Responding to proponents of (current) international trading regime

Response to Pat Gunning.  

Pat Gunning's original included below.  
Apologies for long message and x-postings..  

Regards
Geoff Holland
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Institute for Global Futures Research (IGFR).
P.O. Box 263E, Earlville, QLD 4870, Australia.
E-mail: <igfr@peg.apc.org>.
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Pat Gunning wrote:

>Regarding Geoff Holland's remarks about South Korea, I suggest that he
>compare South Korea before WWII with South Korea today. Or North Korea
>today with South Korea today. Part of the growing pains for a capitalist
>system is learning about the many ways one can make errors in business,
>including the error of being cheated. The Asian financial crisis is
>nothing more than a learning experience. True, when learning experiences
>have such a large magnitude, people die. But people die of starvation
>also. And the numbers are staggering.

Point taken.  I obviously would not want to recommend the North Korean 
path, a failure by most accounts.

Perhaps it is not a question of denouncing capitalism per se but of 
reviewing its direction.  

Does Pat Gunning not think the Casino aspect of the global market 
is intensifying ?  That this aspect is not a problem ?

US capitalism is not the same as European capitalism, which is 
guided more by social-democratic ideology, and is, I believe, more 
socially and environmentally responsible.  Europe is showing the 
US the way in re-orienting capitalism (most notably in Germany, 
Denmark and Sweden).

The neoliberal agenda which came to rise during the Reagan-
Thatcher era is still with us and trying to find expression in 
the further unqualified liberalisation of the global market (eg first 
with MAI, and now through the WTO).

The neoliberal agenda is a blunt instrument in a complex phase of 
transition.  We need to be more sophisticated in our expansion and 
regulation of the international trading scheme.

>First, an important case for continuation of the international trading
>network without substantial intervention is based on its contribution to
>peace. Other things equal, the costs of war to citizens of trading
>countries are greater than they are to citizens of non-trading
>countries. Therefore, trading countries, other things equal, tend to
>avoid war. And a liberal international economic order would be less
>warlike than an order that limited international trade. For more on this
>and other aspects of the results of traditional liberalism, see von
>Mises, Ludwig (1978) Liberalism: The Classical Tradition. Kansas City:
>Sheed, Andrews and McMeel.

I agree that international trade contributes to world peace.  This is a 
strong argument for the promotion of balanced international trade.  We 
must also ensure that the external environmental costs of international 
trade are internalised.  

There are many ways to promote international trade.  There 
are options when developing an international trade regime.  It is not 
a question of either accepting the current regime (and where it is currently 
heading), or no international trade.

If World Peace is one of the justifications, what percentage of World 
Domestic Product to be exported do we consider sufficient to maintain 
integrated and cooperative relations ?  (What is the current ratio of exports 
to total production - does anybody have the figure to hand ?  How has 
this changed since WW2 ?)

>Second, I reiterate that the wealth of the countries I mentioned depends
>on the international trading system. That some of these countries are
>doing less well today than in the past and that some wish to limit
>participation in the international trading system reflects (a) their
>lack of knowledge of the causes of their previous success and (b) the
>presence of special interests. Also, the fact that many of the countries
>were able to achieve at least moderate success even thought they
>restricted imports is not an adequate counter to the point that their
>suceess was due to their liberal policies. Its all a matter of degree.
>Leaders of all countries can choose to use the system or choose not to
>use it. Whether they take advantage of it in the best way depends on
>whether they have the ability and wisdom to use it.

Pat -  Could you please elaborate on 'special interests' ?  Do you mean the 
ruling elite, corrupt 3rdW governments ?  Marxists and many others 
would blame global capitalism for creating and supporting the elites.  
But this argument is lame because the same thing happens in Marxist 
governments.  Transparency and accountability is a long, slow 
evolutionary process relating to participatory democracy.  The IMF and 
World Bank pay some lip service to transparency.  But not enough !  
The US, after many years of propping up dictatorships, is possibly 
now a net promoter of democracy in the developing world (on one 
level at least - well, er, Haiti anyway).  OECD nations and the 
transnational financial institutions are focussed on neoliberal economic 
globalisation, but they are not using their leverage to push for 
democratic reform, participatory democracy, transparency and public 
accountability.  (Not to mention environmental and labor issues etc).

>Third, the example of relative poverty seems irrelevant to me. 
(see full text below)

>Fourth, poverty gaps within countries also appear irrelevant.
(see full text below)

Apart from the first principles of social justice and equity, in practical 
terms, relative poverty is relevant in terms of maintaining social 
harmony and peace (viz your first point).  Now while peace is also 
a first principle, you can also say that without peace, a vibrant stable 
economy cannot function.

Note:  Although many people speak of the economy as if it were a 
first principle, I regard it as a means and not an end in itself.

>Fifth, the problem of global external effects, if one exists, cannot be
>solved within the international trading system. But the question is
>whether the effects, or how much of the effects, are due to the
>international trading system. Even if we assume that the harmful effects
>are greater than the beneficial effects and that these effects are
>entirely due to the efforts of individuals to profit through the
>international trading system, the proper place to look for a solution
>would seem to be the international law of property rights.

Assuming by 'external effects' you mean detrimental social and 
environmental consequences:

Some social negatives can be justified by increased benefits (eg more 
stress but more security, opportunity, longevity).  But other times 
they cannot - benefits for one group at the expense of another.  In the 
latter, some sort of compensation, sharing or correcting mechanism is 
required.

Some environmental negatives can be tolerated.  We appropriate 
x hectares per capita, thus reducing natural habitat, but then we enjoy 
'modern civilisation'.  The problem with the current 'international 
trading system' which is based on global capitalism, is that it is part 
of a Capitalist World System that is not stable.  The environmental 
negatives are increasing (reductions in some ways, but overall, 
unstable and degenerating - habitat loss, species loss, CO2 increase, 
accumulation of toxic waste, general degradation of ecological systems).

International property law is one appropriate arena of regulation, but 
there are many more regulatory and legal mechanisms.  To believe 
that everything can be resolved through property law is 
unnecessary, inappropriate and suggests that such a proponent would 
be guided more by a hardened ideology than a practical, informed and 
open-minded approach.

>Sixth, there are severe difficulties with trying to devise a worthwhile
>plan of redistributing global wealth. Money that is sent from wealthy
>countries to poor countries almost inevitably props up an existing
>government, often an oppressive dictator and his cronies, whose personal
>wealth already greatly exceeds that of ordinary citizens. In addition,
>the pressure on such leaders to give their citizens freedom to trade
>both domestically and internationally and to keep what they earn from
>production and trade is likely to be lessened by such redistribution
>measures. Perhaps this problem can be solved. However, until it is,
>general calls for redistribution are like general calls for communism.
>They fail to grasp reality.

This has been a problem in the past and continues to be a problem.  
However, this is a weak argument to justify the decline in Overseas 
Development Assistance (ODA).

According to a recent World Bank report [1], donor countries now 
provide only 0.22% of their GNP in aid, or Overseas Development 
Assistance (ODA), which is far short of the 0.7% target agreed to at 
the UN, and the lowest since comparable statistics began in the 
1950s.

OECD countries could offer substantially increased levels of 
ODA in return for democratic reform (open, transparent, accountable, 
participatory).  They could also operate more directly with local and 
international NGOs with a good track record - which they are now 
increasingly doing, but could expand this.  Supporting microcredit 
schemes is another option.

[1]  'Assessing Aid: What Works, What Doesn't, and Why', World 
Bank, 1998.

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Pat Gunning's Third and Fourth points in full:

Third, the example of relative poverty seems irrelevant to me. Suppose
that the leaders of a relatively wealthy country are able and wise
enough to improve the average wealth of their citizens by joining the
international trading system. Suppose further that the leaders of a
relatively poor country are not. Then the poverty gap will widen. This
is not evidence that the international trading system causes a widening
of the gap. It is evidence that some leaders are able and wise while
others are not. It is true that the gap widens. It is also true that but
for the international trading system, the gap would not have widened.
However, I can't understand why anyone would want to hamper the leaders
of a country from doing their best for their citizens.   

Fourth, poverty gaps within countries also appear irrelevant. I see no
reason to believe that such gaps are due to the international trading
system. (Whether free enterprise _within_ a country causes a wider
poverty gap in the country than some alternative system of feeding the
people and supporting a population requires a great deal more
examination that just citing statistics. But this is not relevant to the
issue in any case.) Moreover, even if it could be shown that the
internal gaps are due to the international trading system, one would not
want to inhibit the system on these grounds alone. An alternative policy
the benefits of which are greater than the costs would have to exist.