are doing so, not so much to protect their wealth but rather for political, strategic and social reasons. The US currently imposes heavy tarrifs on steel in order to protect its own industry. However cheap steel is important for manufacturing industry, yet tarifs keep it expensive. Tarifs are imposed in this case, not for the overall economic benefit of the country. Steel can be made much more cheaply in other countries trying to get up the ladder. This cheaper steel would be of benefit in other industries that the US is more suited to.

I'm not saying these political, social and strategic reasons aren't important. I'm just saying that they are not necessarily for economic reasons. From a political point of view, policies are influenced by campaign contributions from vested interests as well as the fall out from workers being made unemployed. Farmers in rich countries form a strong voting bloc, etc. Strategically, countries like to maintain a degree of self-suficiency should international trade break down for whatever reason.

My main point is that I agree with the facts stated by shotamoose. What I disagree with is the conclusions derived from them. Free trade (even though it is a double-edged sword) is something that poor countries are striving for, but they are stymied by rich countries imposing tarifs and subsidising agriculture and heavy industry.

SkepticOne

Originally posted by shotamoose
No, the argument is that rich countries didn't liberalise until they were rich, and they got rich partly by protecting their markets and 'liberalising' those of others. Now they still refuse to liberalise markets in which poor countries have an advantage, while continuing to insist that those poor countries open up their markets. Poor country governments should not be punished for demanding similar freedom to follow their chosen developmental paths.

But isn't this an argument in favour of free trade? Free trade must involve opening up of markets in rich and poor countries both to be called such.

Sand

Free trade is basically the removal of government tarriffs and controls/regulations against goods and services. No longer do they distort prices and economic outcomes by making a more efficient producer more exspensive than a less efficient producer merely becuase theyre on the wrong side of a nominal barrier we refer to as international borders.

So:

The consumer *tends* to receive higher quality goods at a lower price - depending on whether world demand/price is higher or lower than domestic demand/price.....oil in nigeria for example.

The efficient producer tends to expand at the exspense of the inefficient producer. This can lead to job losses/gains in affected industries. This works *both* ways - the average developing economy isnt going to beat say, Intel at their own game, but they certainly are more efficient than the American and European farmers. Youd tend to see Americans Europeans developing their high tech industry at the exspense of the agricultural industry ( look around - this is happening even now ) whilst the developing economies would most likely become dominant food and primary producers/exporters.

There is the commonly held view that trade is a war, a zero sum game - there is a winner and a loser from every trade ..... when you go in and buy a paper either you or the shopkeeper has been ****ed over. I dont agree with that view but it underlies the support for protectionism, along with a healthy dose of patriotism/jingoism, and a healthy dose of political fear of the consequences of facing unions power. Whatever else about Margret Thatcher she at least had the spheres to face down hostile unions who refused to recognise reality.

Rule 1: Government ministers suck at picking "winners". If they knew what businesses were going to make it and what werent theyd be multi billionaires and working the stock market like pros.

Rule 2: Government subsidies/protectionism breeds moral hazard - Why bother running a tight ship when the government is taking up the slack? If it isnt worth setting up the business without subsidies/protection from competition what will happen when the subsidies halt? And what guarantee is there that the subsidies will halt at all? And will some protected industries become so heavily subsidised that they are "too big to fail"? Much of Japans economic woes can be laid at the doorstep of the banking industry for example

Rule 3: Subsidies/protectionism arent really just in that they take money from the taxpayers, and pay it to companies so that they can produce goods of uncompetitive price and quality. Youre screwing over taxpayers twice over.

Id disagree that the dominant economic powers became so on the basis of protectionism...... Prior to 1914 international trade existed at a level that was unmatched until the 50s and 60s.... the inter war years famous for the great depression ( which was hugely intensified and lenthened by protectionist measures taken by all nations ) and the period after the ww2 known as a period of unparralled growth in many of the economic power blocs of today.

Indeed, many Empires were built on a mixture of milataristic free trade and jingositic protectionism..... using milatary might to open markets and take resources, whilst closing them to foreign empires. Modern globalisation is peaceful in nature, its arguments are economic reality, not artillery. And protectionsim back in the time of empires still hurt ordinairy people even if it benefitted the elites of each empire.

Adjustment to free trade will be difficult and hard, ending CAP payments to farmers will see a lot of farms, especially family farms, go to the wall and will increase the flight from rural areas to cities and towns. The truth is that farming as know it is on life support, its kept going using EU taxpayers money so that we can be charged higher prices for food. It makes no sense that we shouldnt import our food from cheaper, more effiecient farmers and save twice on the price of food and our taxes.

It will take a politicians of the sheer guts of Thatcher to take on the powerful lobbies that exist to sustain CAP however- dont hold your breath. Especially with agrarian economies like Poland joining.

The WTO needs to start getting rich nations to lead by example, even if poorer nations do not recipocate the EU citizen is still better off as their food will cost that much less and their taxes will be that much lower. And land prices will be that much lower too.

SkepticOne

Originally posted by Sand
The WTO needs to start getting rich nations to lead by example, even if poorer nations do not recipocate the EU citizen is still better off as their food will cost that much less and their taxes will be that much lower. And land prices will be that much lower too.

Except that that is not the role of the WTO. The WTO naturally reflects the point of view of those countries that would dominate in its absence with lesser influence coming from smaller, poorer countries.

What is required is political change within rich countries. Are the rich countries ready for this change?

shotamoose

Originally posted by SkepticOne
But isn't this an argument in favour of free trade? Free trade must involve opening up of markets in rich and poor countries both to be called such.

I don't really follow your argument. I don't think it's an argument in favour of free trade, at least not universal free trade, which I agree is the only useful sense (so many people talk about wanting free trade, when really they mean 'free trade for you, not me', if you follow).

As far as the second issue is concerned, I believe that free trade (if it were to exist) would be in the interests of poor countries overall. On the positive side, foreign currency would enter the country through the sale of agricultural products to rich countries. This money could then be used to develop industry and pay for education.

But that's just the benefits of liberalisation in rich countries. I still haven't heard a good argument why poor countries should liberalise their own economies at such an 'early' developmental stage.

The crucial distinction that needs to be made, I think, is between the situations of the rich and poor countries. The poor countries often have less succesful or pervasive states, inferior infrastructure, inadequate legal and commercial administrative systems, problems collecting taxes, corruption, all sorts of supply problems, greater inequality, etc. These are things which need to be addressed before we can expect them to be able to compete fairly in global markets. Primarily, I think, they need very large investment in all kinds of infrastructure, and they need access to high technology and funds to put into research.

We can't expect competition to reap benefits if some players are not ready to compete. I've heard, though I may be wrong, that Adam Smith saw his principles of comparative advantage and free trade operating most efficiently between countries at an equivalent level of development.

So liberalisation in rich countries can help developing countries, but it's not the answer to everything.

Rich countries, I think, want poor countries to liberalise so they (rich) can have access to the poor countries' markets (poor countries often have sizable middle and upper classes). They're used to putting their own interests first. The point of so much so-called 'anti-globalisation' protests is to pressure them into putting the interests of the poor in faraway countries at least in the same place if not first.

shotamoose

Originally posted by Sand
Rule 1: Government ministers suck at picking "winners". If they knew what businesses were going to make it and what werent theyd be multi billionaires and working the stock market like pros.

Rule 2: Government subsidies/protectionism breeds moral hazard - Why bother running a tight ship when the government is taking up the slack? If it isnt worth setting up the business without subsidies/protection from competition what will happen when the subsidies halt? And what guarantee is there that the subsidies will halt at all? And will some protected industries become so heavily subsidised that they are "too big to fail"? Much of Japans economic woes can be laid at the doorstep of the banking industry for example

Some of the East Asian tiger economies of the 50s, 60s and 70s, notably Taiwan and Korea, were characterised by heavy government intervention in the economy, most notably exactly this type of 'picking the winners'. They offered preferential credit to firms they thought would be the most competitive in international markets, and took it away from companies who were failing to compete. They based this on fairly sound criteria, and it worked.

A lot of the free trade ideology seems to be based on a virulent hatred of governments, and the idea that governments might be able to make sensible economic policies. This in turn does not say much for their respect for democracy.

Id disagree that the dominant economic powers became so on the basis of protectionism...... Prior to 1914 international trade existed at a level that was unmatched until the 50s and 60s....

And what about before that? Britain only really got enthusiastic about free trade in the latter half of the 19th C, and the US later I think. Before that they protected their markets and crowbarred open those of others. It's like I keep saying, they liberalised when they were already rich.

And protectionsim back in the time of empires still hurt ordinairy people even if it benefitted the elites of each empire.

So did free trade. Before the British took over India, it was struck periodically by huge famines, during which the Moghul emperors would stop food exports, regulate prices, and distribute free food. Over the last three decades of the 19th Century, British-ruled India was struck by successive famines, but the British kept exporting food while local prices shot up well out of reach of most peasants. People starved outside silos stuffed with grain waiting destined for the world market. It's estimated that around 20 million Indians died during those famines.

See, I don't think those people would have cared much about how efficient the food market was, as long as it fed them.

SkepticOne

Originally posted by shotamoose
[BThe crucial distinction that needs to be made, I think, is between the situations of the rich and poor countries. The poor countries often have less succesful or pervasive states, inferior infrastructure, inadequate legal and commercial administrative systems, problems collecting taxes, corruption, all sorts of supply problems, greater inequality, etc. These are things which need to be addressed before we can expect them to be able to compete fairly in global markets. Primarily, I think, they need very large investment in all kinds of infrastructure, and they need access to high technology and funds to put into research.[/B]

What I don't want to is argue at cross-purposes here. Like I said, I agree with a lot of your points. It is the end conclusions that I have issues with.

I'm not arguing for forced liberalisation of the internal markets of poor countries. It should be down to them whether or not to open up their markets and the pace of it should be down to them. In poor countries, it may simply not be practical to liberalise fast since disruption of their local economies in this way might cause people to die.

Why they may choose to remove a tarrif from, say, an agricultural product, would be to bring the price down for the local population. This of course may well be at the expense of local producers and the social consequences would have to be dealt with. The social consequences might be overcrowding of shanty towns outside cities as farmers leave the land. This is not a good thing, but it might be in a countries economic interest to develop industry and move away from an agriculture based economy. Again, I'm not saying that this should be forced on them by rich countries.

shotamoose

Originally posted by SkepticOne
Why they may choose to remove a tarrif from, say, an agricultural product, would be to bring the price down for the local population. This of course may well be at the expense of local producers and the social consequences would have to be dealt with. The social consequences might be overcrowding of shanty towns outside cities as farmers leave the land. This is not a good thing, but it might be in a countries economic interest to develop industry and move away from an agriculture based economy. Again, I'm not saying that this should be forced on them by rich countries.

I don't think we're disagreeing much here. Developing countries obviously can and do choose to liberalise in certain sectors for their own benefit. This is a whole world apart from being bounced into across-the-board liberalisation as a result of outside pressure.

SkepticOne

Originally posted by shotamoose
I don't think we're disagreeing much here. Developing countries obviously can and do choose to liberalise in certain sectors for their own benefit. This is a whole world apart from being bounced into across-the-board liberalisation as a result of outside pressure.

The thing is that the term "free trade" keeps getting used incorrectly to mean the forced unilateral liberalisation of markets in poor countries. This is not free trade. As such, examples of such bullying by rich countries is not a valid argument against actual free trade.

Free trade must be a) bilateral or multilateral and b) voluntary.

Examples to look at here might be NAFTA and the EU. The EU is interesting because it also allows relatively free movement of people within the zone.

NAFTA is interesting because of the vast differences in wealth between Mexico on the one hand and the US and Canada on the other. Many tarrifs remain but are being phased out gradually.

shotamoose

We're arguing semantics now, but I don't think it's right to call partial liberalisation 'free trade'. As voluntary liberalisation is likely to be slower and more piecemeal than 'forced' liberalisation, it seems even more wrong to call the former 'free trade' and not the latter, simply because it is voluntary.

Sand

Some of the East Asian tiger economies of the 50s, 60s and 70s, notably Taiwan and Korea, were characterised by heavy government intervention in the economy, most notably exactly this type of 'picking the winners'. They offered preferential credit to firms they thought would be the most competitive in international markets, and took it away from companies who were failing to compete. They based this on fairly sound criteria, and it worked.

If firms are going to compete sucessfully internationally they dont require government loans, or intervention beyond creating a stable legal and economic enviroment in which to do bussiness. If a firm has a good good bussiness plan and sound management they will find some filthy dirty capitalist pig wholl want to loan them money or buy into their company in exchange for a share of profits down the line. If they cant find anyone who believes in them then its a hint theyve got a bad idea/plan. The government does not need to and should not gamble with the taxpayers funds.

A lot of the free trade ideology seems to be based on a virulent hatred of governments, and the idea that governments might be able to make sensible economic policies. This in turn does not say much for their respect for democracy.

I wouldnt say that - Its just if government ministers were any good at being bussiness men theyd be the ones bribing politcians.

The government does have an important role to play - maintain a tolerable system of justice, encourage education, correct market failures such as enviromental policy,and create an attractive business enviroment. Then let the market take care of the market.

And what about before that? Britain only really got enthusiastic about free trade in the latter half of the 19th C, and the US later I think. Before that they protected their markets and crowbarred open those of others. It's like I keep saying, they liberalised when they were already rich.

Before that the industrial revolution hadnt occured and many thought then as you do. That trade is war, that nations must use armies to sieze and control resources in the national interest and that foreigners should be discouraged from trading with them. And yes Britain and others were wealthy (i.e. their *elites* were wealthy - the gerneral public was dying of the pox in the streets ) , but using free trade they would have been wealthier.

And what about before that? Britain only really got enthusiastic about free trade in the latter half of the 19th C, and the US later I think. Before that they protected their markets and crowbarred open those of others. It's like I keep saying, they liberalised when they were already rich.

See, I don't think those people would have cared much about how efficient the food market was, as long as it fed them.

What they would have cared about though was free trade. Given free trade the market will correct the situation.... Food prices begin to rise, food is imported from cheaper areas by scums sucking capitalist pigs and sold at a profit. As people catch on to the idea of importing food supply increases until price falls down again.

Food importers get profit. Starving people get food. Everyones a winner.

The situation you described can and will still occur in todays wars - especially in areas like Africa were hunger can be used as a weapon. Do you think the corrupt elites of any given African nation will give two ****s about starving people even now? Especially if the majority of those starving belong to some despised tribe... a real possibility in the tribal makeup of many of Africas post colonial states. Free trade means that if X wont sell you food, Y can and will make a profit doing so.

shotamoose

Originally posted by Sand
If firms are going to compete sucessfully internationally they dont require government loans, or intervention beyond creating a stable legal and economic enviroment in which to do bussiness. If a firm has a good good bussiness plan and sound management they will find some filthy dirty capitalist pig wholl want to loan them money or buy into their company in exchange for a share of profits down the line. If they cant find anyone who believes in them then its a hint theyve got a bad idea/plan. The government does not need to and should not gamble with the taxpayers funds.

Sorry if it doesn't fit into what you read in a textbook, but the fact is that these countries developed faster than any others at the time using precisely the methods that free trade and neoclassical economic theory says they shouldn't have.

The government does have an important role to play - maintain a tolerable system of justice, encourage education, correct market failures such as enviromental policy,and create an attractive business enviroment. Then let the market take care of the market.

The trouble is that market imperfections abound, and untrammelled market forces have been very poor at providing for everybody's needs.

Before that the industrial revolution hadnt occured and many thought then as you do. That trade is war, that nations must use armies to sieze and control resources in the national interest

I didn't say that's what should happen, I said that's what did happen. An important distinction, as I'm sure you realised.

What they would have cared about though was free trade.

Really? More than getting fed? Interesting view of human nature there, Sand.

Given free trade the market will correct the situation.... Food prices begin to rise, food is imported from cheaper areas by scums sucking capitalist pigs and sold at a profit. As people catch on to the idea of importing food supply increases until price falls down again.

Food importers get profit. Starving people get food. Everyones a winner.

You are completely ignoring, as free trade theory so often does, constraints on transport and supply. Instantaneous transport of food was not available in the 19th Century (and correct me if I'm wrong, but I don't think it's available now), so just because there was some food available for cheap somewhere else doesn't mean those Indian peasants would have been able to buy it, even assuming they had the resources.

The fact remains that they starved to death in their millions while all around them businessmen were exporting food to people who could afford to pay more somewhere else. The exporters could call on an extensive transport infrastructure to get the food out., but the peasants did not have the money or the infrastructure to get food in.

From a market point of view, this was all entirely reasonable. From any sensible point of view, it was a holocaust. The system of the Moghul emperors, though obscenely inefficient from an economic point of view, was incredibly efficient at keeping peope alive.

Von

Might be worth bearing in mind that more and more of the chief proponents of globalisation (ie. neoliberalism) are declaring that it's failed and alternatives are going to have to be sought, which is pretty much what NGO's etc have been saying for the last few years. Last month, an article in The Wall Street Journal said "The World Bank, the apostle of privatization, is having a crisis of faith.(curious use of religous terms) What seemed like a no-brainer idea in the 1990s -- that developing nations should sell off money-losing state infrastructure to efficient private investors -- no longer seems so obvious, especially when it comes to power and water utilities." More...

In the FT last week, a Morgan Stanley chap called Narayan Ramachandran wrote about the collapse of the Washington Consensus - "In the past few years many a consensus has fallen apart. The Kyoto protocol was dealt a near-mortal blow by the George W. Bush administration. The transatlantic consensus was strained to breaking-point in the lead-up to the Iraq war. And in development economics, we appear to be seeing the death of the "Washington consensus" and its rapid replacement with a "get growth going" mantra." More...

There’s this article here World Bank Study Contradicts Its Free-Trade Income Theories

And about the same time Iraq’s windows started getting smashed by militant human rights activists, the IMF published a report which agreed with the main criticisms of its policies.

IMF - no clear proof globalization helps the poor
Reuters, 03.17.03, 6:15 PM ET

By Anna Willard

WASHINGTON, March 17 (Reuters) - The International Monetary Fund sounded more like its critics on Monday when it admitted there is little evidence globalization is helping poor countries.

The IMF, which has often been the target of violent anti-globalization protests, in a new study found economic integration may actually increase the risk of financial crisis in the developing world.

"Theoretical models" show that financial integration can increase economic growth in developing countries, the research found, but in practice it is difficult to prove this link.

"In other words, if financial integration has a positive effect on growth, there is as yet no clear and robust empirical proof that the effect is quantitatively significant," the new report said.

An overview of the study, which was put together by four researchers including the fund's chief economist Kenneth Rogoff, describes the conclusions as "sobering".

More...

So in the space of a couple of years, the institutions, and the more professional (and newly sober) economists appear to have gone from responding to any criticism of their ideology by sticking their fingers in their ears and going LALALALALA to publishing reports which debunk their textbook theories. Interesting. It’d be more interesting if there wasn’t a persistent rumour going around that the WTO is going to be made as irrelevant as the UN because of america’s unilateralism.

Meh

Originally posted by Von
There’s this article here World Bank Study Contradicts Its Free-Trade Income Theories

There's no economic theory claiming that international trade promotes income equality within countries. Everyone benefits from trade; not everyone benefits by the same amount.

In 1988, the average income of the poorest 10% of the people in the countries studied was 30.7% of the average of all people. By 1993, it had declined to 24.8%. By contrast, the average income of the richest 10% was 273.5% of the average of all people in 1988. By 1993, the number had risen to 293.4%.

So what are the absolute income figures? Relative income statistics tell us very little about poverty.

Originally posted by shotamoose:
You are completely ignoring, as free trade theory so often does, constraints on transport and supply. Instantaneous transport of food was not available in the 19th Century (and correct me if I'm wrong, but I don't think it's available now), so just because there was some food available for cheap somewhere else doesn't mean those Indian peasants would have been able to buy it, even assuming they had the resources.

The fact remains that they starved to death in their millions while all around them businessmen were exporting food to people who could afford to pay more somewhere else. The exporters could call on an extensive transport infrastructure to get the food out., but the peasants did not have the money or the infrastructure to get food in.

But isn't that the exact opposite of what you're complaining about in Jamaica in your first post? You can't have it both ways you know.

Sand

Sorry if it doesn't fit into what you read in a textbook, but the fact is that these countries developed faster than any others at the time using precisely the methods that free trade and neoclassical economic theory says they shouldn't have.

Actually the SK exsplosions in growth is a case of the rules for good government being followed ( education, justice, sound business enviroment ) and the exceptionally high savings rate that seemes to be a characteristic of many asian economies ( The Japanese cant persuade their citizens to actually *spend* their money ) but thats not the main issue - government intervention would be....

Using SKs auto production industry as an example ( 0 exports in the 1960s, over 2 million units exported by the mid 1990s and domestic production accounting for roughly 99% of SK car ownership even after the removal of import restrictions, heavy state intervention) - your typical poster boy for state intervention leading to riches .

Have you ever heard of Saenara Motor Corp? Maybe not. Despite an exsclusive licence to make and sell cars in korea- it also had sole rights to import built cars exempt from tarrif and import restrictions, the government also tried to stimulate demand by abolishing the limit on car registrations and subsidising people trading in old cars for their brand spanking new Saenara cars? Could not fail could it? No competition and encouraged demand.

It failed and shut down a year or so after opening. And it wasnt the only failed attempt at jumpstarting an auto industry.

Eventurally they invited in foreign partnerships, firms like General Motors (foreign capitalist pigs eh? ) to show them how it was done. The government sure couldnt.

What the government could do was grant export subsidies,tax exemptions and import quotas so that firms like Hyundai could afford to export their cars and sell them at a loss....

Why the hell would anyone want to sell a car at loss? Well if your the SK government and have a hostile commie regime to the north you want a heavy-chemicals industry with a sideline in the war effort stakes and if it means throwing cash at loss making, unviable industries then so what --- its not their money afterall.

So the development of the auto industry was based on national security interests rather than profitability/market interests.....So when the oil crisis came along the auto manufacturers were left with a lot of cars they couldnt shagging sell. A large number of suppliers go bankrupt.

So the SKs then start to listen to the markets, and throughout the 1980s market reforms take place and government intervention declines drastically. Export increases in the 1980s can be laid at the door of low interest rates ( ecouraging consumption ), low oil prices and favourable exchange rates.

Summary from my point of view?

1) Government intervention leads to several laughable failures
2) Government intervetion is not directed at creating economically viable companies but rather expanding industrial base regardless of cost due to security concerns.
3) Government intervention isnt strong enough to force companies to merge to gain economies of scale...Companies still seem to have a high degree of independance.
4) Government intervention cant protect or even minimise effect of market forces on production --- the 1972 oil crisis and the gains in the 1980s.
5) Advances in technology/production come from foreign investment by private firms, not the government.
6) Now if my auntie had balls shed be my Uncle but theres grounds to argue that SK would have developed with or without state intervention - and the government would have a bit more money to play around with to carry out its actual tasks rather than gambling it in failed schemes.

Oh and another industry in which the SK government have a real investment in are their banking chaebols - their support leads to a moral hazard, which leads to far too much borrowing by those chaebols and thus plays a vital role in the creation of the Asian Financial Crises.

Yes - governments can play an important part in a countries economic development... the SKs did a *lot* of things right in terms of human capital, justice and the actual economic enviroment....Id regard these as the true building blocks of SKs development rather than its contradictory and variable attempts and manipulating industries.

The trouble is that market imperfections abound, and untrammelled market forces have been very poor at providing for everybody's needs.

Agreed, hence you allow for the government to correct market failures...like the enviroment, as private companies do no take the cost of damage to the enviroment into account when determining their economic activity. It is up to the government to ensure they take those costs into account, through pigovian taxation or tradeable permits etc etc.

I didn't say that's what should happen, I said that's what did happen. An important distinction, as I'm sure you realised.

And Im saying that they thought the same way you did about international trade, that it was a threat not a boon.

You are completely ignoring, as free trade theory so often does, constraints on transport and supply. Instantaneous transport of food was not available in the 19th Century (and correct me if I'm wrong, but I don't think it's available now), so just because there was some food available for cheap somewhere else doesn't mean those Indian peasants would have been able to buy it, even assuming they had the resources.

Hmmmmm - you realise your arguing a bit of a silly logical position.

1) We allow that free trade exists. We and everyone else can import and export food anywhere allowing for transport etc etc.

2) Food shortages in India. British continue to export food despite rising food prices - well allow that theres a market elsewhere with even higher food prices thats more attractive. Well call it Ireland for want of a better name.

3) Food prices decline in Ireland for reasons I mentioned above. India becomes the place to import to, and were back to the wonders of free trade.

4) Even if the Indians dont have boats youre saying that none of the other industrial powers have transport networks capable of reaching India and taking advantage of indias rising food prices to import food and turn a profit?

Thats the wonder of free trade - If the British wont sell the Indians food, the Americans will, or the French will, or the Germans will, or the Italians will, or the Spanish will, or the Japanese will, or the Chinese will, or the Argentinians will and so on and so forth.

shotamoose

Thats the wonder of free trade - If the British wont sell the Indians food, the Americans will, or the French will, or the Germans will, or the Italians will, or the Spanish will, or the Japanese will, or the Chinese will, or the Argentinians will and so on and so forth.

So how come nobody did?

SkepticOne

I would be interested in Sand's view on this.

This is related to shotamoose's point but brought up to date.

In a situation of global free trade, the price of commodity foods everywhere will tend to the world price for that commodity. A local farmer in a poor country will not sell, say, rice at a price to cater to local demand but will naturally sell it at the world price.

Such cases will arise where a local population will not be able to afford rice.

Should that country impose export barriers to keep the price down? Should it subsidise food by taxing the farmers?

No of course, if the country can industrialise quickly enough, then everything's fine. But, of course, countries don't react that fast.

Another solution would be to let the people die.

Which would you advocate in this admittedly counter-factual situation.

Note that this is the opposite situation that many complain about which is that rich countries keep the price of basic food low by subsidising their own farmers.

Sand

So how come nobody did?

Because the British Empire believed as you do....that free trade ( true free trade ) would undermine British industry and lead to the ruin of its people.

Which would you advocate in this admittedly counter-factual situation.

I wouldnt say its counter factual - way back I noted nigeria as an example of where if free trade were introduced its likely the average Nigerians price of oil would rise - as their oil prices are kept artificially low by the government so they turn a blind eye to the rest

In a situation like that youve got to ask whether free trade is *overall* good or bad for those particular people ( and youve got to hope that the evaluation means more than the undoubtedly vocal cries of the lobby groups that it hits hardest ) - personally I believe it would be good overall as their industries wouldnt be facing the developed worlds subsidies/tarriffs and theyd attract a lot more inward investment - assuming of course their government creates the conditions necessary for a strong economy.

As for people dying.... I personally dont see people dying solely because of the adjustment to free trade - Ill allow its certainly possible but in a situation where the EU and the US ( and others of course ) keeps food priced artificially high when widespread famine exists its clear that politically at least life is cheap.

bonkey

Originally posted by SkepticOne
Which would you advocate in this admittedly counter-factual situation.

There are other options.

There is nothing obliging the farmer to sell at the world price. Indeed, I would question your initial surmise that the farmer would "naturally" sell at the higher price.

As a slightly tangential example :

In the US, downsizing and outsourcing became two massive tools in increasing profit. Due dilligence requires that a company does its best for its shareholders, so this has been often used as a drum to beat when performing these tasks which have (in some respects at least) reshaped modern America.

I was talking to a mate about Switzerland recently, and one of the first things he asked was why swiss companies kept themselves in Switzerland. Why did Victorinox, for example, not shut all factories, outsource everything to some poor Eastern-European, Asian or African nation, and cut the cost of their products massively, thus leading (in theory at least) to greater profit. The same would apply to Swatch, and several other large companies.

Your assertion that the farmer would "naturally" sell at the world price would be like me saying all companies should "naturally" seek the cheapest costs. But not all of them do.

Why do these Swiss companies not seek to maximise profits? Because of their social conscience, (and the social conscience of their shareholoders, possibly).

This isn't a Swiss phenomenon, I'm sure. If you look around, you will find that not everyone is purely profit-driven, and often do things which make less money for a variety of reasons...not least of which is local good will.

Free markets do not oblige anyone to sell at the highest price.

jc

SkepticOne

Originally posted by bonkey
Your assertion that the farmer would "naturally" sell at the world price would be like me saying all companies should "naturally" seek the cheapest costs. But not all of them do.

Nevertheless, there will be a general tendency for prices to tend to the global price once the local economy is opened up to global market prices. The farmer in the poor country would tend to sell to the buyer offering the best prices. He may not even know where the produce is ultimately destined.

bonkey

Originally posted by SkepticOne
The farmer in the poor country would tend to sell to the buyer offering the best prices. He may not even know where the produce is ultimately destined.

You're repeating this assertion, and still offering absolutely no evidence to support it, other than (from what I can see) your argument that it would appear to make sense.

"The farmer in a poor country" is typically also classifiable as "a poor farmer" - they go hand in hand. These people may choose to sell for a better price, to a distributor who will take their food (as you said) to an unknown destination....or (as I am asserting), they may choose to continue to sell locally.

Put yourself in their position. On one hand, you can get more money. On the other hand, doing so will remove much-needed food from the locale, resulting in ppl having to pay more for alternatives....possibly money they don't have.

Your argument is blaming (?) globalisation for offering the farmer the choice.....but ultimately the farmer is the one making the decision as to whether or not to let his neighbours starve to death in order to make more money. There is - as I said - no compulsion on him to sell at the higher price. He has free choice, and he uses it.

Ultimately, you can say that globalisation / free markets are permitting greater abuses...and I would agree...but I don't believe they are necessarily responsible for them. The system still allows that farmer to sell locally at the old price he used to.

If, on the other hand, the farmer was instructed by the government as to what he could and couldnt do....that he had to sell at the higher price and allow his neighbours to starve to death....that would be a different story.

Bear in mind, that the options you gave Sand were effectively what should the government do because the farmer is greedy enough to allow his neighbours to die for more cash. I'm not sure the government should be the responsible body there at all.

jc