England UK

Free Life Commentary
Issue Number 135
Saturday, 16 April 2005
http://www.seangabb.co.uk/flcomm/flc135.htm

Free Trade v Fair Trade
A Debate Organised by Christian Aid
St Margaret's Church, Westminster
The Evening of Friday 15th April 2005
12:15am - 1:15 am
A Speech Together with Introduction and Brief Commentary by Sean Gabb

Introduction

I took a telephone call about a week ago from a young man called Leo Bryant. He worked for
Christian Aid, he said, and was organising a joint conference with Oxfam on world poverty. Would I
like to sit on the panel and debate the issue? The provisional title of the debate was "Free Trade v
Fair Trade". Would I speak for free trade? I should normally have said yes at once. The conference
was to be in St Margaret's Church in Westminster, and would draw an audience of around 700. I
had long been scandalised by the socialist takeover of English Christianity, and this would be the
closest I might ever get to addressing one of my sermons to a real congregation.

The problem was the timing. The whole event was set for Friday evening, and my debate was to be
after midnight. I thought of having to wander round Central London with nowhere to go between the
closing of my university and the beginning of the debate, and was inclined to turn Mr Bryant down.
But he offered me a bed for the night, and urged on me the size of the audience. So I agreed.

As it happened, Central London was just as cold and lonely as I had expected. But there I finally
sat last night, about 20 feet in front of the altar in St Margaret's. Beside me was Alex Singleton from
the Globalisation Institute. Beside him was Alan Beattie of The Financial Times, who would chair
the meeting. Beyond sat Martin Khor from Third World Network and Prosper Heoyi from Oxfam.
Before me was the large audience I had been promised. They were a fragment of a vast procession
that had streamed all evening through Westminster, waving banners and candles and singing the
rather feeble stuff that has since the 1960s passed for religious music.

Not all was grim, though. I had some friends there. David Carr, David Goldstone, Paul Coulam and a
few others had braved cold and boredom to be there. More would have come, but were appalled by
the timing of the event.

We began with Alex Singleton. He put the case for free trade in its most orthodox form. Trade
benefitted both parties, he said. It was not an act of charity for us to open our markets to poor
countries, but obvious self-interest. As for the poor countries themselves, those that had liberalised
their domestic economies and opened up to foreign trade and investment had enjoyed the best
growth rates over the past few decades. It was all true and all very well said.

I had expected to speak at the end of the debate. I had agreed with Mr Singleton that he should use
the first five minutes to put the case for, and that I should use the next to last five minutes. However,
Mr Beattie turned to me and asked me to go next. This was a nuisance. I had been settling into a
gentle doze in preparation for the fair traders, and I think it was amusingly plain to the audience how
I unprepared I was for immediate action. However, I had written and largely memorised a speech,
and I delivered this, cutting where necessary to fit it into the time available.

Though I was praised afterwards, I know that I am a poor speaker for short occasions. I am not
frightened by large audiences. I can speak clearly and grammatically. Give me 40 minutes to outline
a case, and I can do a fine job. I am, after all, a lecturer. But I do not shine when it comes to the
short speech. So it was last night. I had been awake for nearly 20 hours. I had given four lectures
during the day. was half asleep. I found my eyes wandering to my text. If praise was due at all, it
was for the content of what I was saying, not for my manner of saying it. Yet the speech was a
good one. I can write well.

These reservations being made, here is what I said::

The Speech

If you think that I came here tonight to defend multinational corporations and the international
government institutions, you have chosen the wrong person. These are dishonest. They are corrupt.
They are incompetent. They have blood on their hands.

But do not suppose for a moment that the world trading order as it actually exists is liberal or more
than incidentally connected with free markets. A free market is a place where individuals and groups
of individuals come together to transact voluntary exchanges without any backing of government
force. To call the actually existing order liberal - or "neo-liberal" - is as taxonomically accurate as
calling the old Soviet Communist Party syndicalist. That order is based on tariffs, subsidies and a
web of other often invisible regulations. The international institutions are a projection of Western
states. The multinational corporations are creatures of these states. They shelter behind the
privilege of limited liability. They get their political friends to cartelise markets, and do favours in
return.

This is not market liberalism. It is a fraud played on us all by our ruling classes - these being those
politicians, bureaucrats, educators, lawyers and media and business people who derive wealth,
power and status from an enlarged and activist state.

But this being said, the fair trade solution is easily worse than the problem. The ruling classes in
any country never have at heart the best interests of their subjects. But in the West, we can just
about afford corporatism. We still have some heritage of market liberalism. Our ruling classes are to
some degree restrained in their predations. That is not so in poor countries. The ruling classes there
are naked kleptocracies. All that keeps them from utterly starving their unfortunate subjects is their
own idleness and incompetence. The fair trade talk may well be of "import substitution" or "rational
planning" or "picking local winners". The reality will be to turn poor countries into sealed territories
ruled by the law of the jungle - a jungle in which only the well-connected will survive. Presented in
the lilting, caring tones of "helping the poor", what we have is nothing more than the old Nazi policy
of autarky.

Let me give one example of how fair trade works in practice. On the 1st January this year, import
taxes were raised in Kenya and in several other African countries on second hand clothing from the
West. The stated purpose of this was to give local textile manufacturers the chance to grow big
enough to face foreign competition. Of course, the textile interests will never be able to face open
competition. Infant industries never grow up. Protect them, and prices rise. Money that would
otherwise be saved and invested is spent on paying the higher prices. Money that would otherwise
be spent on other goods is spent on paying the higher prices. The country gains a sector in which it
may have no comparative advantage - or in which it might have a comparative advantage only in less
well-connected hands. Those sectors in which there might be a comparative advantage suffer. But
the lucky capitalists who are protected make big profits, and their friends in government collect the
usual gifts. And the people at the bottom? Norman Nyaga, a Kenyan Member of Parliament can
answer here. Writing in The Kenya Times last month, he accused the Government of deliberately
rigging the textile market in favour of some foreign investors. He said the effect would be to damage
the livelihood of 10 million Kenyans who work in the second hand clothing sector, and to lower the
incomes still further of the 56 per cent of Kenyans who live below the official poverty line and who
must buy second hand clothes or go without.

I do not support the present system of world trade. But give me a straight choice between this and
the economics of the jungle that is fair trade, and I will choose the present system. Global
corporatism may be unfair. But it does at least allow some wealth to be created. It does allow at
least some rational economic calculation. Fair trade simply gives even more power to politicians
and bureaucrats and favoured business interests in poor countries - that is, to the very people and
interests that made and have kept these countries poor.

If you really want to improve the lives of the poorest, forget all this "kumbaya socialism" - which is a
cocktail of bad economics and bad theology, held together by self-righteous candle-waving. Either
settle for what we have - which, unfair as it is, delivers something - or campaign for a system of real
voluntary exchange. Fair trade can never be fair. But free trade can be free.

Commentary

Had I been giving a lecture rather than a brief speech, I could usefully have elaborated on some of
my points. I have written at length elsewhere about the political and economic implications of the
Christian faith, and so will not repeat myself here. But I grow increasingly convinced that allowing
the creation of joint stock limited liability corporations was one of the greatest legislative mistakes
of the 19th century. Their existence is based on a separation of ownership from control. The owners
are released from all responsibility. The controllers form a separate class of corporate bureaucrats
little different in outlook from civil servants. The usual psychology operates. They will commit
immoral acts for their organisations they might not consider committing for themselves. The owners
will assent. The legal privileges and unlimited lifespan of these corporations let them grow to
enormous size and wealth. The opportunities exist for highly effective immorality. Collectively, they
become part of the state apparatus, and work to destroy true, unregulated enterprise.

These corporations could not exist in any natural economic order. I have heard other libertarians
argue that they might emerge without legal privilege on some loose contractual basis. But I do not
agree. The shareholders would still be liable in tort, and that alone would deter them from any
involvement with a business that they did not personally control. As for the utilitarian argument, that
large undertakings need large companies, I also disagree. So long as it showed an acceptable
return on investment, there is no project too big to be taken on by clusters of sole traders and
partnerships. No doubt, things like the Channel Tunnel would not have been built - but I fail to see
how not having that would have made the world a poorer place. Even if some highly valuable projects
might not be undertaken, their lack would be compensated by the greater general innovation to be
expected in an order of small, unregulated firms.

Indeed, the matter of what to do about the corporations is more interesting to me than world poverty.
As I said in my speech, people in places like black Africa are poor because they have maniacally
corrupt and oppressive governments. They would do better even with the most cartelised global
corporatism than left in the clutches of their own rulers. And that is it. But how can this corporatism
be replaced by a system of voluntary exchange between legally responsible small firms? I think I
have a few answers here, but will give these at another time.

Outside the church, I bumped into the personal assistant for one of the Conservative leaders. The
usual sort of well-dressed, well-connected young man on the make who appeals to such people, he
insisted I might have brought a few people over to my side had my speech been less "abrasive". I
replied by noting how eight years of being soft and gentle had got his Party nowhere. I also pointed
out that five minutes speaking time is best given up to blunt expression, when what is expressed is
probably new to the audience. I know that a few mouths had fallen open at my dismissal of "self-
righteous candle waving". But that effect was my intention. I wanted the audience to go away with a
few memorable phrases. These might eventually provoke a chain of thought in the hearer's mind, or
be passed on in conversation to someone else more receptive.

There are times when arguments can be won by moderate expression and compromise. But this
was not such a time. It was not even a time for argument. An hour chopped into little blocks of
comments from the panel and questions from the audience does not allow for argument in any
meaningful sense. As said, it was a time for blunt expression.

I wish I had been able to stay longer and have some real arguments, but I could now feel great
waves of tiredness sweeping over me. So I went off to bed. The audience remained in the church,
singing responses in a language unknown to me and set to music that might have been more suited
to lullabies for an idiot child. The rest of the procession had taken to resolute candle waving, and
had moved down Whitehall to Downing Street, where hopes were expressed of waking up Tony
Blair. A pity, I thought at the time, the Salvation Army had not sent a few of its brass bands to join
in the parade.

And that is it. A fuller account would mention the grotesque nonsense uttered by the other
speakers. They had obviously never opened an economics textbook in their lives. Nor had most of
the audience that so warmly applauded their nonsense. But I cannot be bothered to record any of
what was said on the other side. There will be a DVD of the whole event, and this will speak for
itself.

On balance, it was worth attending. I waved the flag for the Libertarian Alliance. I handed out several
dozen business cards. I might be invited to speak at other events where I can outline my objections
in more detail to the heresies of theological socialism. Together with Mr Singleton, I might even have
started a few trains of thought in unknown minds.


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